UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC 20549
 
 FORM
10-Q
 
 (Mark
One)
 T
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended March 31,
2008
 
 OR
 
 £
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from ______________ to _____________
  Commission
file number: 0-51852
  Northeast
Community Bancorp, Inc.
 (Exact
name of registrant as specified in its charter)
 
 United States of America
              
              06-1786701(State
      or other jurisdiction of incorporation ororganization)
              
              (I.R.S.
      Employer Identification No.)
 
 325 Hamilton Avenue, White Plains, New
      York
              
              10601(Address
      of principal executive offices)
              
              (Zip
      Code)
 
 (914) 684-2500
 (Registrant’s
telephone number, including area code)
 
 N/A
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes T     No
£
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one)
 
 Large
      Accelerated Filer  £
              
              Accelerated
      Filer  £Non-accelerated
      Filer  £
              
              Smaller
      Reporting Company  T(Do
      not check if a smaller reporting
company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £     No
T
 
 As of May
12, 2008, there were 13,225,000 shares of the registrant’s common stock
outstanding.
  
 
  NORTHEAST
COMMUNITY BANCORP, INC.
 Table
of Contents
 
 Page
      No.Part
      I—Financial InformationItem
      1.
              
              Financial
      Statements (Unaudited)Consolidated
      Statements of Financial Condition at March 31, 2008 and December 31,
      2007
              
              1Consolidated
      Statements of Income for the Three Months Ended March 31, 2008 and
      2007
              
              2Consolidated
      Statements of Changes in Stockholders’ Equity for the Three Months Ended
      March 31, 2008 and 2007
              
              3Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2008 and
      2007
              
              4Notes
      to Consolidated Financial Statements
              
              5Item
      2.
              
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              10Item
      3.
              
              Quantitative
      and Qualitative Disclosures about Market Risk
              
              16Item
      4.
              
              Controls
      and Procedures
              
              18Part
      II—Other InformationItem
      1.
              
              Legal
      Proceedings
              
              18Item
      1A.
              
              Risk
      Factors
              
              18Item
      2.
              
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              18Item
      3.
              
              Defaults
      Upon Senior Securities
              
              18Item
      4.
              
              Submission
      of Matters to a Vote of Security Holders
              
              18Item
      5.
              
              Other
      Information
              
              19Item
      6.
              
              Exhibits
              
              19Signatures
              
              20
  
  PART
      I.
              FINANCIAL
      INFORMATION
 
 Item
      1.
              Financial
      Statements
 
 CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
 March
      31, 2008
              
              
              December 31,
      2007(In
      thousands,
                except
      share and per share data)ASSETSCash
      and amounts due from depository institutions
              
              $
              5,640
              
              
              $
              1,878Interest-bearing
      deposits
              
              
              43,780
              
              
              
              37,268Cash
      and cash equivalents
              
              
              49,420
              
              
              
              39,146Securities
      available for sale
              
              
              299
              
              
              
              320Securities
      held to maturity
              
              
              2,608
              
              
              
              2,875Loans
      receivable, net of allowance for loan losses of $1,489and
      $1,489, respectively
              
              
              311,700
              
              
              
              283,133Bank
      owned life insurance
              
              
              8,616
              
              
              
              8,515Premises
      and equipment, net
              
              
              4,459
              
              
              
              4,529Federal
      Home Loan Bank of New York stock, at cost
              
              
              1,089
              
              
              
              414Accrued
      interest receivable
              
              
              1,450
              
              
              
              1,340Goodwill
              
              
              1,310
              
              
              
              1,310Intangible
      assets
              
              
              695
              
              
              
              710Other
      assets
              
              
              1,961
              
              
              
              1,603Total
      assets
              
              $
              383,607
              
              
              $
              343,895LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilitiesDeposits:Non-interest
      bearing
              
              $
              4,452
              
              
              $
              1,745Interest
      bearing
              
              
              243,910
              
              
              
              224,233Total
      deposits
              
              
              248,362
              
              
              
              225,978Long-term
      FHLB of New York advances
              
              
              15,000
              
              
              
              –Advance
      payments by borrowers for taxes and insurance
              
              
              4,379
              
              
              
              2,884Accounts
      payable and accrued expenses
              
              
              5,968
              
              
              
              5,577Note
      payable
              
              
              634
              
              
              
              627Total
      liabilities
              
              
              274,343
              
              
              
              235,066Commitments
      and contingencies
              
              
              –
              
              
              
              –Stockholders’
      equityPreferred
      stock, $0.01 par value; 1,000,000 shares authorized, none
      issued
              
              
              –
              
              
              
              –Common
      stock, $0.01 par value; 19,000,000 shares authorized, 13,225,000 shares
      issued and outstanding
              
              
              132
              
              
              
              132Additional
      paid-in capital
              
              
              57,566
              
              
              
              57,555Unearned
      Employee Stock Ownership Plan (“ESOP”) shares
              
              
              (4,601
              )
              
              
              (4,665
              )Retained
      earnings
              
              
              56,319
              
              
              
              55,956Accumulated
      other comprehensive loss
              
              
              (152
              )
              
              
              (149
              )Total
      stockholders’ equity
              
              
              109,264
              
              
              
              108,829Total
      liabilities and stockholders’ equity
              
              $
              383,607
              
              
              $
              343,895
   See Notes
to Consolidated Financial Statements
  1
  CONSOLIDATED STATEMENTS OFINCOME(UNAUDITED)
 
 Three
      Months EndedMarch
      31,2008
              
              
              2007(In
      thousands,
                except
      per share data)INTEREST
      INCOMELoans,
      including fees
              
              $
              4,928
              
              
              $
              3,181Interest-earning
      deposits
              
              
              299
              
              
              
              416Securities
      - taxable
              
              
              55
              
              
              
              372Total
      Interest Income
              
              
              5,282
              
              
              
              3,969INTEREST
      EXPENSEDeposits
              
              
              1,983
              
              
              
              1,284Borrowings
              
              
              70
              
              
              
              –Total
      Interest Expense
              
              
              2,053
              
              
              
              1,284Net
      Interest Income
              
              
              3,229
              
              
              
              2,685PROVISION
      FOR LOAN LOSSES
              
              
              –
              
              
              
              –Net
      Interest Income after Provision for Loan Losses
              
              
              3,229
              
              
              
              2,685NON-INTEREST
      INCOMEOther
      loan fees and service charges
              
              
              91
              
              
              
              90Earnings
      on bank owned life insurance
              
              
              101
              
              
              
              88Investment
      Advisory Fees
              
              
              201
              
              
              
              –Other
              
              
              35
              
              
              
              4Total
      Non-Interest Income
              
              
              428
              
              
              
              182NON-INTEREST
      EXPENSESSalaries
      and employee benefits
              
              
              1,468
              
              
              
              1,129Net
      occupancy expense of premises
              
              
              276
              
              
              
              265Equipment
              
              
              144
              
              
              
              140Outside
      data processing
              
              
              167
              
              
              
              156Advertising
              
              
              61
              
              
              
              32Other
              
              
              656
              
              
              
              537Total
      Non-Interest Expenses
              
              
              2,772
              
              
              
              2,259Income
      before Income Taxes
              
              
              885
              
              
              
              608INCOME
      TAXES
              
              
              357
              
              
              
              218Net
      Income
              
              $
              528
              
              
              $
              390Net
      Income per Common Share – Basic
              
              $
              .04
              
              
              $
              .03Weighted
      Average Number of Common Shares Outstanding – Basic
              
              
              12,761
              
              
              
              12,736Dividends
      paid per common share
              
              $
              .03
              
              
              $
              –
 
 
 See Notes
to Consolidated Financial Statements
  2
  CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
 Three
Months Ended March 31, 2008 and 2007
 
 
 Common
      Stock
              
              
              Additional
      Paid-in Capital
              
              
              Unearned
      ESOP Shares
              
              
              Retained
      Earnings
              
              
              Accumulated
      Other Comprehensive Loss
              
              
              Total
      Stockholders’
      Equity
              
              
              Comprehensive
      IncomeBalance
      at December 31, 2006
              
              $
              132
              
              
              $
              57,513
              
              
              $
              (4,925
              )
              
              $
              44,147
              
              
              $
              (116
              )
              
              $
              96,751Comprehensive
      income:Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              390
              
              
              
              -
              
              
              
              390
              
              
              $
              390Unrealized
      loss on securities available for sale, net of taxes of $2
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5
              )
              
              
              (5
              )
              
              
              (5
              )Prior
      Service Cost – DRP, net of taxes of $3
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4
              )
              
              
              (4
              )
              
              
              (4
              )ESOP
      shares earned
              
              
              -
              
              
              
              13
              
              
              
              65
              
              
              
              -
              
              
              
              -
              
              
              
              78Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              381Balance
      at March 31, 2007
              
              $
              132
              
              
              $
              57,526
              
              
              $
              (4,860
              )
              
              $
              44,537
              
              
              $
              (125
              )
              
              $
              97,210Balance
      at December 31, 2007
              
              $
              132
              
              
              $
              57,555
              
              
              $
              (4,665
              )
              
              $
              55,956
              
              
              $
              (149
              )
              
              $
              108,829Comprehensive
      income:Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              528
              
              
              
              -
              
              
              
              528
              
              
              $
              528Unrealized
      loss on securities available for sale, net of taxes of $6
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (7
              )
              
              
              (7
              )
              
              
              (7
              )Prior
      Service Cost and Actuarial Loss– DRP, net of taxes of $2
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4
              
              
              
              4
              
              
              
              4Cash
      dividend declared ($.03 per share) to minority
stockholders
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (165
              )
              
              
              -
              
              
              
              (165
              )ESOP
      shares earned
              
              
              -
              
              
              
              11
              
              
              
              64
              
              
              
              -
              
              
              
              -
              
              
              
              75Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              525Balance
      at March 31, 2008
              
              $
              132
              
              
              $
              57,566
              
              
              $
              (4,601
              )
              
              $
              56,319
              
              
              $
              (152
              )
              
              $
              109,264
 
 
 See Notes
to Consolidated Financial Statements
  3
  CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 Three
      Months EndedMarch
      31,2008
              
              
              2007(In
      thousands)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
              
              $
              528
              
              
              $
              390Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:Net
      accretion of securities premiums and (discounts), net
              
              
              1
              
              
              
              (285
              )Provision
      for depreciation
              
              
              121
              
              
              
              154Amortization
      of deferred loan discounts, fees and costs, net
              
              
              45
              
              
              
              29Amortization
      other
              
              
              22
              
              
              
              –Earnings
      on bank owned life insurance
              
              
              (101
              )
              
              
              (88
              )Decrease
      in accrued interest receivable
              
              
              (110
              )
              
              
              63(Increase)
      in other assets
              
              
              (358
              )
              
              
              (429
              )(Decrease)
      increase in accrued interest payable
              
              
              (3
              )
              
              
              6Increase
      (decrease) in other liabilities
              
              
              404
              
              
              
              (1
              )ESOP
      shares earned
              
              
              75
              
              
              
              78Net
      Cash Provided by (Used in) Operating Activities
              
              
              624
              
              
              
              (83
              )CASH
      FLOWS FROM INVESTING ACTIVITIESNet
      (increase) in loans
              
              
              (28,612
              )
              
              
              (8,286
              )Purchase
      of securities held to maturity
              
              
              -
              
              
              
              (24,689
              )Principal
      repayments on securities available for sale
              
              
              8
              
              
              
              2Principal
      repayments on securities held to maturity
              
              
              266
              
              
              
              22,625Purchase
      of Federal Home Loan Bank of New York Stock
              
              
              (675
              )
              
              
              -Purchases
      of premises and equipment
              
              
              (51
              )
              
              
              (21
              )Net
      Cash (Used in) Investing Activities
              
              
              (29,064
              )
              
              
              (10,369
              )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      increase (decrease) in deposits
              
              
              22,384
              
              
              
              (377
              )Increase
      in advance payments by borrowers for taxesand
      insurance
              
              
              1,495
              
              
              
              1,332Proceeds
      from FHLB of New York long term advances
              
              
              15,000
              
              
              
              –Cash
      dividends paid to minority stockholders
              
              
              (165
              )
              
              
              –Net
      Cash Provided by Financing Activities
              
              
              38,714
              
              
              
              955Net
      Increase (decrease) in Cash and Cash Equivalents
              
              
              10,274
              
              
              
              (9,497
              )Cash
      and Cash Equivalents - Beginning
              
              
              39,146
              
              
              
              36,749Cash
      and Cash Equivalents - Ending
              
              $
              49,420
              
              
              $
              27,252SUPPLEMENTARY
      CASH FLOWS INFORMATIONIncome
      taxes paid
              
              $
              405
              
              
              $
              340Interest
      paid
              
              $
              2,056
              
              
              $
              1,278
 
 
 See Notes
to Consolidated Financial Statements
  4
  NORTHEAST
COMMUNITY BANK
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
1 – BASIS OF PRESENTATION
 
 Northeast
Community Bancorp, Inc. (the “Company”) is a Federally-chartered corporation
organized as a mid-tier holding company for Northeast Community Bank (the
“Bank”), in conjunction with the Bank’s reorganization from a mutual savings
bank to the mutual holding company structure on July 5, 2006.  The
accompanying unaudited consolidated financial statements include the accounts of
the Company and the Bank.  All significant intercompany accounts and
transactions have been eliminated in consolidation.
 
 New
England Commercial Properties, LLC, a New York limited liability company and
wholly owned subsidiary of the Bank, was formed in October 2007 to facilitate
the purchase or lease of real property by the Bank.  New England
Commercial Properties, LLC has been inactive since inception and had no assets
or employees during 2007 and through March 31, 2008.
 
 The
accompanying unaudited consolidated financial statements were prepared in
accordance with generally accepted accounting principles for interim financial
information as well as instructions for Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information or footnotes
necessary for the presentation of financial position, results of operations,
changes in stockholders’ equity and cash flows in conformity with accounting
principles generally accepted in the United States of America for complete
financial statements.  In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included.  Operating results for the
three-month period ended March 31, 2008 are not necessarily indicative of the
results that may be expected for the full year or any other interim
period.  The December 31, 2007 consolidated statement of financial
condition data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles.  That data, along with the interim financial information
presented in the consolidated statements of financial condition, income, changes
in stockholders’ equity, and cash flows should be read in conjunction with the
consolidated financial statements and notes thereto, included in the Company’s
annual report on Form 10-K for the year ended December 31, 2007.
 
 The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain recorded amounts and
disclosures.  Accordingly, actual results could differ from those
estimates.  The most significant estimate pertains to the allowance
for loan losses.
 
 NOTE
2 – EARNINGS PER SHARE
 
 Basic
earnings per common share is calculated by dividing the net income available to
common stockholders by the weighted-average number of common shares outstanding
during the period.  Diluted earnings per common share is computed in a
manner similar to basic earnings per common share except that the weighted
average number of common shares outstanding is increased to include the
incremental common shares (as computed using the treasury stock method) that
would have been outstanding if all potentially dilutive common stock equivalents
were issued during the period.  Common stock equivalents may include
restricted stock awards and stock options.  Anti-dilutive shares are
common stock equivalents with weighted-average exercise prices in excess of the
weighted-average market value for the periods presented.  The Company
has not granted any restricted stock awards or stock options and, during the
three-month periods ended March 31, 2008 and 2007, had no potentially dilutive
common stock equivalents.  Unallocated common shares held by the
Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average
number of common shares outstanding for purposes of calculating both basic and
diluted earnings per common share until they are committed to be
released.
  5
  NOTE
3 – EMPLOYEE STOCK OWNERSHIP PLAN
 
 As of
December 31, 2007 and March 31, 2008, the ESOP owned 518,420 shares of the
Company’s common stock, which are held in a suspense account until released for
allocation to participants.  As of December 31, 2007, the Company had
allocated 25,921 shares to participants, and an additional 25,921 shares had
been committed to be released.  As of March 31, 2008, the Company had
allocated 51,842 shares to participants, and an additional 6,480 shares had
committed to be released.  The Company recognized compensation expense
of $75,000 and $78,000 during the three-month periods ended March 31, 2008 and
2007, respectively, which equals the fair value of the ESOP shares when they
became committed to be released.
 
 NOTE 4 – OUTSIDE DIRECTOR RETIREMENT PLAN
(“DRP”)
 
 Periodic
expenses for the Company’s DRP were as follows:
 
 Three
      Months Ended March 31,2008
              
              
              2007(In
      thousands)Service
      cost
              
              $
              12
              
              
              $
              11Interest
      cost
              
              
              7
              
              
              
              6Amortization
      of Prior Service Cost
              
              
              5
              
              
              
              5Amortization
      of actuarial loss
              
              
              1
              
              
              
              -Total
              
              $
              25
              
              
              $
              22
 
 Effective
January 1, 2006, the Bank implemented the DRP.  This plan is a
non-contributory defined benefit pension plan covering all non-employee
directors meeting eligibility requirements as specified in the plan document.
The DRP is accounted for under Statements of Financial Accounting Standards Nos.
132 and 158.  The amortization of prior service cost and actuarial
loss in the three-month periods ended March 31, 2008 and 2007, is also reflected
as a reduction in other comprehensive income during the period.
 
 NOTE 5 –FAIR VALUE
MEASUREMENTS
 
 Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements”, for financial assets and financial liabilities.  In
accordance with Financial Accounting Standards Board Staff Position (FSP) No.
157-2, “Effective Date of FASB Statement No. 157,” the Company will delay
application of SFAS 157 for non-financial assets and non-financial liabilities,
until January 1, 2009.  SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements.
 
 SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants.  A fair value measurement assumes that the transaction
to sell the asset or transfer the liability occurs in the principal market for
the asset or liability or, in the absence of a principal market, the most
advantageous market for the asset or liability.  The price in the
principal (or most advantageous) market used to measure the fair value of the
asset or liability shall not be adjusted for transaction costs.  An
orderly transaction is a transaction that assumes exposure to the market for a
period prior to the measurement date to allow for marketing activities that are
usual and customary for transactions involving such assets and liabilities; it
is not a forced transaction.  Market participants are buyers and
sellers in the principal market that are (i) independent, (ii) knowledgeable,
(iii) able to transact, and (iv) willing to transact.
 
 SFAS 157
requires the use of valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach.  The market
approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets and
liabilities.  The income approach uses valuation techniques to convert
future amounts, such as cash flows or earnings, to a single present amount on a
discounted basis.  The cost approach is based on the amount that
currently would be required to replace the service capacity of an asset
(replacement cost).  Valuation techniques should be consistently
applied.
  6
  NOTE 5
–FAIR VALUE
MEASUREMENTS(Continued)
 
 Inputs to
valuation techniques refer to the assumptions that market participants would use
in pricing the asset or liability.  Inputs may be observable, meaning
those that reflect the assumptions market participants would use in pricing the
asset or liability developed based on market data obtained from independent
sources, or unobservable, meaning those that reflect the reporting
entity’s own assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information available
in the circumstances.  In that regard, SFAS 157 establishes a fair
value hierarchy for valuation inputs that gives the highest priority to quoted
prices in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs.  The fair value hierarchy is as
follows:
 
 Level
1 Inputs – Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
 
 Level
2 Inputs – Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability; either directly or
indirectly.  These might include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted prices that
are observable for the assets or liabilities (such as interest rates,
volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived
principally from or corroborated by market data by correction or other
means.
 
 Level
3 Inputs – Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity’s own assumptions about the assumptions that
market participants would use in pricing the assets or liabilities.
 
 A
description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of such instruments pursuant to the
valuation hierarchy, is set forth below.  These valuation
methodologies were applied to all of the Company’s financial assets and
financial liabilities carried at the fair value effective January 1,
2008.
 
 In
general, fair value is based upon quoted market prices, where
available.  If such quoted market prices are not available, fair value
is based upon internally developed models that primarily use, as inputs,
observable market-based parameters.  Valuation adjustments may be made
to ensure that financial instruments are recorded at fair
value.  These adjustments may include amounts to reflect counter-party
credit quality, the Company’s creditworthiness, among other things, as well as
unobservable parameters.  Any such valuation adjustments are applied
consistently over time.  The Company’s valuation methodologies may
produce a fair value calculation that may not be indicative of net realizable
value or reflective of future fair values.  While management believes
the Company’s valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.
 
 Securities Available for
Sale.  Securities classified as available for sale are reported
at fair value utilizing Level 2 inputs.  For these securities, the
Company obtains fair value measurements from an independent pricing
service.  The fair value measurements consider observable data that
may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield
curve, live trading levels, trade execution data, market consensus prepayment
speeds, credit information, and the bond’s terms and conditions, among other
things.
 
 The
following table summarizes financial assets measured at fair value on a
recurring basis as of March 31, 2008, segregated by the level of the valuation
inputs within the fair value hierarchy utilized to measure fair
value:
 
 
 Level
      1
                Inputs
              
              
              Level
      2
                Inputs
              
              
              Level
      3
                Inputs
              
              
              Total
                Fair
      ValueSecurities
      available for sale
              
              $
              -
              
              
              $
              299
              
              
              $
              -
              
              
              $
              299
  7
  NOTE 5
–FAIR VALUE
MEASUREMENTS(Continued)
 
 Certain
financial assets and financial liabilities are measured at fair value on a
nonrecurring basis; that is, the instruments are not measured at fair value on
an ongoing basis but are subject to fair value adjustments in certain
circumstances (for example, when there is evidence of
impairment).  Financial assets and financial liabilities measured at
fair value on a nonrecurring basis were not significant at March 31,
2008.
 
 Certain
non-financial assets and non-financial liabilities measured at fair value on a
recurring basis include reporting units measured at fair value in the first step
of a goodwill impairment test.  Certain non-financial assets measured
at fair value on a nonrecurring basis include non-financial assets and
non-financial liabilities measured at fair value in the second step of a
goodwill impairment test, as well as intangible assets and other non-financial
long-lived assets measured at fair value for impairment
assessment.  As stated above, SFAS 157 will be applicable to these
fair value measurements beginning January 1, 2009.
 
 Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities – Including an
amendment of FASB Statement No. 115”.  SFAS 159 permits the Company to
choose to measure eligible items at fair value at specified election
dates.  Unrealized gains and losses on items for which the fair value
measurement option has been elected are reported in earnings at each subsequent
reporting date.  The fair value option (i) may be applied instrument
by instrument, with certain exceptions, thus the Company may record identical
financial assets and liabilities at fair value or by another measurement basis
permitted under generally accepted accounting principles, (ii) is irrevocable
(unless a new election date occurs), and (iii) is applied only to entire
instruments and not to portions of instruments.  Adoption of SFAS 159
on January 1, 2008 did not have any impact on the Company’s financial
statements.
 
 NOTE 6 –EFFECT OF
SALE OF OUR NEW YORK CITY BRANCH OFFICE
 
 On June
29, 2007, the Bank completed the sale of its branch office building located at
1353-55 First Avenue, New York, New York.  The purchase price for the
building was $28.0 million.  The Bank received $10.0 million in cash
at closing.  The remaining $18.0 million will be paid in two
installments of $9.0 million on each of June 29, 2008 and June 29, 2009,
pursuant to a zero coupon promissory note secured by a purchase money real
estate mortgage, assignment and security agreement.  The zero coupon
note was recorded at its  present value of $16.3 million.
 
 NOTE
7 – EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
 
 Financial
Accounting Standards Board (“FASB”) Statement No. 141 (R) “Business
Combinations” was issued in December 2007.  This Statement establishes
principles and requirements for how the acquirer of a business recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the
acquiree.  The Statement also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  The
guidance will become effective as of the beginning of a company’s fiscal year
beginning after December 15, 2008.  This new pronouncement will impact
the Company’s accounting for business combinations, if any, completed beginning
January 1, 2009.
 
  8
  NOTE
7 – EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
 
 On
September 29, 2006, the FASB issued Statement No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans”, which
amends Statement 87 and Statement 106 to require recognition of the over funded
or under funded status of pension and other postretirement benefit plans on the
balance sheet.  Under Statement 158, gains and losses, prior service
costs and credits, and any remaining transition amounts under Statement 87 and
Statement 106 that have not yet been recognized through net periodic benefit
cost will be recognized in accumulated other comprehensive income, net of tax
effects, until they are amortized as a component of net periodic
cost.  The measurement date — the date at which the benefit obligation
and plan assets are measured — is required to be the company’s fiscal year
end.  Statement 158 is effective for publicly-held companies for
fiscal years ending after December 15, 2006, except for the measurement
date provisions, which are effective for fiscal years ending after
December 15, 2008.  The implementation of the measurement date
provisions of Statement 158, effective January 1, 2008, did not have a
significant impact on the Company’s financial condition or results of
operations.
  FASB
Statement No. 160 “Non-controlling Interests in Consolidated Financial
Statements—an amendment of ARB No. 51” was issued in December of
2007.  This Statement establishes accounting and reporting standards
for the non-controlling interest in a subsidiary and for the deconsolidation of
a subsidiary.  The guidance will become effective as of the beginning
of a company’s fiscal year beginning after December 15, 2008.  The
Company is currently evaluating the potential impact the new pronouncement will
have on its consolidated financial statements.
 
 In
September 2006, the FASB's Emerging Issues Task Force (EITF) issued EITF Issue
No. 06-4, "Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split Dollar Life Insurance Arrangements" ("EITF
06-4").  EITF 06-4 requires the recognition of a liability related to
the postretirement benefits covered by an endorsement split-dollar life
insurance arrangement.  The consensus highlights that the employer
(who is also the policyholder) has a liability for the benefit it is providing
to its employee.  As such, if the policyholder has agreed to maintain
the insurance policy in force for the employee's benefit during his or her
retirement, then the liability recognized during the employee's active service
period should be based on the future cost of insurance to be incurred during the
employee's retirement.  Alternatively, if the policyholder has agreed
to provide the employee with a death benefit, then the liability for the future
death benefit should be recognized by following the guidance in SFAS No. 106 or
Accounting Principles Board (APB) Opinion No. 12, as appropriate.
 
 For
transition, an entity can choose to apply the guidance using either of the
following approaches: (a) a change in accounting principle through retrospective
application to all periods presented or (b) a change in accounting principle
through a cumulative-effect adjustment to the balance in retained earnings at
the beginning of the year of adoption.  This EITF is effective for
fiscal years beginning after December 15, 2007, with early adoption permitted.
The implementation of this guidance did not have a material impact on
the Company's consolidated financial statements.
 
 In March
2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting
for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF
06-10).  EITF 06-10 provides guidance for determining a liability for
the postretirement benefit obligation as well as recognition and measurement of
the associated asset on the basis of the terms of the collateral assignment
agreement.  The requirements of EITF 06-10 are essentially equivalent
to EITF 06-04 and are effective for fiscal years beginning after December 15,
2007.  The implementation of this guidance did not have a
material impact on the Company's consolidated financial
statements.
  9
  NOTE
7 – EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
 
 In June
2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue
No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based
Payment Awards” (“EITF 06-11”).  EITF 06-11 states that an entity should
recognize a realized tax benefit associated with dividends on non-vested equity
shares, non-vested equity share units and outstanding equity share options
charged to retained earnings as an increase in additional paid in capital. 
The amount recognized in additional paid in capital should be included in the
pool of excess tax benefits available to absorb potential future tax
deficiencies on share-based payment awards.  EITF 06-11 should be
applied prospectively to income tax benefits of dividends on equity-classified
share-based payment awards that are declared in fiscal years beginning after
December 15, 2007.  In the absence of any existing share-based
compensation plans, the implementation of this guidance will not impact on the
Company's consolidated financial statements.  Should share-based
compensation plans be adopted in the future, this guidance will
apply.
 
 Staff
Accounting Bulletin No. 109 (SAB 109), "Written Loan Commitments Recorded at
Fair Value Through Earnings" expresses the views of the staff regarding written
loan commitments that are accounted for at fair value through earnings under
generally accepted accounting principles. To make the staff's views consistent
with current authoritative accounting guidance, the SAB revises and rescinds
portions of SAB No. 105, "Application of Accounting Principles to Loan
Commitments."  Specifically, the SAB revises the SEC staff's views on
incorporating expected net future cash flows related to loan servicing
activities in the fair value measurement of a written loan commitment. The SAB
retains the staff's views on incorporating expected net future cash flows
related to internally-developed intangible assets in the fair value measurement
of a written loan commitment. The staff expects registrants to apply the views
in Question 1 of SAB 109 on a prospective basis to derivative loan commitments
issued or modified in fiscal quarters beginning after December 15, 2007.
The implementation of this guidance did not have a material impact
on the Company’s consolidated
financial statements.
 
 
 Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
 
 Forward-Looking
Statements
 
 This
quarterly report contains forward-looking statements that are based on
assumptions and may describe future plans, strategies and expectations of the
Company.  These forward-looking statements are generally identified by
use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,”
“project” or similar expressions.  The Company’s ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the operations
of the Company include, but are not limited to, changes in interest rates,
national and regional economic conditions, legislative and regulatory changes,
monetary and fiscal policies of the U.S. government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality and composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Bank’s market area, changes in
real estate market values in the Bank’s market area, and changes in relevant
accounting principles and guidelines.  Additional factors that may
affect the Company’s results are discussed in the Company’s Annual Report on
Form 10-K under “Item 1A.  Risk Factors.”  These risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.  Except as
required by applicable law or regulation, the Company does not undertake, and
specifically disclaims any obligation, to release publicly the result of any
revisions that may be made to any forward-looking statements to reflect events
or circumstances after the date of the statements or to reflect the occurrence
of anticipated or unanticipated events.
  10
  Comparison
of Financial Condition at March 31, 2008 and December 31, 2007
 
 Total
assets increased by $39.7 million, or 11.5%, to $383.6 million at March 31, 2008
from $343.9 million at December 31, 2007.  The increase in total
assets was due to an increase of $28.6 million in loans receivable, net, an
increase of $10.3 million in cash and cash equivalents, and an increase of
$675,000 in FHLB of New York stock.
 
 Cash and
cash equivalents increased by $10.3 million, or 26.2%, to $49.4 million at March
31, 2008, from $39.1 million at December 31, 2007.  The increase in
short-term liquidity was primarily the result of an increase of $22.4 million in
deposits, $15.0 million from advances with FHLB of New York and a $1.5 million
increase from advance payments by borrowers for taxes and insurance partially
offset by the $28.6 million increase in loans receivable.
 
 Loans
receivable increased by $28.6 million, or 10.1%, to $311.7 million at March 31,
2008 from $283.1 million at December 31, 2007, due to loan originations of $35.8
million and increases in commercial lines of credit of $982,000 that exceeded
loan repayments of $8.2 million.
 
 Federal
Home Loan Bank (“FHLB”) of New York stock increased by $675,000, or 163.0%, to
$1.1 million at March 31, 2008, from $414,000 at December 31,
2007.  The increase was due to increased borrowings from the FHLB in
the first quarter of 2008, which required additional purchases of FHLB New York
stock.
 
 Advances
from the FHLB increased to $15.0 million at March 31, 2008 from zero outstanding
FHLB advances at December 31, 2007.  The increase in borrowings was
used to fund loan originations.  During the quarter ended March 31,
2008, the Bank borrowed $15.0 million in fixed rate term advances from the
FHLB.  These advances mature during 2011 through 2013 and have an
average interest rate of 3.57%.
 
 Deposits
increased by $22.4 million, or 9.9%, to $248.4 million at March 31, 2008 from
$226.0 million at December 31, 2007.  The increase in deposits was
primarily attributable to an effort by the Bank to increase deposits from
commercial business loan customers and through the offering of competitive
interest rates in our retail branches and in two nationwide certificate of
deposit listing services.  As a result, the commercial loan department
attracted $5.2 million in deposits and the deposit listing services attracted
$58.1 million in deposits in the first quarter of 2008.
 
 Advance
payments by borrowers for taxes and insurance increased by $1.5 million, or
51.8%, to $4.4 million at March 31, 2008 from $2.9 million at December 31, 2007
due primarily to the timing of remittances to municipalities, which are
primarily semi-annual in June and December.
 
 Stockholders’
equity increased by $435,000, or 0.4%, to $109.3 million at March 31, 2008, from
$108.8 million at December 31, 2007.  This increase was primarily the
result of net income of $528,000 and the amortization of $75,000 for the ESOP
for the period, partially offset by a cash dividend declared of
$165,000.
 
 Comparison
of Operating Results for the Three Months Ended March 31, 2008 and
2007
 
 General.Net
income increased by $138,000, or 35.4%, to $528,000 for the quarter ended March
31, 2008 from $390,000 for the quarter ended March 31, 2007.  The
increase was the result of in increase in net interest income of $544,000 and
$246,000 in non-interest income, which was offset in part by increases of
$513,000 in non-interest expense and $139,000 in income tax
expense.
 
 Net
Interest Income. Net interest income
increased by $544,000, or 20.3%, to $3.2 million for the three months ended
March 31, 2008 from $2.7 million for the three months ended March 31,
2007.  The increase in net interest income resulted primarily from the
increased average balance of net interest-earning assets of $23.3 million due
primarily to increased loan originations, offset by a 49 basis point decrease in
our net interest rate spread to 2.76% for the three months ended March 31, 2008
from 3.25% for the three months ended March 31, 2007.  The decrease in
the interest rate spread in the first quarter of 2008 compared to the same
period in 2007 was due to the cost of our interest-bearing liabilities
increasing to a greater degree than the increase in the yield earned on our
interest-earning assets.  The cost of our interest-bearing liabilities
increased by 63 basis points to 3.39% for the three months ended March 31, 2008
from 2.76% for the three months ended March 31, 2007.
  11
  The net
interest margin decreased by 31 basis points between these periods from 4.07%
for the quarter ended March 31, 2007 to 3.76% for the quarter ended March 31,
2008.  The increase in the net interest income, despite the declines
in net interest spread and net interest margin, was due to the increase in net
interest-earning assets.
 
 The
following table summarizes average balances and average yields and costs of
interest-earning assets and interest-bearing liabilities for the three months
ended March 31, 2008 and 2007.
 
 Three
      Months Ended March 31,2008
              
              
              2007Average
                Balance
              
              
              Interest
                and
      Dividends
              
              
              Yield/
                Cost
              
              
              Average
                Balance
              
              
              Interest
                and
      Dividends
              
              
              Yield/
                Cost(Dollars
      in thousands)Assets:Interest-earning
      assets:Loans
              
              $
              301,469
              
              
              $
              4,928
              
              
              
              6.54
              %
              
              $
              202,209
              
              
              $
              3,181
              
              
              
              6.29
              %Securities
              
              
              3,846
              
              
              
              55
              
              
              
              5.72
              
              
              
              30,330
              
              
              
              372
              
              
              
              4.91Other
      interest-earning assets
              
              
              38,107
              
              
              
              299
              
              
              
              3.14
              
              
              
              31,576
              
              
              
              416
              
              
              
              5.27Total
      interest-earning assets
              
              
              343,422
              
              
              
              5,282
              
              
              
              6.15
              
              
              
              264,115
              
              
              
              3,969
              
              
              
              6.01Allowance
      for loan losses
              
              
              (1,489
              )
              
              
              
              
              
              
              
              
              
              
              (1,200
              )Non-interest-earning
      assets
              
              
              19,172
              
              
              
              
              
              
              
              
              
              
              
              25,135Total
      assets
              
              $
              361,105
              
              
              
              
              
              
              
              
              
              
              $
              288,050Liabilities
      and equity:Interest-bearing
      liabilities:Interest-bearing
      demand
              
              $
              21,053
              
              
              
              39
              
              
              
              0.74
              
              
              $
              20,351
              
              
              
              24
              
              
              
              0.47Savings
      and club accounts
              
              
              57,294
              
              
              
              104
              
              
              
              0.73
              
              
              
              60,358
              
              
              
              104
              
              
              
              0.69Certificates
      of deposit
              
              
              156,103
              
              
              
              1,840
              
              
              
              4.71
              
              
              
              105,349
              
              
              
              1,156
              
              
              
              4.39Total
      interest-bearing deposits
              
              
              234,450
              
              
              
              1,983
              
              
              
              3.38
              
              
              
              186,058
              
              
              
              1,284
              
              
              
              2.76Borrowings
              
              
              7,638
              
              
              
              70
              
              
              
              3.67
              
              
              
              –
              
              
              
              –
              
              
              
              –Total
      interest-bearing liabilities
              
              
              242,088
              
              
              
              2,053
              
              
              
              3.39
              
              
              
              186,058
              
              
              
              1,284
              
              
              
              2.76Noninterest-bearing
      demand
              
              
              2,557
              
              
              
              
              
              
              
              
              
              
              
              1,253Other
      liabilities
              
              
              7,414
              
              
              
              
              
              
              
              
              
              
              
              3,546Total
      liabilities
              
              
              252,059
              
              
              
              
              
              
              
              
              
              
              
              190,857Stockholders’
      equity
              
              
              109,046
              
              
              
              
              
              
              
              
              
              
              
              97,193Total
      liabilities and Stockholders’ equity
              
              $
              361,105
              
              
              
              
              
              
              
              
              
              
              $
              288,050Net
      interest income
              
              
              
              
              
              $
              3,229
              
              
              
              
              
              
              
              
              
              
              $
              2,685Interest
      rate spread
              
              
              
              
              
              
              
              
              
              
              2.76
              
              
              
              
              
              
              
              
              
              
              
              3.25Net
      interest margin
              
              
              
              
              
              
              
              
              
              
              3.76
              
              
              
              
              
              
              
              
              
              
              
              4.07Net
      interest-earning assets
              
              $
              101,334
              
              
              
              
              
              
              
              
              
              
              $
              78,057Average
      interest-earning assets to average interest-bearing
      liabilities
              
              
              141.86
              %
              
              
              
              
              
              
              
              
              
              
              141.95
              %
 
 Total
interest income increased by $1.3 million, or 33.1%, to $5.3 million for the
three months ended March 31, 2008, from $4.0 million for the three months ended
March 31, 2007.  Interest income on loans increased by $1.7 million,
or 54.9%, to $4.9 million for the three months ended March 31, 2008 from $3.2
million for the three months ended March 31, 2007.  The average
balance of the loan portfolio increased by $99.3 million to $301.5 million for
the three months ended March 31, 2008 from $202.2 million for the three months
ended March 31, 2007 as originations outpaced repayments.  The average
yield on loans increased by 25 basis points to 6.54% for the three months ended
March 31, 2008 from 6.29% for the three months ended March 31,
2007.
  12
  Interest
income on securities decreased by $317,000, or 85.2%, to $55,000 for the three
months ended March 31, 2008 from $372,000 for the three months ended March 31,
2007.  The decrease was primarily due to a decrease of $26.5 million,
or 87.3%, in the average balance of securities to $3.8 million for the three
months ended March 31, 2008 from $30.3 million for the three months ended March
31, 2007.  This decrease was partially offset by an increase of 81
basis points in the average yield on securities to 5.72% for the three months
ended March 31, 2008 from 4.91% for the three months ended March 31,
2007.  The decrease in average balance was due to the redeployment of
funds into mortgage loans and commercial loans.
 
 Interest
income on other interest-earning assets decreased by $117,000, or 85.2%, to
$299,000 for the three months ended March 31, 2008 from $416,000 for the three
months ended March 31, 2007.  The decrease was primarily the result of
a decrease of 213 basis points in the yield to 3.14% for the three months ended
March 31, 2008 from 5.27% for the three months ended March 31, 2007, partially
offset by an increase of $6.5 million in the average balance of other
interest-earning assets to $38.1 million for the three months ended March 31,
2008 compared to $31.6 million for the three months ended March 31,
2007.  The decrease in the yield of other interest-earning assets was
due to a decline in the short-term interest rates during the quarter ended March
31, 2008.  The increase in the average balance of other
interest-earning assets was due to the increase in deposits.
 
 Total
interest expense increased by $769,000, or 59.9%, to $2.1 million for the three
months ended March 31, 2008 from $1.3 million for the three months ended March
31, 2007.  Interest expense on deposits increased by $699,000, or
54.4%, to $2.0 million for the three months ended March 31, 2008 from $1.3
million for the three months ended March 31, 2007.  During this same
period, the average interest cost of deposits increased by 62 basis points to
3.38% for the three months ended March 31, 2008 from 2.76% for the three months
ended March 31, 2007.
 
 The
increase in interest expense on deposits is attributable to an effort by the
Bank to increase deposits through the posting of competitive interest rates in
its retail branch network and on two nationwide certificate of deposit listing
services.  This had the effect of increasing the average balance of
certificates of deposits by $50.8 million, or 48.2%, to $156.1 million for the
three months ended March 31, 2008 from $105.3 million for the three months ended
March 31, 2007.  During this same period, the interest cost of our
certificates of deposits increased by 32 basis points to 4.71% for the three
months ended March 31, 2008 from 4.39% for the three months ended March 31,
2007.
 
 Interest
expense on our other deposit products increased by $15,000, or 11.7%, to
$143,000 for the three months ended March 31, 2008 from $128,000 for the three
months ended March 31, 2007.  The increase was due to an increase of
27 basis points in our interest-bearing demand deposits to 0.74% for the three
months ended March 31, 2008 from 0.47% for the three months ended March 31, 2007
and an increase of 4 basis points in our savings and holiday club deposits to
0.73% for the three months ended March 31, 2008 from 0.69% for the three months
ended March 31, 2007.  The increase was also due to an increase of
$702,000, or 3.4%, in the average balance of interest-bearing demand deposits to
$21.1 million for the three months ended March 31, 2008 from $20.4 million for
the three months ended March 31, 2007.  The increase was offset by a
decrease of $3.1 million, or 5.1%, in the average balance of our savings and
holiday club deposits to $57.3 million for the three months ended March 31, 2008
from $60.4 million for the three months ended March 31, 2007.
 
 Interest
expense on borrowed money was $70,000 for the three months ended March 31, 2008
due to $63,000 in interest expense on $15.0 million in FHLB advances and $7,000
in interest expense on a $634,000 note payable incurred in connection with the
acquisition of the operating assets of Hayden Financial Group LLC in the fourth
quarter of 2007.  We had no borrowings or borrowing cost for the three
months ended March 31, 2007.
  13
  Provision
for Loan Losses.  The following table summarizes the activity
in the allowance for loan losses and provision for loan losses for the three
months ended March 31, 2008 and 2007.
 
 Three
      Months
                Ended
      March 31,2008
              
              
              2007(Dollars
      in thousands)Allowance
      at beginning of period
              
              $
              1,489
              
              
              $
              1,200Provision
      for loan losses
              
              
              –
              
              
              
              –Charge-offs
              
              
              –
              
              
              
              –Recoveries
              
              
              –
              
              
              
              –Net
      charge-offs
              
              
              –
              
              
              
              –Allowance
      at end of period
              
              $
              1,489
              
              
              $
              1,200Allowance
      to nonperforming loans
              
              
              47.77
              %
              
              
              156.00
              %Allowance
      to total loans outstanding at the end of the period
              
              
              0.48
              %
              
              
              0.57
              %Net
      charge-offs (recoveries) to average loans outstanding during the
      period
              
              
              0.00
              %
              
              
              0.00
              %
 
 The
allowance for loan losses was $1.5 million at March 31, 2008, $1.5 million at
December 31, 2007, and $1.2 million at March 31, 2007.  We did not
record any provisions for loan losses and did not have any loan charge-offs or
recoveries during the three months ended March 31, 2008 and March 31,
2007.
 
 The
following table provides information with respect to our non-performing assets
at the dates indicated.  We had no troubled debt restructurings at the
dates presented.
 
 At
                March 31,
      2008
              
              
              At
                December 31,
      2007(Dollars
      in thousands)Non-accrual
      loans
              
              $
              1,866
              
              
              $
              1,867Loans
      past due 90 days or more and accruing
              
              
              1,251
              
              
              
              407Total
      non-performing loans
              
              
              3,117
              
              
              
              2,274Other
      non-performing assets
              
              
              –
              
              
              
              –Total
      non-performing assets
              
              
              3,117
              
              
              
              2,274Troubled
      debt restructurings
              
              
              –
              
              
              
              –Total
      troubled debt restructurings and non-performing assets
              
              $
              3,117
              
              
              $
              2,274Total
      non-performing loans to total loans
              
              
              1.00
              %
              
              
              0.80
              %Total
      non-performing loans to total assets
              
              
              0.81
              %
              
              
              0.66
              %Total
      non-performing assets and troubled debt restructurings to total
      assets
              
              
              0.81
              %
              
              
              0.66
              %
 
 At March
31, 2008, we had one non-accrual multi-family mortgage loan and two non-accrual
non-residential mortgage loans totaling $1.9 million.  The non-accrual
multi-family mortgage loan had an outstanding balance of $666,000 and is secured
by three buildings containing fourteen apartments located at the beach in
Hampton, New Hampshire.  We accepted a deed-in-lieu of foreclosure on
this property on April 28, 2008.  Based on a current fair value
analysis of the property, the Bank did not need to provide a specific reserve
for this loan.
 
 One of
the non-accrual non-residential mortgage loans had an outstanding balance of
$769,000 and is secured by two gasoline stations and an automobile repair
facility located in Putnam and Westchester Counties, New
York.  Subsequent to March 31, 2008 this debtor has filed for
bankruptcy under Chapter 11.  The other non-accrual non-residential
mortgage loan had an outstanding balance of $431,000 and is secured by a
non-residential building located in Yonkers, New York.  Based on
current fair value of the properties collateralizing these loans, the Bank has
not provided specific reserves on these loans.
  14
  At March
31, 2008, we had one accruing, 90 days or more past due multi-family delinquent
mortgage loan and one accruing, 90 days or more past due non-residential
mortgage loan totaling $1.3 million in the aggregate.  The accruing
multi-family mortgage loan had an outstanding balance of $407,000 and is secured
by a six-unit apartment building located in Newark, New Jersey.  The
accruing non-residential mortgage loan had an outstanding balance of $845,000
and is secured by an office building located in Mamaroneck, New
York.  Based on current fair values of the properties collateralizing
these loans, the Bank has not provided specific reserves these
loans.
 
 We have
commenced foreclosure actions on all the above-mentioned non-performing
loans.
 
 At March
31, 2008, we had one multi-family mortgage loan with an outstanding balance of
$457,000 that is current but we had classified as special
mention.  This loan is secured by a mixed-use property located in Port
Jervis, New York.
 
 Non-interest
Income.Non-interest
income increased by $246,000, or 135.2%, to $428,000 for the three months ended
March 31, 2008 from $182,000 for the three months ended March 31,
2007.  The increase was primarily due to $201,000 in fee income
generated by Hayden Financial, the Bank’s investment advisory and financial
planning services division, a $32,000 one-time payment from Visa in connection
with Visa’s initial public stock offering, and an increase of $13,000 in
earnings on bank owned life insurance.
 
 Non-interest
Expense.Non-interest
expense increased by $513,000, or 22.7%, for the three months ended March 31,
2008 to $2.8 million from $2.3 million for the three months ended March 31,
2007.  The increase resulted primarily from increases of $339,000 in
salaries and employee benefits, $119,000 in other non-interest expense, $29,000
in advertising expense, $11,000 in outside data processing, $11,000 in net
occupancy expense of premises and $4,000 in equipment expense.
 
 Salaries
and employee benefits increased by $339,000, or 30.0%, to $1.4 million in 2008
from $1.1 million in 2007 due to an increase in the number of full time
equivalent employees from 76 at March 31, 2007 to 85 at March 31,
2008.  The increase was due to the acquisition of the operating assets
of Hayden Financial Group, LLC, an investment advisory firm, in November 2007,
and the addition of two additional loan officers in 2007.
 
 Other
non-interest expense increased by $119,000, or 22.2%, to $656,000 in 2008 from
$537,000 in 2007 due mainly to increases of $37,000 in legal fees, $37,000 in
directors, officers and employees expenses, $16,000 in audit and accounting
fees, $15,000 in amortization of intangible assets, $12,000 in office supplies
and stationery and $19,000 in other non-interest expenses.  These
increases were offset by a decrease of $17,000 in directors
compensation.
 
 Advertising
expenses increased by $29,000, or 90.6%, to $61,000 in 2008 from $32,000 in 2007
due to an increased effort to market the Bank’s loan, deposit and investment
products and services.
 
 Income
Taxes. Income tax expense
increased by $139,000, or 63.8%, to $357,000 for the three months ended March
31, 2008, from $218,000 for the three months ended March 31,
2007.  The increase resulted primarily from an increase of $277,000 in
income before taxes to $885,000 for the three months ended March 31, 2008, as
compared to $608,000 for the three months ended March 31, 2007.  The
effective tax rate was 40.3% for the three months ended March 31, 2008 compared
to 35.9% for the same period in 2007.  The increase in effective tax
rate is the result of a smaller percentage of our pre-tax income being
tax-exempt.
 
 Liquidity
Management.  Liquidity
is the ability to meet current and future financial obligations of a short-term
nature.  Our primary sources of funds consist of deposit inflows, loan
repayments, maturities and sales of securities, and borrowings from the Federal
Home Loan Bank of New York.  While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by general interest rates,
economic conditions and competition.
  15
  We
regularly adjust our investments in liquid assets based upon our assessment
of:  (1) expected loan demands; (2) expected deposit flows; (3) yields
available on interest-earning deposits and securities; and (4) the objectives of
our asset/liability management policy.
 
 Our most
liquid assets are cash and cash equivalents.  The levels of these
assets depend on our operating, financing, lending, and investing activities
during any given period.  Cash and cash equivalents totaled $49.4
million at March 31, 2008 and consist primarily of deposits at other financial
institutions and miscellaneous cash items.  Securities classified as
available for sale and whose fair value exceeds our cost provide an additional
source of liquidity.  Total securities classified as available for
sale were $299,000 at March 31, 2008.
 
 At March
31, 2008, we had $40.1 million in loan commitments outstanding, consisting of
$30.7 million of real estate loan commitments, $5.7 million in unused commercial
business lines of credit, $2.9 million in unused real estate equity lines of
credit, $549,000 in unused loans in process, and $194,000 in consumer lines of
credit.  Certificates of deposit due within one year of March 31, 2008
totaled $113.2 million.  This represented 70.1% of certificates of
deposit at March 31, 2008.  We believe the large percentage of
certificates of deposit that mature within one year reflects customers’
hesitancy to invest their funds for long periods in the current interest rate
environment.  If these maturing deposits do not remain with us, we
will be required to seek other sources of funds, including other certificates of
deposit and borrowings.  Depending on market conditions, we may be
required to pay higher rates on such deposits or other borrowings than we
currently pay on the certificates of deposit due on or before March 31,
2009.  We believe, however, based on past experience, a significant
portion of our certificates of deposit will remain with us.  We have
the ability to attract and retain deposits by adjusting the interest rates
offered.
 
 Our
primary investing activities are the origination of loans and the purchase of
securities.  Our primary financing activities consist of deposit
accounts and Federal Home Loan Bank advances.  At March 31, 2008, we
had the ability to borrow $69.2 million, net of $15 million in outstanding
advances, from the Federal Home Loan Bank of New York, which included two
available overnight lines of credit of $5.6 million each.  At March
31, 2008, we had no overnight advances outstanding.  Deposit flows are
affected by the overall level of interest rates, the interest rates and products
offered by us and our local competitors and other factors.  We
generally manage the pricing of our deposits to be competitive and to maintain
or increase our core deposit relationships depending on our level of real estate
loan commitments outstanding.  Occasionally, we offer promotional
rates on certain deposit products to attract deposits or to lengthen repricing
time frames.
 
 Capital
Management.The
Bank is subject to various regulatory capital requirements administered by the
Office of Thrift Supervision, including a risk-based capital measure. The
risk-based capital guidelines include both a definition of capital and a
framework for calculating risk-weighted assets by assigning balance sheet assets
and off-balance sheet items to broad risk categories.  At March 31,
2008, the Bank exceeded all regulatory capital requirements.  The Bank
is considered “well capitalized” under regulatory guidelines.
 
 Off-Balance
Sheet Arrangements.  In the normal course of operations, we
engage in a variety of financial transactions that, in accordance with U.S.
generally accepted accounting principles, are not recorded in our financial
statements.  These transactions involve, to varying degrees, elements
of credit, interest rate and liquidity risk.  Such transactions are
used primarily to manage customers’ requests for funding and take the form of
loan commitments, letters of credit and lines of credit.
 
 For the
three months ended March 31, 2008 and the year ended December 31, 2007, we
engaged in no off-balance sheet transactions reasonably likely to have a
material effect on our financial condition, results of operations or cash
flows.
 
 Item
      3.
              Quantitative
      and Qualitative Disclosures About Market
Risk.
 
 Qualitative Aspects of Market
Risk.  The Company’s most significant form of market risk is
interest rate risk. 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.  Deposit accounts typically react more quickly to changes
in market interest rates than mortgage loans because of the shorter maturities
of deposits.
  16
  As a
result, sharp increases in interest rates may adversely affect our earnings
while decreases in interest rates may beneficially affect 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:  originating mortgage real
estate loans that reprice to market interest rates in three to five years;
purchasing securities that typically reprice within a three year time frame to
limit exposure to market fluctuations; and, where appropriate, offering higher
rates on long term certificates of deposit to lengthen the repricing time frame
of our liabilities.  We currently do not participate in hedging
programs, interest rate swaps or other activities involving the use of
derivative financial instruments.
 
 We have
an Asset/Liability Committee, comprised of our chief executive officer, chief
financial officer, chief mortgage officer, chief retail banking officer and
treasurer, whose function is 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 income and net income.
 
 Quantitative Aspects of Market
Risk.  We use an interest rate sensitivity analysis prepared by
the Office of Thrift Supervision to review our level of interest rate
risk.  This analysis measures interest rate risk by computing changes
in the net portfolio value of our cash flows from assets, liabilities and
off-balance sheet items in the event of a range of assumed changes in market
interest rates.  Net portfolio value represents the market value of
portfolio equity and is equal to the market value of assets minus the market
value of liabilities, with adjustments made for off-balance sheet
items.  These analyses assess the risk of loss in market
risk-sensitive instruments in the event of a sudden and sustained 100 to 200
basis point increase or 100 basis point decrease in market interest rates with
no effect given to any steps that we might take to counter the effect of that
interest rate movement.
 
 The
following table presents the change in our net portfolio value at March 31,
2008that would
occur in the event of an immediate change in interest rates based on Office of
Thrift Supervision assumptions, with no effect given to any steps that we might
take to counteract that change.
  Net
      Portfolio Value
                  (Dollars
      in thousands)
                
                
                Net
      Portfolio Value
                  as
      % of
                  Portfolio
      Value of
                  AssetsBasis
      Point (“bp”)
                  Change
      in Rates
                
                $
                  Amount
                
                
                $
                  Change
                
                
                %
                  Change
                
                
                NPV
                  Ratio
                
                
                Change300
                
                
                $
                87,465
                
                
                $
                (3,283
                )
                
                
                (4
                )%
                
                
                23.92
                %
                
                
                (13
                )
      bp200
                
                
                
                88,685
                
                
                
                (2,063
                )
                
                
                (2
                )%
                
                
                24.00
                %
                
                
                (5
                )
      bp100
                
                
                
                89,750
                
                
                
                (998
                )
                
                
                (1
                )%
                
                
                24.03
                %
                
                
                (1
                )
      bp50
                
                
                
                90,280
                
                
                
                (468
                )
                
                
                (1
                )%
                
                
                24.05
                %
                
                
                (0
                )
      bp0
                
                
                
                90,748
                
                
                
                -
                
                
                
                -
                
                
                
                24.05
                %(50)
                
                
                
                91,187
                
                
                
                439
                
                
                
                0
                %
                
                
                24.04
                %
                
                
                (1
                )
      bp(100)
                
                
                
                91,620
                
                
                
                872
                
                
                
                1
                %
                
                
                24.03
                %
                
                
                (2
                )
      bp
 We and
the Office of Thrift Supervision use various assumptions in assessing interest
rate risk.  These assumptions relate to interest rates, loan
prepayment rates, deposit decay rates and the market values of certain assets
under differing interest rate scenarios, among others.  As with any
method of measuring interest rate risk, certain shortcomings are inherent in the
methods of analyses presented in the foregoing tables.  For example,
although certain assets and liabilities may have similar maturities or periods
to repricing, they may react in different degrees to changes in market interest
rates.  Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market
rates.  Additionally, certain assets, such as adjustable-rate mortgage
loans, have features that restrict changes in
  17
  interest
rates on a short-term basis and over the life of the asset.  Further,
in the event of a change in interest rates, expected rates of prepayments on
loans and early withdrawals from certificates could deviate significantly from
those assumed in calculating the table.  Prepayment rates can have a
significant impact on interest income.  Because of the large
percentage of loans we hold, rising or falling interest rates have a significant
impact on the prepayment speeds of our earning assets that in turn affect the
rate sensitivity position.  When interest rates rise, prepayments tend
to slow.  When interest rates fall, prepayments tend to
rise.  Our asset sensitivity would be reduced if prepayments slow and
vice versa.  While we believe these assumptions to be reasonable,
there can be no assurance that assumed prepayment rates will approximate actual
future loan repayment activity.
 
 Item
      4.
              Controls
      and Procedures
 
 The
Company’s management, including the Company’s principal executive officer and
principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”).  Based upon their evaluation, the principal executive
officer and principal financial officer concluded that, as of the end of the
period covered by this report, the Company’s disclosure controls and procedures
were effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure.
 
 There
were no changes in the Company’s internal control over financial reporting
during the three months ended March 31, 2008 that have materially affected, or
are reasonable likely to materially affect, the Company’s internal control over
financial reporting.
 
 PART
      II.
              OTHER
      INFORMATION
 
 Item
      1.
              Legal
      Proceedings
 
 From time
to time, we may be party to various legal proceedings incident to our
business.  At March 31, 2008, we were not a party to any pending legal
proceedings that we believe would have a material adverse effect on our
financial condition, results of operations or cash flows.
 
 Item
      1A.
              Risk
      Factors
 
 In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2007, which could materially
affect our business, financial condition or future results.  The risks
described in our Annual Report on Form 10-K are not the only risks that we
face.  Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially affect our business,
financial condition and/or operating results.
 
 Item
      2.
              Unregistered
      Sales of Equity Securities and Use of
Proceeds
 
 Not
applicable
 
 Item
      3.
              Defaults
      Upon Senior Securities
 
 Not
applicable
 
 Item
      4.
              Submission
      Of Matters to a Vote of Security
Holders
 
 Not
applicable
  18
  Item
      5.
              Other
      Information
 
 None
 
 Item
      6.
              Exhibits
 
 31.1
              CEO
      certification pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.
 
 31.2
              CFO
      certification pursuant to Section 302 of the Sarbanes Oxley Act of
      2002.
 
 32.1
              CEO
      and CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
  19
  Signatures
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 Northeast
      Community Bancorp, Inc.Date:  May
      14, 2008
              
              By:
              /s/
      Kenneth A. MartinekKenneth
      A. MartinekPresident
      and Chief Executive OfficerDate:  May
      14, 2008
              
              By:
              /s/ Salvatore
      RandazzoSalvatore
      RandazzoExecutive
      Vice President and Chief Financial
Officer
   20