UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q


(Mark
One)


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





For the
quarterly period ended March 31,
2010





OR





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





For the
transition period from to  Commission file
number 001-33713





BEACON FEDERAL BANCORP,
INC.


(Exact
name of registrant as specified in its charter)





Maryland
            26-0706826(State
      or other jurisdiction of
            (I.R.S.
      Employer Identification No.)incorporation
      or organization)





6611 Manlius Center Road, East Syracuse, New
      York
            13057(Address
      of principal executive office)
            (Zip
      Code)





Registrant's
telephone number, including area code (315)
433-0111





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Sections 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 x  
No o





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





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





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





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





Class
            Outstanding May 10, 2010Common
      Stock, par value $0.01 per share
            6,533,378











BEACON
FEDERAL BANCORP, INC.


FORM
10-Q





FOR THE
QUARTER ENDED MARCH 31, 2010





TABLE OF
CONTENTS





PAGE
      NO.PART
      I – FINANCIAL INFORMATIONItem
      1.
            Financial
      Statements
            3Consolidated
      Balance Sheets
            3Consolidated
      Statements of Operations
            4Consolidated
      Statements of Stockholders’ Equity and Comprehensive
Income
            5Consolidated
      Statements of Cash Flows
            6Notes
      to Consolidated Financial Statements
            8Item
      2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            27Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            36Item
      4.
            Controls
      and Procedures
            36PART
      II – OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            37Item
      1A.
            Risk
      Factors
            37Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            37Item
      3.
            Defaults
      Upon Senior Securities
            37Item
      4.
            Other
      Information
            37Item
      5.
            Exhibits
            37Signatures
            39Certifications
            40




2




BEACON FEDERAL BANCORP,
INC.


PART
1.  FINANCIAL INFORMATION


Item
1.  Financial Statements




CONSOLIDATED
BALANCE SHEETS


(Dollars
in thousands, except per share data)




March
      31,
              
              
              December
      31,ASSETS
              
              2010
              
              
              2009(Unaudited)Cash
      and cash equivalents - cash and due from financial
      institutions
              
              $
              22,391
              
              
              $
              12,993Interest-bearing
      deposits in other financial institutions
              
              
              170
              
              
              
              170Securities
      available for sale
              
              
              166,618
              
              
              
              167,238Securities
      held to maturity (fair value of $13,695 and $14,500,
      respectively)
              
              
              13,657
              
              
              
              14,561Loans
      held for sale
              
              
              472
              
              
              
              940Loans,
      net of allowance for loan losses of $17,148 and $15,631,
      respectively
              
              
              816,636
              
              
              
              816,061Federal
      Home Loan Bank ("FHLB") of New York stock
              
              
              11,359
              
              
              
              11,487Premises
      and equipment, net
              
              
              12,424
              
              
              
              12,604Accrued
      interest receivable
              
              
              3,904
              
              
              
              3,888Foreclosed
      and repossessed assets
              
              
              812
              
              
              
              797Bank-owned
      life insurance ("BOLI")
              
              
              10,501
              
              
              
              10,488Other
      assets
              
              
              14,362
              
              
              
              15,670Total
      assets
              
              $
              1,073,306
              
              
              $
              1,066,897LIABILITIES
      AND STOCKHOLDERS' EQUITYDeposits
              
              $
              699,197
              
              
              $
              693,297Federal
      Home Loan Bank advances
              
              
              188,902
              
              
              
              191,094Securities
      sold under agreement to repurchase
              
              
              70,000
              
              
              
              70,000Accrued
      interest payable and other liabilities
              
              
              3,499
              
              
              
              3,511Capital
      lease obligation
              
              
              7,737
              
              
              
              7,736Total
      liabilities
              
              
              969,335
              
              
              
              965,638Commitments
      and contingencies (Note 8)Preferred
      stock, $.01 par value, 50,000,000 shares authorized;none
      issued or outstandingCommon
      stock, $.01 par value, 100,000,000 shares authorized;
      7,653,565shares
      issued and 6,533,378 shares outstanding atMarch
      31, 2010 and December 31, 2009
              
              
              74
              
              
              
              74Additional
      paid-in capital
              
              
              73,345
              
              
              
              73,156Retained
      earnings-substantially restricted
              
              
              48,012
              
              
              
              47,021Unearned
      Employee Stock Ownership Plan ("ESOP") shares
              
              
              (3,819
              )
              
              
              (3,997
              )Accumulated
      other comprehensive loss, net
              
              
              (4,108
              )
              
              
              (5,462
              )Treasury
      stock, 1,120,187 shares at March 31, 2010 at cost
              
              
              (9,533
              )
              
              
              (9,533
              )Total
      stockholders' equity
              
              
              103,971
              
              
              
              101,259Total
      liabilities and stockholders' equity
              
              $
              1,073,306
              
              
              $
              1,066,897See
      accompanying notes to consolidated financial statements.




3




BEACON FEDERAL BANCORP,
INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Dollars
in thousands, except per share data)




Three
      Months EndedMarch
      31,2010
              
              
              2009Interest
      and dividend income:
              
              (Unaudited)Loans,
      including fees
              
              $
              11,612
              
              
              $
              11,342Securities
              
              
              1,967
              
              
              
              2,355FHLB
      stock
              
              
              167
              
              
              
              99Federal
      funds sold and other
              
              
              5
              
              
              
              16Total
      interest income
              
              
              13,751
              
              
              
              13,812Interest
      expense:Deposits
              
              
              3,178
              
              
              
              4,247FHLB
      advances
              
              
              1,976
              
              
              
              2,294Securities
      sold under agreement to repurchase
              
              
              668
              
              
              
              543Lease
      obligation
              
              
              196
              
              
              
              -Total
      interest expense
              
              
              6,018
              
              
              
              7,084Net
      interest income
              
              
              7,733
              
              
              
              6,728Provision
      for loan losses
              
              
              1,780
              
              
              
              2,570Net
      interest income after provisionfor
      loan losses
              
              
              5,953
              
              
              
              4,158Noninterest
      income:Service
      charges
              
              
              796
              
              
              
              730Commission
      and fee income
              
              
              167
              
              
              
              140Change
      in cash surrender value of BOLI
              
              
              13
              
              
              
              32Gain
      on sale of loans
              
              
              113
              
              
              
              163Other-than-temporary
      impairment (OTTI) creditloss
      on securities
              
              
              (257
              )
              
              
              (424
              )Other
              
              
              285
              
              
              
              159Total
      noninterest income
              
              
              1,117
              
              
              
              800Noninterest
      expense:Salaries
      and employee benefits
              
              
              2,622
              
              
              
              2,351Occupancy
      and equipment
              
              
              592
              
              
              
              327Advertising
      and marketing
              
              
              111
              
              
              
              121Telephone,
      delivery and postage
              
              
              180
              
              
              
              192Supplies
              
              
              48
              
              
              
              66Audit
      and examination
              
              
              200
              
              
              
              122FDIC
      premium expense
              
              
              318
              
              
              
              163Other
              
              
              942
              
              
              
              949Total
      noninterest expense
              
              
              5,013
              
              
              
              4,291Income
      before income taxes
              
              
              2,057
              
              
              
              667Income
      tax expense
              
              
              763
              
              
              
              231Net
      income
              
              $
              1,294
              
              
              $
              436Basic
      and diluted earnings per share
              
              $
              0.21
              
              
              $
              0.06OTTI
      credit loss on securities:Total
      OTTI loss on securities
              
              $
              271
              
              
              $
              444Portion
      of OTTI loss recognized in other
              
              
              -comprehensive
      loss before income taxes
              
              
              (14
              )
              
              
              (20
              )OTTI
      credit loss on securities
              
              $
              257
              
              
              $
              424See
      accompanying notes to consolidated financial statements.




4




BEACON FEDERAL BANCORP,
INC.





CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME


(Dollars
in thousands, except per share data)







Three
      Months EndedMarch
      31,2010
              
              
              2009(Unaudited)Common
      Stock
              
              $
              74
              
              
              $
              74Additional
      paid-in capital:Balance
      at beginning of period
              
              
              73,156
              
              
              
              72,160Earned
      ESOP shares
              
              
              (18
              )
              
              
              (37
              )Amortization
      of stock-based compensation expense
              
              
              207
              
              
              
              240Balance
      at end of period
              
              
              73,345
              
              
              
              72,363Retained
      earnings:Balance
      at beginning of period
              
              
              47,021
              
              
              
              44,701Net
      income
              
              
              1,294
              
              
              
              436Cash
      dividends, $.05 and $.04 per share, respectively
              
              
              (303
              )
              
              
              (274
              )Balance
      at end of period
              
              
              48,012
              
              
              
              44,863Unearned
      ESOP shares:Balance
      at beginning of period
              
              
              (3,997
              )
              
              
              (4,733
              )Earned
      ESOP shares
              
              
              178
              
              
              
              198Balance
      at end of period
              
              
              (3,819
              )
              
              
              (4,535
              )Accumulated
      other comprehensive loss, net:Balance
      at beginning of period
              
              
              (5,462
              )
              
              
              (10,117
              )Net
      change in unrealized gains (losses) on available for salesecurities,
      net of taxes of $908 and $11, respectively
              
              
              1,362
              
              
              
              (17
              )OTTI
      non-credit related loss on securities for which a portion of the
      OTTIhas
      been recognized in income, net of taxes of $6 and $8,
      respectively
              
              
              (8
              )
              
              
              (12
              )Balance
      at end of period
              
              
              (4,108
              )
              
              
              (10,146
              )Treasury
      stock:Balance
      at beginning of period
              
              
              (9,533
              )
              
              
              -Repurchase
      of 383,116 shares of common stock
              
              
              -
              
              
              
              (3,042
              )Balance
      at end of period
              
              
              (9,533
              )
              
              
              (3,042
              )Total
      stockholders' equity
              
              $
              103,971
              
              
              $
              99,577Comprehensive
      income:Net
      income
              
              $
              1,294
              
              
              $
              436Net
      change in unrealized gains (losses) on available for salesecurities,
      net of taxes of $908 and $11, respectively
              
              
              1,362
              
              
              
              (17
              )OTTI
      non-credit related loss on securities for which a portion of the
      OTTIhas
      been recognized in income, net of taxes of $6 and $8,
      respectively
              
              
              (8
              )
              
              
              (12
              )Comprehensive
      income
              
              $
              2,648
              
              
              $
              407See
      accompanying notes to consolidated financial statements.
 5
 
  BEACON FEDERAL BANCORP,
INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Dollars
in thousands)




Three
      Months EndedMarch
      31,2010
              
              
              2009Cash
      flows from operating activities:
              
              (Unaudited)Net
      income
              
              $
              1,294
              
              
              $
              436Adjustments
      to reconcile net income to netcash
      provided by operating activities:Provision
      for loan losses
              
              
              1,780
              
              
              
              2,570Provision
      for loss on servicing assets
              
              
              130
              
              
              
              (34
              )Depreciation
      and amortization
              
              
              345
              
              
              
              123ESOP
      expense
              
              
              160
              
              
              
              161Amortization
      of stock-based compensation expense
              
              
              207
              
              
              
              240Amortization
      of net deferred loan costs
              
              
              594
              
              
              
              630Net
      amortization of premiums and discounts on securities
              
              
              74
              
              
              
              (5
              )Gain
      on sale of loans
              
              
              (113
              )
              
              
              (163
              )Other-than-temporary
      impairment loss on securities
              
              
              257
              
              
              
              424Originations
      of loans held for sale
              
              
              (7,637
              )
              
              
              (29,730
              )Proceeds
      from loans held for sale
              
              
              8,218
              
              
              
              24,855Proceeds
      from sale of trading account assets
              
              
              -
              
              
              
              23,337Increase
      in cash surrender value of BOLI
              
              
              (13
              )
              
              
              (32
              )Net
      change in:Accrued
      interest receivable
              
              
              (16
              )
              
              
              232Other
      assets
              
              
              275
              
              
              
              (568
              )Accrued
      interest payable and other liabilities
              
              
              (11
              )
              
              
              907Net
      cash provided by operating activities
              
              
              5,544
              
              
              
              23,383Cash
      flows from investing activities:Purchase
      of FHLB stock
              
              
              (463
              )
              
              
              (284
              )Redemption
      of FHLB stock
              
              
              591
              
              
              
              928Securities
      held to maturity:Maturities,
      prepayments and calls
              
              
              894
              
              
              
              1,753Securities
      available for sale:Purchases
              
              
              (15,389
              )
              
              
              (5,974
              )Proceeds
      from maturity or call
              
              
              17,945
              
              
              
              11,059Loan
      originations and payments, net
              
              
              (3,139
              )
              
              
              (22,058
              )Purchase
      of premises and equipment
              
              
              (165
              )
              
              
              (980
              )Proceeds
      from sale of foreclosed and repossessed assets
              
              
              175
              
              
              
              212Net
      cash provided by (used for) investing activities
              
              $
              449
              
              
              $
              (15,344
              )


Continued
on following page


6





BEACON FEDERAL BANCORP,
INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Dollars
in thousands)





Continued





Three
      Months EndedMarch
      31,2010
              
              
              2009Cash
      flows from financing activities:
              
              (Unaudited)Net
      change in deposits
              
              $
              5,900
              
              
              $
              30,369Proceeds
      from FHLB advances
              
              
              12,500
              
              
              
              -Repayment
      of FHLB advances
              
              
              (14,692
              )
              
              
              (10,000
              )Cash
      dividends
              
              
              (303
              )
              
              
              (274
              )Repurchase
      of common stock
              
              
              -
              
              
              
              (3,042
              )Net
      cash provided by financing activities
              
              
              3,405
              
              
              
              17,053Net
      change in cash and cash equivalents
              
              
              9,398
              
              
              
              25,092Cash
      and cash equivalents at beginning of period
              
              
              12,993
              
              
              
              18,297Cash
      and cash equivalents at end of period
              
              $
              22,391
              
              
              $
              43,389Supplemental
      cash flow information:Interest
      paid
              
              $
              6,012
              
              
              $
              7,323Income
      taxes paid
              
              $
              544
              
              
              $
              38Real
      estate and repossessions acquired in settlement of loans
              
              $
              222
              
              
              $
              310See
      accompanying notes to consolidated financial statements.




7




BEACON FEDERAL BANCORP,
INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note
1 – Basis of Presentation





The
accompanying unaudited interim consolidated financial statements include the
accounts of Beacon Federal Bancorp, Inc. and its subsidiaries (collectively, the
“Company”) and have been prepared in accordance with the instructions for Form
10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all
disclosures necessary for a complete presentation of the financial statements in
conformity with U.S. generally accepted accounting principles.  In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation of the results of
operations for the interim periods.  The results of operations for the
quarter ended March 31, 2010 are not necessarily indicative of the results that
may be expected for the entire year or any other interim period.





Certain
amounts in the prior period consolidated financial statements have been
reclassified to conform with the current presentation.  The
reclassifications made to the prior year have no impact on the net income or
overall presentation of the consolidated financial statements.


Note
2 – Critical Accounting Estimates and Policies





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Management has identified the allowance for credit
losses, the carrying value of securities and income taxes to be the accounting
areas that require the most subjective and complex judgments, and as such could
be the most subject to revision as new information becomes available. Actual
results could differ from those estimates.




Securities




Debt
securities are classified as held to maturity and carried at amortized cost when
management has the positive intent and ability to hold them to maturity. Debt
securities are classified as available for sale when they might be sold before
maturity. Equity securities with readily determinable fair values are classified
as available for sale. Securities available for sale are carried at fair value,
with unrealized gains and losses reported in other comprehensive income, net of
tax. The Company does not purchase securities for trading purposes.




Beacon
Federal (the “Bank”) is a member of the Federal Home Loan Bank of New York. The
required investment in the common stock is based upon a certain percentage of
the Bank’s assets and advances. Federal Home Loan Bank stock is carried at cost,
which represents redemption value, and is periodically evaluated for impairment
based on ultimate recovery of par value. Dividends received on such stock are
reported as income.




Interest
income includes amortization of purchase premium or discount. Premiums and
discounts on securities are amortized using the interest method based upon
anticipated prepayments. Gains and losses on sales are recorded on the trade
date and determined using the specific identification method.




8




BEACON FEDERAL BANCORP,
INC.




Declines
in the fair value of securities below their cost that are other than temporary
are reflected as realized losses. In estimating if losses are
other-than-temporary, management considers: (1) the length of time and extent
that fair value has been less than cost, (2) the financial condition and near
term prospects of the issuer, (3) the Company’s intent to sell the security or
whether it is more likely than not that it will be required to sell the security
before the anticipated recovery of its remaining amortized cost basis and (4)
evaluation of cash flows to determine if they have been adversely
affected.




Allowance
for Loan Losses




The
allowance for loan losses is a valuation allowance for probable incurred credit
losses. Loan losses are charged against the allowance when management believes
the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
any, are credited to the allowance. Additions to the allowance for loan losses
are provided by charges to income based on various factors which, in the Bank’s
judgment, deserve current recognition in estimating probable
losses.




The
allowance consists of specific and general components. The specific component
relates to loans that are individually classified as impaired, for which the
carrying value of the loan exceeds the fair value of the collateral or the
present value of expected future cash flows, or loans otherwise adversely
classified. The general component covers nonclassified loans and is based on the
historical loan loss experience for the last four years, including adjustments
to historical loss experience, maintained to cover uncertainties that affect the
Bank’s estimate of probable losses for each loan type. The adjustments to
historical loss experience are based on evaluation of several factors, including
primarily changes in lending policies and procedures; changes in collection,
charge-off and recovery practices; changes in the nature and volume of the loan
portfolio; changes in the volume and severity of nonperforming loans; the
existence and effect of any concentrations of credit and changes in the level of
such concentrations; and changes in current, national and local economic and
business conditions.




A loan is
impaired when full payment under the loan terms is not expected. Multi-family,
commercial business and commercial real estate loans are individually evaluated
for impairment. If a loan is impaired, a portion of the allowance is allocated
so that the loan is reported, net, at the present value of estimated future cash
flows using the loan’s existing rate or at the fair value of collateral if
repayment is expected solely from the collateral. Large groups of smaller
balance homogeneous loans, such as consumer and residential real estate loans,
are collectively evaluated for impairment, and accordingly, they are not
separately identified for impairment disclosures.




Allocations
of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management’s judgment, should be charged off.
The Bank is subject to periodic examination by regulatory agencies that may
require the Bank to record increases in the allowances based on their evaluation
of available information. There can be no assurance that the Bank’s regulators
will not require further increases to the allowances.




Income Taxes




Provisions
for income taxes are based on taxes currently payable or refundable, and
deferred taxes which are based on temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial
statements.  Deferred tax assets and liabilities are reported in the
financial statements at currently enacted income tax rates applicable to the
period in which the deferred tax assets and liabilities are expected to be
realized or settled.




9





BEACON FEDERAL BANCORP,
INC.





New
Accounting Pronouncements




On
January 1, 1010, we adopted ASU No. 2009-16 “Transfers and Servicing (Topic 860)
- Accounting For Transfers of Financial Assets,” which is a codification of
guidance issued in June 2009. This guidance removes the concept of a qualifying
special-purpose entity. The guidance also establishes conditions for accounting
and reporting of a transfer of a portion of a financial asset, modifies the
asset sale/derecognition criteria, and changes how retained interests are
initially measured. The adoption of this guidance did not impact the
Company’s consolidated financial statements.




On
January 1, 2010, we adopted ASU No. 2009-17 “Consolidations (Topic 810) -
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities,” which is a codification of guidance issued in June 2009.
This guidance removes the scope exception for qualifying special-purpose
entities, contains new criteria for determining the primary beneficiary of a
variable interest entity (VIE) and increases the frequency of required
reassessments to determine whether an entity is the primary beneficiary of a
VIE. VIEs are assessed for consolidation under Topic 810 when we hold variable
interests in these entities.  The adoption of this guidance did not
impact the Company’s consolidated financial statements.




In
January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and
Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements.”
The ASU provides amendments that require disclosures of the transfers in or out
of level 1 and 2 inputs and the reasons for the transfers and summary of
activity in Level 3 fair value measurements on a gross basis rather than net. In
addition, the ASU clarifies existing disclosures related to the level of
disaggregation and inputs and valuation techniques. The level 3 purchases,
sales, issuances and settlements activity disclosures will be effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years. All other disclosures will be effective for interim and
annual periods beginning after December 15, 2009.  The ASC was adopted
January 1, 2010, and did not have any material impact on the Company’s financial
position or results of operations as it required only disclosures which are
included in the Fair Value footnote.




In March
2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic 815) –
Scope Exception Related to Embedded Credit Derivatives.” The ASU amends and
clarifies the guidance on how entities should evaluate credit derivatives
embedded in beneficial interests in securitized financial assets.  The
updated guidance also eliminates the scope exception for bifurcation of embedded
credit derivatives in interests in securitized financial assets, unless they are
created solely by subordination of one financial instrument to
another.  The ASU is effective for interim and annual periods
beginning after June 15, 2010.  The Company is currently evaluating
this new ASU.




10




BEACON FEDERAL BANCORP,
INC.


Note
3 – Earnings Per Share





Earnings
per share are based upon the weighted-average shares
outstanding.  ESOP shares, which have been committed to be released
and stock options, to the extent dilutive, are considered
outstanding.  Under the treasury stock method, stock options are
dilutive when the average market price of the Company’s common stock and effect
of any unamortized compensation expense exceeds the option price during the
period.  In addition, proceeds from the assumed exercise of dilutive
stock options and related tax benefit are assumed to be used to repurchase
common stock at the average market price during the period.  Basic and
diluted earnings per share are summarized as follows (dollars in thousands,
except per share data):




Three
      Months EndedMarch
      31,2010
              
              
              2009Basic
      earnings per share:Net
      income
              
              $
              1,294
              
              
              $
              436Less
      dividends paid:Common
      stock
              
              
              295
              
              
              
              263Participating
      securities
              
              
              8
              
              
              
              11Undistributed
      earnings
              
              $
              991
              
              
              $
              162Weighted-average
      basic shares outstanding
              
              
              5,987
              
              
              
              6,819Add:
      weighted-average participating securities outstanding
              
              
              155
              
              
              
              266Total
      weighted-average basic shares and participating securities
      outstanding
              
              
              6,142
              
              
              
              7,085Distributed
      earnings per share
              
              $
              0.05
              
              
              $
              0.04Undistributed
      earnings per share
              
              
              0.16
              
              
              
              0.02Net
      income per share
              
              $
              0.21
              
              
              $
              0.06Diluted
      earnings per share:Undistributed
      earnings
              
              $
              991
              
              
              $
              162Total
      weighted-average basic shares and participating securities
      outstanding
              
              
              6,142
              
              
              
              7,085Add:
      Dilutive stock options
              
              
              14
              
              
              
              -Total
      weighted-average diluted shares and participating securities
      outstanding
              
              
              6,156
              
              
              
              7,085Distributed
      earnings per share
              
              $
              0.05
              
              
              $
              0.04Undistributed
      earnings per share
              
              
              0.16
              
              
              
              0.02Net
      income per share
              
              $
              0.21
              
              
              $
              0.06




11




BEACON FEDERAL BANCORP,
INC.


Note
4 – Securities





The
amortized cost, unrealized gross gains and losses and fair values of securities
at March 31, 2010 were as follows (dollars in thousands):




Gross
              
              
              GrossAmortized
              
              
              Unrealized
              
              
              Unrealized
              
              
              FairMarch
      31, 2010
              
              Cost
              
              
              Gains
              
              
              Losses
              
              
              ValueHeld
      to maturity:Debt
      securities:Mortgage-backed
      securities
              
              $
              4,559
              
              
              $
              162
              
              
              $
              (237
              )
              
              $
              4,484Collateralized
      mortgage obligations
              
              
              9,098
              
              
              
              131
              
              
              
              (18
              )
              
              
              9,211Total
              
              $
              13,657
              
              
              $
              293
              
              
              $
              (255
              )
              
              $
              13,695Available
      for sale:Debt
      securities:Treasuries
              
              $
              100
              
              
              $
              1
              
              
              $
              -
              
              
              $
              101Agencies
              
              
              21,004
              
              
              
              89
              
              
              
              (53
              )
              
              
              21,040Pooled
      trust preferred securities
              
              
              12,459
              
              
              
              -
              
              
              
              (6,771
              )
              
              
              5,688Mortgage-backed
      securities
              
              
              35,886
              
              
              
              1,771
              
              
              
              -
              
              
              
              37,657Collateralized
      mortgage obligations
              
              
              103,914
              
              
              
              2,523
              
              
              
              (4,305
              )
              
              
              102,132Total
              
              $
              173,363
              
              
              $
              4,384
              
              
              $
              (11,129
              )
              
              $
              166,618




Mortgage-backed
securities and collateralized mortgage obligations consist of residential
mortgage securities and are backed by single-family mortgage
loans.  The Company does not have any such securities backed by
commercial real estate loans.  Of the Company’s forty-eight
collateralized mortgage obligations at March 31, 2010, three are subprime (Alt
A) securities, with an amortized cost of $10,054 and a fair value of
$7,434.





12





BEACON FEDERAL BANCORP,
INC.





The
amortized cost, unrealized gross gains and losses and fair values of securities
at December 31, 2009 were as follows (dollars in thousands):




Gross
              
              
              GrossAmortized
              
              
              Unrealized
              
              
              Unrealized
              
              
              FairDecember
      31, 2009
              
              Cost
              
              
              Gains
              
              
              Losses
              
              
              ValueHeld
      to maturity:Debt
      securities:Mortgage-backed
      securities
              
              $
              4,850
              
              
              $
              116
              
              
              $
              -
              
              
              $
              4,966Collateralized
      mortgage obligations
              
              
              9,711
              
              
              
              146
              
              
              
              (323
              )
              
              
              9,534Total
              
              $
              14,561
              
              
              $
              262
              
              
              $
              (323
              )
              
              $
              14,500Available
      for sale:Debt
      securities:Treasuries
              
              $
              100
              
              
              $
              1
              
              
              $
              -
              
              
              $
              101Agencies
              
              
              26,002
              
              
              
              21
              
              
              
              (51
              )
              
              
              25,972Pooled
      trust preferred securities
              
              
              12,755
              
              
              
              -
              
              
              
              (7,743
              )
              
              
              5,012Mortgage-backed
      securities
              
              
              39,629
              
              
              
              1,646
              
              
              
              (22
              )
              
              
              41,253Collateralized
      mortgage obligations
              
              
              97,754
              
              
              
              2,177
              
              
              
              (5,031
              )
              
              
              94,900Total
              
              $
              176,240
              
              
              $
              3,845
              
              
              $
              (12,847
              )
              
              $
              167,238




Maturities
of debt securities at March 31, 2010 are summarized as follows (dollars in
thousands):




Held
      to Maturity
              
              
              Available
      for SaleAmortized
              
              
              Fair
              
              
              Amortized
              
              
              FairCost
              
              
              Value
              
              
              Cost
              
              
              ValueDue
      within one year
              
              $
              -
              
              
              $
              -
              
              
              $
              100
              
              
              $
              101Due
      after one through five years
              
              
              -
              
              
              
              -
              
              
              
              6,006
              
              
              
              6,070Due
      after five through ten years
              
              
              -
              
              
              
              -
              
              
              
              9,998
              
              
              
              10,023Due
      after ten years
              
              
              -
              
              
              
              -
              
              
              
              17,459
              
              
              
              10,635-
              
              
              
              -
              
              
              
              33,563
              
              
              
              26,829Mortgage-backed
      securities
              
              
              4,559
              
              
              
              4,484
              
              
              
              35,886
              
              
              
              37,657Collateralized
      mortgage obligations
              
              
              9,098
              
              
              
              9,211
              
              
              
              103,914
              
              
              
              102,132$
              13,657
              
              
              $
              13,695
              
              
              $
              173,363
              
              
              $
              166,618





13





BEACON FEDERAL BANCORP,
INC.





Securities
with unrealized losses, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized loss position,
are as follows (dollars in thousands):





Less
      than 12 Months
              
              
              12
      Months or Longer
              
              
              TotalFair
              
              
              Unrealized
              
              
              Fair
              
              
              Unrealized
              
              
              Fair
              
              
              UnrealizedMarch
      31, 2010
              
              Value
              
              
              loss
              
              
              Value
              
              
              loss
              
              
              Value
              
              
              lossAgencies
              
              $
              4,947
              
              
              $
              (53
              )
              
              $
              -
              
              
              $
              -
              
              
              $
              4,947
              
              
              $
              (53
              )Pooled
      trustpreferred
      securities
              
              
              -
              
              
              
              -
              
              
              
              5,689
              
              
              
              (6,771
              )
              
              
              5,689
              
              
              
              (6,771
              )Mortgage
      backedsecurities
              
              
              1,103
              
              
              
              (18
              )
              
              
              -
              
              
              
              -
              
              
              
              1,103
              
              
              
              (18
              )Collateralizedmortgage
      obligations
              
              
              -
              
              
              
              -
              
              
              
              16,470
              
              
              
              (4,542
              )
              
              
              16,470
              
              
              
              (4,542
              )$
              6,050
              
              
              $
              (71
              )
              
              $
              22,159
              
              
              $
              (11,313
              )
              
              $
              28,209
              
              
              $
              (11,384
              )Less
      than 12 Months
              
              
              12
      Months or Longer
              
              
              TotalFair
              
              
              Unrealized
              
              
              Fair
              
              
              Unrealized
              
              
              Fair
              
              
              UnrealizedDecember
      31, 2009
              
              Value
              
              
              loss
              
              
              Value
              
              
              loss
              
              
              Value
              
              
              lossAgencies
              
              $
              5,953
              
              
              $
              (51
              )
              
              $
              -
              
              
              $
              -
              
              
              $
              5,953
              
              
              $
              (51
              )Pooled
      trustpreferred
      securities
              
              
              -
              
              
              
              -
              
              
              
              5,012
              
              
              
              (7,743
              )
              
              
              5,012
              
              
              
              (7,743
              )Mortgage
      backedsecurities
              
              
              3,263
              
              
              
              (22
              )
              
              
              -
              
              
              
              -
              
              
              
              3,263
              
              
              
              (22
              )Collateralizedmortgage
      obligations
              
              
              10,375
              
              
              
              (79
              )
              
              
              20,142
              
              
              
              (5,275
              )
              
              
              30,517
              
              
              
              (5,354
              )$
              19,591
              
              
              $
              (152
              )
              
              $
              25,154
              
              
              $
              (13,018
              )
              
              $
              44,745
              
              
              $
              (13,170
              )




No
assurance can be made that the credit quality of the securities with unrealized
losses at March 31, 2010 will not deteriorate in the future which may require
future reductions in income for OTTI credit losses.





Agencies (1
issue).The unrealized loss on the Company’s agency was caused
primarily by decreased liquidity and larger non-credit risk premium for this
security.  Management of the Company does not intend to sell the
security and it is not more likely than not that the Company will be required to
sell the security before recovery of its amortized cost basis, which may be upon
maturity.  Accordingly, the Company did not consider the unrealized
loss on this security to be an other-than-temporary credit-related loss at March
31, 2010.




Pooled Trust Preferred Securities
(PTPS) (6 issues).The unrealized losses on the Company’s
pooled trust preferred securities, which are backed by financial institution
issuers, were caused by general market conditions for financial institutions,
which is an industry sector that is relatively out of favor, and the resulting
lack of liquidity in the market for securities issued by or backed by financial
institutions. Management of the Company does not intend to sell the securities
and it is not more likely than not that the Company will be required to sell the
securities before recovery of their amortized cost basis, which may be upon
maturity. The Company used a discounted cash flow (“DCF”) analysis to provide an
estimate of the fair value which was more than the carrying amount. The
predominate factor in the fair value being greater than the carrying amount was
the Company holding senior tranche positions in these securities, providing a
priority in receipt of the cash flows estimated to be
collected.  Accordingly, the Company did not consider the unrealized
losses on those securities to be other-than-temporary credit-related losses at
March 31, 2010.




14




BEACON FEDERAL BANCORP,
INC.




Our PTPS
were rated “BBB+”, or lower, and the lowest was rated “Ca”, as discussed below
under the caption “Other-Than-Temporary Impairments.”





Mortgage-backed Securities (1 issue)
and Collateralized Mortgage Obligations (10 issues).The
unrealized losses on the Company’s mortgage-backed security and collateralized
mortgage obligations were caused primarily by decreased liquidity and larger
non-credit risk premiums for these securities.  Management of the
Company does not intend to sell the securities and it is not more likely than
not that the Company will be required to sell the securities before recovery of
their amortized cost basis, which may be upon maturity.  Accordingly,
the Company did not consider the unrealized losses on those securities to be
other-than-temporary credit-related losses at March 31, 2010.




Mortgage-backed
securities, and to a lesser extent, collateralized mortgage obligations (CMOs)
are issued by federal agencies, primarily FNMA and FHLMC. Of the Company’s
forty-eight CMOs, thirty-four are government agency and fourteen are privately
issued. The CMOs with unrealized losses are all privately issued CMOs, which
generally carry a higher yield and greater degree of credit risk and liquidity
risk than agency issues. Seven privately issued CMOs with unrealized losses were
rated investment grade or better and six privately issued CMOs were rated less
than investment grade with the lowest rated “Caa2”.





Other-Than-Temporary
Impairments. In estimating other-than-temporary impairment (“OTTI”)
losses, management considers: (1) the length of time and extent that fair value
has been less than cost, (2) the financial condition and near term prospects of
the issuer, (3) the Company’s intent to sell the security or whether it is more
likely than not that it will be required to sell the security before the
anticipated recovery of its remaining amortized cost basis and (4) evaluation of
cash flows to determine if they have been adversely affected.





15




BEACON FEDERAL BANCORP,
INC.




OTTI
credit losses on debt securities recognized in noninterest income during the
quarter ended March 31, 2010 and OTTI non-credit losses recognized in
accumulated other comprehensive loss (AOCL) at March 31, 2010 are summarized as
follows (dollars in thousands):




Non-CreditFair
              
              
              OTTI
      Credit Loss
              
              
              Loss
      in AOCLDescription/Rating
              
              Number
              
              
              Value
              
              
              During
      the Quarter
              
              
              March
      31, 2010Trust
      preferred securities:Baa2
              
              
              1
              
              
              $
              840
              
              
              $
              4
              
              
              $
              2,128Ca
              
              
              1
              
              
              
              204
              
              
              
              228
              
              
              
              6412
              
              
              
              1,044
              
              
              
              232
              
              
              
              2,769Collateralized
      mortgageobligations:CCC+
              
              
              1
              
              
              
              2,830
              
              
              
              19
              
              
              
              424CCC
              
              
              1
              
              
              
              2,593
              
              
              
              6
              
              
              
              2452
              
              
              
              5,423
              
              
              
              25
              
              
              
              6694
              
              
              $
              6,467
              
              
              $
              257
              
              
              $
              3,438






The
Company recognized an OTTI credit loss on trust preferred securities of $232,000
during the quarter ended March 31, 2010.  The Company used a DCF
analysis to provide an estimate of the OTTI credit loss, which resulted from the
fair value amount being less than the carrying amount. Inputs to the discount
model included default rates, deferrals of interest, over-collateralization
tests, interest coverage tests and other factors. For debt securities with
credit ratings below “AA” (not high quality), the Company discounts the expected
cash flows at the current yield used to accrete the beneficial interest in
accordance with FASB ASC 325-40-35, “Investments-Other-Beneficial Interests in
Securitized Financial Assets.” The accretable yield for the beneficial interest
on the date of evaluation is the excess of estimated cash flows over the
beneficial interest’s reference amount. The reference amount is equal to the
initial investment minus cash received to date minus other-than-temporary
impairments recognized to date plus the yield accreted to date. The increase in
the defaults and deferrals contributed to the OTTI credit loss.  For
those trust preferred securities with OTTI credit losses, defaults and deferrals
provided by a third-party broker increased by $15.3 million for the quarter
ended March 31, 2010.  At March 31, 2010 the projected defaults in the
“Baa2” and the “Ca” trust preferred securities were 24.1% and 36.2%,
respectively.





The
Company recognized an OTTI credit loss on collateralized mortgage obligations of
$25,000 during the quarter ended March 31, 2010.  The Company used a
DCF analysis to provide an estimate of the OTTI credit loss, which resulted from
the fair value amount being less than the carrying amount. Inputs to the DCF
analysis include prepayment rate, default rate, delinquencies, loss severities
and percentage of non-performing assets. For debt securities with credit ratings
below “AA” (not high quality), the Company discounts the expected cash flows at
the current yield used to accrete the beneficial interest, which is in
accordance with the subsequent measurement provisions of FASB ASC 325-40-35,
“Investments-Other-Beneficial Interests in Securitized Financial Assets.” The
accretable yield for the beneficial interest on the date of evaluation is the
excess of estimated cash flows over the beneficial interest’s reference amount.
The reference amount is equal to the initial investment minus cash received to
date minus other-than-temporary impairments recognized to date plus the yield
accreted to date. The increase in the percentage of loans greater than 90 days
delinquent contributed to the OTTI credit loss.  For those
collateralized mortgage obligations with OTTI credit losses, the percentage of
loans greater than 90 days delinquent provided by a third-party broker increased
from 17% on average at December 31, 2009 to 19% on average at March 31,
2010.




16




BEACON FEDERAL BANCORP,
INC.




The
largest OTTI credit loss for any single issue was $228,000 for the quarter ended
March 31, 2010 and represented 27.0% of its amortized cost.  The
percentage of OTTI credit loss to amortized cost for the other three issues was
less than 1%.  These OTTI credit losses resulted more from the
Company’s credit analysis than the extent of decline in value of the
securities.





An OTTI
loss of $217,000 and $207,000 related to a trust preferred security and a
collateralized mortgage obligation, respectively, was recorded during the
quarter ended March 31, 2009.





The
following table summarizes the change in OTTI credit related losses on debt
securities, exclusive of tax effects,  for the quarter ended March 31,
2010 (dollars in thousands):


Credit
      related impairments with a portionrecognized
      in other comprehensiveloss:Balance
      at January 1, 2010
              
              $
              3,293Credit
      related impairments on portionsof
      OTTI previously recognized in othercomprehensive
      loss
              
              
              257Balance
      at March 31, 2010
              
              $
              3,550





Note
5 – Loans, Foreclosed Assets and Repossessed Assets





Activity
in the allowance for loan losses was as follows (dollars in
thousands):




Three
      Months EndedMarch
      31,2010
              
              
              2009Beginning
      balance
              
              $
              15,631
              
              
              $
              10,546Provision
      for loan losses
              
              
              1,780
              
              
              
              2,570Loans
      charged off
              
              
              (367
              )
              
              
              (617
              )Recoveries
              
              
              104
              
              
              
              69Ending
      balance
              
              $
              17,148
              
              
              $
              12,568Ratios:Annualized
      net charge-offs to average loans outstanding
              
              
              0.13
              %
              
              
              0.28
              %Allowance
      for loan losses to nonperforming loans at end of period
              
              
              106.58
              %
              
              
              130.00
              %Allowance
      for loan losses to total loans at end of period
              
              
              2.07
              %
              
              
              1.58
              %
  17


BEACON FEDERAL BANCORP,
INC.





Following
is a summary of nonperforming assets, impaired loans and other related data
(dollars in thousands):




March
      31,
              
              
              December
      31,2010
              
              
              2009Nonaccrual
      loans
              
              $
              13,053
              
              
              $
              12,061Loans
      past due over 90 days still accruing
              
              
              3,037
              
              
              
              827Total
      nonaccrual loans and loans past dueover
      90 days and still accruing
              
              
              16,090
              
              
              
              12,888Foreclosed
      and repossessed assets
              
              
              812
              
              
              
              797Total
      nonperforming assets
              
              $
              16,902
              
              
              $
              13,685Ratios:Nonperforming
      loans to total loans
              
              
              1.94
              %
              
              
              1.56
              %Nonperforming
      assets to total assets
              
              
              1.57
              %
              
              
              1.28
              %Impaired
      loans (in nonaccrual loans)
              
              $
              10,216
              
              
              $
              10,331Impaired
      loans (past due over 90 days on accrual)
              
              
              1,120
              
              
              
              647Total
      impaired loans
              
              $
              11,336
              
              
              $
              10,978Allowance
      for losses on impaired loans
              
              $
              5,200
              
              
              $
              4,103Impaired
      loans with no allowance
              
              $
              -
              
              
              $
              27Average
      balance of impaired loans
              
              $
              10,745
              
              
              $
              5,102Interest
      income recognized
              
              $
              97
              
              
              $
              197





Note
6 – Equity Incentive Plan





Equity Incentive Plan:As
authorized by the Beacon Federal Bancorp, Inc. 2008 Equity Incentive Plan (the
“2008 Plan”), the Board of Directors granted 444,134 shares of non-incentive
stock options and 265,884 shares of common stock as restricted stock awards to
directors, officers and employees on November 26, 2008.  The 2008 Plan
authorizes the award of up to 739,643 shares pursuant to grants of stock options
and up to 295,857 shares of common stock may be issued as restricted stock
awards, subject to restrictions, to directors, officers and employees of the
Company and the Bank.   The Plan provides for the grant of stock
options, stock appreciation rights and restricted stock.  Options
expire ten years from the date of the grant.  All stock options and
stock awards granted are vested over a three-year period.





Under the
measurement provisions of FASB ASC 718-10-30 and FASB ASC 718-10-35,
“Compensation-Stock Compensation,” compensation expense is recognized based on
the fair value of awards granted which includes restricted stock and stock
options, at the grant date and is recognized on a straight-line basis over the
requisite service period, generally defined as the vesting period.





The
Company has estimated the fair value of awards granted under its stock option
plan to be $1.60 per award utilizing the Black-Scholes pricing
model.  There were no awards granted during the quarter ended March
31, 2010 or 2009.




18


BEACON FEDERAL BANCORP,
INC.




Stock
option compensation expense is as follows (dollars in thousands, except per
share data):


Three
      Months EndedMarch
      31,2010
              
              
              2009Pre-tax
              
              $
              48
              
              
              $
              58After-tax
              
              
              29
              
              
              
              35Impact
      on basic and diluted earnings per share
              
              $
              0.01
              
              
              $
              0.01




At March
31, 2010, the total unrecognized expense related to non-vested stock options was
approximately $391 and is expected to be recognized over the weighted-average
period of 1.75 years.




A summary
of the Company’s stock option activity under the 2008 Plan for the three months
ended March 31, 2010 is as follows (dollars in thousands, except per share
data):




Weighted-AverageWeighted-
              
              
              RemainingAverage
              
              
              Contractual
              
              
              AggregateNumber
              
              
              Exercise
              
              
              Term
      in
              
              
              Intrinsicof
      Shares
              
              
              Price
              
              
              Years
              
              
              ValueOutstanding
      at January 1, 2010
              
              
              405,134
              
              
              $
              8.23
              
              
              
              8.90
              
              
              $
              -Granted
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Expired
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at March 31, 2010
              
              
              405,134
              
              
              $
              8.23
              
              
              
              8.65
              
              
              $
              -Exercisable
      at March 31, 2010
              
              
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -Vested
      at March 31, 2010
              
              
              159,045
              
              
              $
              8.23
              
              
              
              8.65
              
              
              $
              -At
      March 31, 2010 share optionsexpected
      to vest in the future
              
              
              239,129
              
              
              $
              8.23
              
              
              
              8.65
              
              
              $
              -




A summary
of the Company’s restricted stock award expense is as follows (dollars in
thousands, except per share data):




Three
      Months EndedMarch
      31,2010
              
              
              2009Pre-tax
              
              $
              159
              
              
              $
              182After-tax
              
              
              95
              
              
              
              109Impact
      on basic and diluted earnings per share
              
              $
              0.02
              
              
              $
              0.02




At March
31, 2010, the total unrecognized expense related to restricted stock awards
was approximately $1.1 million and is expected to be recognized over the
weighted-average period of 1.75 years.




19




BEACON FEDERAL BANCORP,
INC.




A summary
of the Company’s non-vested stock award activity for the period ended March 31,
2010 is as follows:




Number
              
              
              Weighted-of
              
              
              AverageNonvested
              
              
              Grant
      DateShares
              
              
              Fair
      ValueNonvested
      at January 1, 2010
              
              
              154,776
              
              
              $
              8.23Granted
              
              
              -
              
              
              
              -Vested
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -Nonvested
      at March 31, 2010
              
              
              154,776
              
              
              $
              8.23





Note
7 – Income Taxes





Under
FASB ASC 740-10-25, ”Income Taxes,” a tax position is recognized as a benefit
only if it is “more likely than not” that the tax
position would be sustained in a tax examination, with a tax examination being
presumed to occur.  The amount recognized is the largest amount of tax
benefit that is greater than 50% likely of being realized on
examination.  For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded.





At March
31, 2010, the Company had $190,000 of unrecognized tax benefits, which would
affect the effective tax rate if recognized.  The Company does not
anticipate that the total unrecognized tax benefits will change significantly in
the next twelve months.  We are subject to U.S. Federal income taxes,
as well as State of New York, Massachusetts, Texas and Tennessee income
taxes.  Income tax returns filed for the tax years ended December 31,
2006 through December 31, 2008 remain open to examination by these
jurisdictions.





Note
8 – Commitments and Financial Guarantees





As a
financial services provider, we routinely are a party to various financial
instruments with off-balance sheet risks, such as commitments to extend credit
and unused lines of credit.  While these contractual obligations
represent our future cash requirements, a significant portion of commitments to
extend credit may and are likely to expire without being drawn
upon.  Such commitments are subject to the same credit policies and
approval process accorded to loans we make.




The
contractual amount of financial instruments with off-balance sheet risk was as
follows (dollars in thousands):





March
      31, 2010
              
              
              December
      31, 2009Fixed
              
              
              Variable
              
              
              Fixed
              
              
              VariableRate
              
              
              Rate
              
              
              Rate
              
              
              RateCommitments
      to make loans
              
              $
              18,209
              
              
              $
              37,432
              
              
              $
              23,785
              
              
              $
              20,362Unused
      lines of credit
              
              $
              4,014
              
              
              $
              55,681
              
              
              $
              6,985
              
              
              $
              55,367Range
      of fixed-rate commitments
              
              
              3.25%-15.00
              %
              
              
              -
              
              
              
              3.25%-15.00
              %
              
              
              -





20




BEACON FEDERAL BANCORP,
INC.




The
following instruments are considered financial guarantees and are carried at
fair value.  The contract amount and fair value of these instruments
was as follows (dollars in thousands):




March
      31, 2010
              
              
              December
      31, 2009Contract
              
              
              Fair
              
              
              Contract
              
              
              FairAmount
              
              
              Value
              
              
              Amount
              
              
              ValueStandby
      letters of credit
              
              $
              1,041
              
              
              $
              -
              
              
              $
              1,041
              
              
              $
              -Limited
      recourse obligationsrelated
      to loans sold
              
              $
              1,664
              
              
              $
              -
              
              
              $
              1,665
              
              
              $
              -


Loans
sold to the Federal Home Loan Bank (FHLB) of New York under the Mortgage
Partnership Finance program are sold with recourse.  The Bank has
agreements to sell residential loans up to $60.0 million to the FHLB of New
York.  Approximately $48.6 million has been sold through March 31,
2010.  Under the agreement, the Bank has a maximum credit enhancement
of $1.7 million at March 31, 2010.   Based upon a favorable
payment history, the Bank does not anticipate recognizing any losses on these
residential loans, and accordingly, has not recorded a liability for the credit
enhancement.





Note
9 – Fair Value Measurements and Financial Instruments





Fair
Value Measurements





General.  The
Company follows the provisions of FASB ASC 820-10, “Fair Value Measurements,”
for financial assets and liabilities.  FASB ASC 820-10 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 at the
measurement date.  The fair value hierarchy prioritizes the
assumptions that market participants would use in pricing the assets or
liabilities (the “inputs”) into three broad levels.





The fair
value hierarchy gives the highest priority (Level 1) to quoted prices in active
markets for identical assets and liabilities and the lowest priority (Level 3)
to unobservable inputs in which little, if any, market activity exists,
requiring entities to develop their own assumptions and data.





Level 2
inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly.  These inputs include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in market areas that are not active, inputs other than quoted prices
that are observable for the asset or liability (such as interest rates,
volatilities, prepayment speeds, credit risks and default rates) or inputs that
are derived principally from or corroborated by observable market data by
correlation or other means.





Valuation
Techniques.Securities available for sale are carried at fair
value on a recurring basis utilizing Level 1, Level 2 and Level 3 inputs. For
U.S. Treasuries, the Company obtains fair values using quoted prices in the U.S.
Treasury market. For agencies, mortgage-backed securities, and collateralized
mortgage obligations, the Company obtains fair value measurements from an
independent pricing service. The fair value measurements consider observable
data that may include dealer quotes, live trading levels, trade execution data,
cash flows, market consensus prepayment speeds, market spreads, credit
information and the U.S. Treasury yield curve.




21




BEACON FEDERAL BANCORP,
INC.




For trust
preferred securities, the Company obtains fair values using a discounted cash
flow analysis.  The analysis considers the structure and term of the
trust preferred securities and the financial condition of the underlying
financial institution issuers.  Specifically, the analysis details
interest rates, principal balances of note classes and underlying issuers, the
timing and amount of interest and principal payments of the underlying issuers,
and the allocation of the payments to the note classes.  The current
estimate of expected cash flows is based on the most recent trustee reports and
any other relevant market information including announcements of interest
payment deferrals or defaults.  Assumptions used in the analysis
include default rate, deferral of interest, over-collateralization test,
interest coverage test and other factors.  For debt securities with
credit ratings below “AA” (not high quality), the Company discounts the expected
cash flows at the current yield used to accrete the beneficial interest in
accordance with the subsequent measurement provisions of FASB ASC 325-40-35,
“Investments-Other-Beneficial Interests in Securitized Financial Assets.” The
accretable yield for the beneficial interest on the date of evaluation is the
excess of estimated cash flows over the beneficial interest’s reference amount.
The reference amount is equal to the initial investment minus cash received to
date minus other-than-temporary impairments recognized to date plus the yield
accreted to date.





In
determining the amount of currently performing collateral for purposes of
modeling the expected future cash flows, management analyzed the default and
deferral history.  This review indicated significant increases in the
number and amount of defaults and deferrals by the financial institution
issuers.  Additionally, management has noted the correlation between
the rising levels of nonperforming loans as a percent of tangible equity plus
loan loss reserves, by those issuers that have defaulted and, or, deferred
interest payments.  Therefore management has used this ratio as a
primary indicator to project the levels of future defaults for fair value
analysis purposes.  Management expects the trend of higher default and
deferral levels to continue, potentially negatively impacting the future
cash flows of these securities.





Mortgage
loans originated and intended for sale in the secondary market are carried at
the lower of aggregate cost or market, utilizing Level 2 inputs as determined
based on expected proceeds from outstanding commitments from
investors.




The
Company estimates fair values on mortgage servicing rights using Level 2 inputs,
which include discounted cash flows based on current market pricing. For
purposes of measuring impairment, the rights are stratified based on the
predominant risk characteristics of the underlying loans. The predominant
characteristic currently used for stratification is type of loan, including
coupon and loan age. The fair value of each stratification of servicing
portfolio is estimated by calculating the present value of estimated future net
servicing cash flows, taking into consideration actual and expected mortgage
loan prepayment rates, discount rates, servicing costs, and other economic
factors. The amount of impairment recognized is the amount by which the
capitalized mortgage servicing rights for a stratum exceeds their fair
value.




Derivative
instruments used in the ordinary course of business consist of mandatory forward
sales contracts and interest rate lock commitments. The Company manages interest
rate risk and hedges the interest rate lock commitments through mandatory
forward sales contracts, which have fair value changes opposite to market
movements. Generally, in an interest rate lock commitment, the borrower locks-in
the current market rate for a fixed-rate loan. The mandatory forward sales
contract is a loans sales agreement in which the Company commits to deliver a
certain principal amount of mortgage loans to an investor at a specific price on
or before a specific date.




22




BEACON FEDERAL BANCORP,
INC.




The
Company had outstanding forward sales contracts of $5.2 million in notional
value, matched against $6.2 million of interest rate lock commitments at March
31, 2010.  The interest rate lock commitments included in other assets
and forward sales contracts recognized in other liabilities amounted to $88,000
and $0, respectively, at March 31, 2010 and were accounted for at fair value as
an undesignated derivative.  The interest rate lock commitments show a
fair value gain of $88,000 recognized in noninterest income for the three months
ended March 31, 2010.  The fair value of the Company’s derivative
financial instruments is primarily measured by obtaining pricing from
broker-dealers recognized to be market participants.  The pricing is
derived from market observable inputs that can generally be verified and do not
typically involve significant judgment by the Company.  Forward
contracts and loan commitments are recorded at fair value utilizing Level 2
inputs.  The Company believes that it has enough sources of liquidity
to satisfy future cash requirements as they related to these derivative
instruments.





Impaired
loans are carried at fair value on a non-recurring basis utilizing Level 3
inputs, consisting of appraisals of underlying collateral and discounted cash
flow analysis. A loan is impaired when full payment under the loan terms is not
expected. Multi-family, commercial business and commercial real estate loans are
individually evaluated for impairment. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported net, at the present value of
estimated future cash flows using the loan’s existing rate or at the fair value
of collateral if repayment is expected solely from the collateral. Real estate
collateral is typically valued using independent appraisals or other indications
of value based on recent comparable sales of similar properties or assumptions
generally observable in the marketplace, adjusted based on non-observable inputs
and the related nonrecurring fair value measurement adjustments and have
generally been classified as Level 3.  Large groups of smaller balance
homogeneous loans, such as consumer and residential real estate loans, are
collectively evaluated for impairment, and accordingly, they are not separately
identified for impairment disclosures.





Nonfinancial
assets measured at fair value on a non-recurring basis include foreclosed and
repossessed assets. Assets acquired through or instead of loan foreclosure and
by repossession are initially recorded at fair value utilizing level 2 units
based on observable market data less costs to sell when acquired, establishing a
new cost basis. Foreclosed assets also include properties for which the Bank has
taken physical possession, even though formal foreclosure proceedings have not
taken place.





23




BEACON FEDERAL BANCORP,
INC.





Assets and Liabilities Measured at
Fair Value on a Recurring Basis.The following table
summarizes financial assets and liabilities measured at fair value on a
recurring basis at March 31, 2010, segregated by the level of the inputs within
the hierarchy used to measure fair value (dollars in thousands):





Quoted
      Prices in
              
              
              SignificantActive
      Markets
              
              
              Other
              
              
              Significantfor
      Identical
              
              
              Observable
              
              
              Unobservable
              
              
              TotalAssets
              
              
              Inputs
              
              
              Inputs
              
              
              FairAssets
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)
              
              
              ValueAvailable
      for sale securities:Debt
      securities:U.S.
      Treasury and agencies
              
              $
              101
              
              
              $
              21,040
              
              
              $
              -
              
              
              $
              21,141Pooled
      trust preferred securities
              
              
              -
              
              
              
              -
              
              
              
              5,688
              
              
              
              5,688Mortgage-backed
      securities
              
              
              -
              
              
              
              37,657
              
              
              
              -
              
              
              
              37,657Collateralized
      mortgage obligations
              
              
              -
              
              
              
              102,132
              
              
              
              -
              
              
              
              102,132$
              101
              
              
              $
              160,829
              
              
              $
              5,688
              
              
              $
              166,618Loans
      held for sale
              
              $
              -
              
              
              $
              472
              
              
              $
              -
              
              
              $
              472Mortgage
      servicing rights
              
              $
              -
              
              
              $
              852
              
              
              $
              -
              
              
              $
              852Loan
      commitment derivatives
              
              $
              -
              
              
              $
              88
              
              
              $
              -
              
              
              $
              88




The
following table summarizes financial assets measured at fair value on a
recurring basis at December 31, 2009, segregated by the level of the inputs
within the hierarchy used to measure fair value (dollars in
thousands):




Quoted
      Prices in
              
              
              SignificantActive
      Markets
              
              
              Other
              
              
              Significantfor
      Identical
              
              
              Observable
              
              
              Unobservable
              
              
              TotalAssets
              
              
              Inputs
              
              
              Inputs
              
              
              FairAssets
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)
              
              
              ValueSecurities
      available for sale:Debt
      securities:U.S.
      Treasury and agencies
              
              $
              101
              
              
              $
              25,972
              
              
              $
              -
              
              
              $
              26,073Pooled
      trust preferred securities
              
              
              -
              
              
              
              -
              
              
              
              5,012
              
              
              
              5,012Mortgage-backed
      securities
              
              
              -
              
              
              
              41,253
              
              
              
              -
              
              
              
              41,253Collateralized
      mortgage obligations
              
              
              -
              
              
              
              94,900
              
              
              
              -
              
              
              
              94,900$
              101
              
              
              $
              162,125
              
              
              $
              5,012
              
              
              $
              167,238Loans
      held for sale
              
              $
              -
              
              
              $
              940
              
              
              $
              -
              
              
              $
              940Mortgage
      servicing rights
              
              $
              -
              
              
              $
              900
              
              
              $
              -
              
              
              $
              900Loan
      commitment derivatives
              
              $
              -
              
              
              $
              79
              
              
              $
              -
              
              
              $
              79LiabilitiesSales
      contract derivatives
              
              $
              -
              
              
              $
              17
              
              
              $
              -
              
              
              $
              17




24




BEACON FEDERAL BANCORP,
INC.




Assets Measured at Fair Value on a
Recurring Basis Using Significant Unobservable Inputs (Level
3).A reconciliation of the beginning and ending balances for
trust preferred securities using Level 3 inputs was as follows (dollars in
thousands):





Balance
      at January 1, 2010
              
              $
              5,012Transfers
      into Level 3
              
              
              -Capitalized
      interest
              
              
              35Principal
      paydowns
              
              
              (99
              )Total
      gains or losses (realized/unrealized)Included
      in earnings
              
              
              (232
              )Included
      in other comprehensive income
              
              
              972Balance
      at March 31, 2010
              
              $
              5,688





Financial Assets Measured at Fair
Value on a Non-Recurring Basis.Assets measured at fair value
on a non-recurring basis at March 31, 2010, include impaired loans of $6.1
million, net of allowance for loan losses of $5.2 million, utilizing level 3
inputs.  The impaired loans are collateral dependent.





The
activity in the allowance for losses on impaired loans during the quarter ended
March 31, 2010 was as follows (dollars in thousands):





Balance
      at January 1, 2010
              
              $
              4,103Provision
      for loan losses
              
              
              1,207Loans
      charged off
              
              
              -Recoveries
              
              
              (110
              )Balance
      at March 31, 2010
              
              $
              5,200





Assets
measured at fair value on a non-recurring basis at December 31, 2009 consisted
of impaired loans of $6.9 million net of allowance for loan losses of $4.1
million.





Nonfinancial Assets Measured at Fair
Value on a Non-Recurring Basis.Nonfinancial assets measured
on a non-recurring basis at March 31, 2010 include foreclosed and repossessed
assets of $812,000, utilizing Level 2 inputs.  There was no provision
for losses on these assets during the quarter ended March 31, 2010.





25




BEACON FEDERAL BANCORP,
INC.




Financial
Instruments


Carrying
amount and estimated fair values of financial instruments were as follows
(dollars in thousands):




March
      31,
              
              
              December
      31,2010
              
              
              2009Carrying
              
              
              Fair
              
              
              Carrying
              
              
              FairAmount
              
              
              Value
              
              
              Amount
              
              
              ValueFinancial
      assets:Cash
      and cash equivalents
              
              $
              22,391
              
              
              $
              22,391
              
              
              $
              12,993
              
              
              $
              12,993Interest-bearing
      deposits
              
              
              170
              
              
              
              170
              
              
              
              170
              
              
              
              170Securities
      available for sale
              
              
              166,618
              
              
              
              166,618
              
              
              
              167,238
              
              
              
              167,238Securities
      held to maturity
              
              
              13,657
              
              
              
              13,695
              
              
              
              14,561
              
              
              
              14,500Loans
      held for sale
              
              
              472
              
              
              
              472
              
              
              
              940
              
              
              
              940Loans,
      net
              
              
              816,636
              
              
              
              834,442
              
              
              
              816,061
              
              
              
              812,186FHLB
      stock
              
              
              11,359
              
              
              
              N/A
              
              
              
              11,487
              
              
              
              N/AAccrued
      interest receivable
              
              
              3,904
              
              
              
              3,904
              
              
              
              3,888
              
              
              
              3,888Financial
      liabilities:Deposits
              
              
              699,197
              
              
              
              705,302
              
              
              
              693,297
              
              
              
              699,514Federal
      Home Loan Bank advances
              
              
              188,902
              
              
              
              198,287
              
              
              
              191,094
              
              
              
              201,123Securities
      sold under agreement to repurchase
              
              
              70,000
              
              
              
              76,434
              
              
              
              70,000
              
              
              
              75,829Accrued
      interest payable
              
              $
              1,553
              
              
              $
              1,553
              
              
              $
              1,522
              
              
              $
              1,522




The
methods and assumptions used to estimate fair value are described as
follows:




Carrying
amount is the estimated fair value for cash and cash equivalents,
interest-bearing deposits, accrued interest receivable and payable, demand
deposits, short-term debt, and variable rate loans or deposits that reprice
frequently and fully.  It is not practicable to determine the fair
value of FHLB stock due to the restriction placed on its
transferability.  For fixed rate loans or deposits and for variable
rate loans or deposits with infrequent repricing or repricing limits, fair value
is based on discounted cash flows using current market rates applied to the
estimated life and credit risk.  Fair value of debt is based on
current rates for similar financing.  The fair value of off-balance
sheet items is not considered material.





The
discounted cash flow models used to determine fair value are significantly
affected by the assumptions used, including, but not limited to, the discount
rate and estimates of future cash flows.




26





BEACON FEDERAL BANCORP,
INC.




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





Management’s
discussion and analysis of financial condition and results of operations at
March 31, 2010 and for the three months ended March 31, 2010 and 2009 is
intended to assist in understanding the financial condition and results of
operations of the Company.  The information contained in this section
should be read in conjunction with the unaudited Consolidated Financial
Statements and the notes thereto, appearing in Part 1, Item 1 of this
report.





Forward-Looking
Statements





When used
in this Form 10-Q, the words or phrases “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “estimate,” “project” or similar expressions
are intended to identify “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995.  Such statements are
subject to certain risks and uncertainties including changes in economic
conditions in our market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in our market area, and
competition that could cause actual results to differ materially from historical
earnings and those presently anticipated or projected.  Additionally,
other risks and uncertainties are described in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009, as filed with the Securities and
Exchange Commission (the “SEC”), which is available through the SEC’s website at
www.sec.gov.  The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which only speak as of the date
made.  The Company wishes to advise readers that the factors listed
above could affect the Company’s financial performance and could cause the
Company’s actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.





The
Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.





Critical
Accounting Policies




Preparation
of our financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. We believe the most complex and sensitive judgments, because of
their significance to the Consolidated Financial Statements, result primarily
from the need to make estimates about the effects of matters that are inherently
uncertain.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Note 1 to the Consolidated Financial
Statements in our 2009 Annual Report, incorporated by reference in our 2009 Form
10-K, describe the significant accounting estimates and policies used in
preparation of the Consolidated Financial Statements.  The critical
accounting policies include the accounting for credit losses, the valuation of
securities and the accounting for income taxes.  Actual results in
these areas could differ from management’s estimates. There have been no
significant changes in our critical accounting estimates during the first three
months of 2010.





Overview





General.  Our
results of operations depend mainly on our net interest income, which is the
difference between the interest income earned on our loan and investment
portfolios and interest expense we pay on our deposits and borrowings. Results
of operations are also affected by fee income from banking operations,
provisions for loan losses, gains on sales of loans and other miscellaneous
income.  Our noninterest expense consists primarily of compensation
and employee benefits, occupancy and equipment, marketing, general
administrative expenses and income tax expense.




27




BEACON FEDERAL BANCORP,
INC.




Our
results of operations are also significantly affected by general economic and
competitive conditions, particularly with respect to changes in interest rates,
government policies and actions of regulatory authorities. Future changes in
applicable law, regulations or government policies may materially affect our
financial condition and results of operations.




Economic
Conditions.The national economy, as well as the local
economies within our market areas, continue to be weak.  The economy
has been marked by higher unemployment rates, rising numbers of foreclosures,
declining home prices and contractions in business and consumer
credit.  The national unemployment rate was at 9.7% in March 2010
compared to 8.6% in March 2009.  The unemployment rate in the
Company’s primary market area in New York State is slightly below the national
average at 8.6% in March 2010 compared to 7.8% in March 2009.  The
Federal Open Market Committee has responded by keeping the federal funds rate
between 0.00% and 0.25% since December 2008.  The reduced federal
funds rate has increased the Company’s net interest margin and net interest
income.  However, price competition for loans and deposits has
increased.




At March
31, 2010 Beacon Federal was categorized as “well capitalized” under regulatory
capital requirements.




Operating
Results.  Net income increased to $1.3 million for the quarter
ended March 31, 2010 from $0.4 million for the quarter ended March 31,
2009.  The increase in net income resulted from substantially higher
net interest income and lower provision for loan losses, partially offset by
higher noninterest expenses and income taxes.





The lower
provision for loan losses resulted from a decline in net charge-offs, when
compared to the same period a year ago and the change in the balance of
nonperforming loans.  See “Comparison of Operating Results - Provision
for Loan Losses” for further discussion regarding the change in the level of
nonperforming loans.





Financial
Condition.Total assets increased slightly by $6.4 million to
$1.07 billion at March 31, 2010 as a result of a $9.4 million increase in cash
and cash equivalents and $0.6 million increase in net loans, partially offset by
a $1.3 million decrease in other assets and a $1.5 million decrease in
securities.  The increase in assets was funded by a $5.9 million
increase in deposits, partially offset by a $2.2 million decrease in
borrowings.  Stockholders’ equity increased by $2.7 million, or 2.7%,
to $104.0 million at March 31, 2010 from $101.3 million at December 31,
2009.  The increase reflected net income of $1.3 million and a
decrease in net unrealized holding losses on securities of $1.4 million,
partially offset by cash dividends of $0.3 million.


Comparison
of Financial Condition at March 31, 2010 and December 31, 2009





Cash and Cash
equivalents.Cash and cash equivalents increased by $9.4
million, as funds were kept on hand to fund loan growth and in preparation of
paying down borrowings set to mature in the second quarter 2010.





Securities.  Securities
available for sale decreased slightly to $166.6 million at March 31, 2010 from
$167.2 million at December 31, 2009.  The decrease in securities
available for sale reflected primarily the principal payments of $17.9 million
in excess of purchases of $15.4 million.  Securities held to maturity
decreased $0.9 million to $13.7 million at March 31, 2010.




28




BEACON FEDERAL BANCORP,
INC.




Loans,
Net.  Net loans increased slightly by $0.6 million to $816.6
million at March 31, 2010 from $816.1 million at December 31,
2009.  For the quarter the Company originated $46.8 million of loans,
partially offset by provision for loan losses of $1.8 million and scheduled
principal payments.





Other
Assets.  Other assets decreased by $1.3 million to $14.4
million at March 31, 2010 from $15.7 million at December 31, 2009, due primarily
to the decrease in deferred tax asset as a result of a decrease in net
unrealized holding losses on AFS securities for the quarter.





Deposits.  Deposits
increased by $5.9 million to $699.2 million at March 31, 2010, from $693.3
million at December 31, 2009.  Money market accounts increased by
$27.4 million and represented the largest dollar increase in our deposit
accounts.  CDARS, noninterest checking and savings increased by $13.8
million, $4.7 million and $3.7 million, respectively.  Certificates of
deposit and checking deposits decreased $38.9 million and $4.8 million,
respectively.





Borrowings.  FHLB
advances decreased by $2.2 million, or 1.1%, to $188.9 million at March 31, 2010
from $191.1 million at December 31, 2009 as the Company was able to fund loan
growth for the quarter using the growth in deposits.  The Company also
has access when necessary to alternative sources of financing, including
brokered deposits, CDARS and the Borrower-in-Custody (“BIC”) program with the
Federal Reserve Bank of New York.





Stockholders’
Equity.  Stockholders’ equity increased by $2.7 million, or
2.7%, to $104.0 million at March 31, 2010 from $101.3 million at December 31,
2009.  The increase reflected net income of $1.3 million, a decrease
in net unrealized holding losses on securities of $1.4 million, partially offset
by cash dividends of $0.3 million.





Comparison
of Operating Results for the Three Months Ended March 31, 2010 and
2009





Interest
Income.  Interest income decreased by $61,000, or less than 1%,
to $13.8 million for the quarter ended March 31, 2010.  The decrease
resulted primarily from lower yields on securities, partially offset by a higher
average balance of loans.





Interest
income on loans increased $270,000, or 2.4%, to $11.6 million for the quarter
ended March 31, 2010 from $11.3 million for the quarter ended March 31,
2009.  The effect of a higher average balance of loans was partially
offset by a lower average yield. The average balance on loans increased to
$836.0 million for the quarter ended March 31, 2010 from $796.6 million for the
quarter ended March 31, 2009, reflecting our continued emphasis on loan
growth.  The average yield on loans declined 14 basis points to 5.63%
for the quarter ended March 31, 2010 from 5.77% for the quarter ended March 31,
2009, which reflected a decline in the yield on loans indexed to prime,
partially offset by the greater proportion of higher-yielding commercial real
estate, commercial business and secured consumer loans in our loan portfolio
during the 2010 period compared to the 2009 period.





Interest
income on securities, including FHLB stock, decreased by $320,000 to $2.1
million for the quarter ended March 31, 2010 from $2.5 million for the quarter
ended March 31, 2009, reflecting lower average yields on such securities to
4.50% from 5.65%, partially offset by higher average balances, $192.5
million from $176.3 million.





29




BEACON FEDERAL BANCORP,
INC.




Interest
Expense.  Interest expense decreased by $1.1 million, or 15.0%,
to $6.0 million for the quarter ended March 31, 2010 from $7.1 million for the
quarter ended March 31, 2009.  The decrease in interest expense
reflected primarily lower average rates on deposits, partially offset by higher
balances of deposits.





Interest
expense on deposits decreased by $1.1 million, or 25.2%, to $3.2 million for the
quarter ended March 31, 2010 from $4.2 million for the quarter ended March 31,
2009.  The average rate paid on deposits decreased to 1.95% for the
current quarter from 2.86% for the comparable quarter in 2009. The average
balance of deposits increased to $659.9 million for the quarter ended March 31,
2010 from $601.7 million for the quarter ended March 31, 2009.





Interest
expense on certificates of deposit decreased by $561,000, or 18.3%, to $2.5
million for the quarter ended March 31, 2010 from $3.1 million for the quarter
ended March 31, 2009, due primarily to a decrease of 92 basis points in average
certificate of deposit rates to 2.63% from 3.55%. The decrease in deposit rates
was partially offset by a $35.4 million increase in the average balances of
certificates of deposit to $385.0 million from $349.5 million. Interest expense
on money market accounts decreased to $559,000 from $906,000, reflecting
substantially lower average rates on such accounts, 1.37% in the 2010 period
compared to 2.56% in the 2009 period, partially offset by higher average
balances on such accounts, $165.9 million compared to $143.8
million.





Interest
expense on borrowings decreased to $2.6 million for the quarter ended March 31,
2010 from $2.8 million for the quarter ended March 31, 2009, due primarily to a
lower average balance, partially offset by a higher average rate.  The
average balance on borrowings decreased to $260.5 million for the quarter ended
March 31, 2010 from $285.4 million for the quarter ended March 31, 2009. The
interest rates paid on such borrowings increased to 4.12% from
4.03%.





Net Interest
Income.  Net interest income increased by $1.0 million, or
14.9%, to $7.7 million for the quarter ended March 31, 2010 from $6.7 million
for the quarter ended March 31, 2009.  The increase in net interest
income was due to a higher interest rate spread and overall asset
growth.  Our net interest rate spread increased to 2.75% for the
current quarter from 2.40% for the first quarter 2009 and the net interest
margin increased to 3.02% from 2.75%.  The higher interest rate spread
was attributable to a lower cost of funds.  The cost of funds
decreased 61 basis points, while the yield on interest-earning assets declined
by 26 basis points.





Net
interest-earning assets increased to $108.7 million for the quarter ended March
31, 2010 from $106.7 million for the quarter ended March 31,
2009.  The slight increase in net interest-earning assets was
principally a result of using deposits to fund loan growth and to allow for a
$25.0 million reduction in average borrowings.




Provision for
Loan Losses.We establish provisions for loan losses, which are charged
to operations, in order to maintain the allowance for loan losses at a level we
consider necessary to absorb credit losses incurred in the loan portfolio that
are both probable and reasonably estimable at the balance sheet date. In
determining the level of the allowance for loan losses, we consider specific and
general components. The specific component relates to loans that are
individually classified as impaired, for which the carrying value of the loan
exceeds the fair value of the collateral, net of selling costs, or the present
value of expected future cash flows. The general component covers non-classified
loans and is based on the historical loan loss experience for the last four
years, including adjustments to historical loss experience, maintained to cover
uncertainties that affect the Bank’s estimate of probable losses for each loan
type. The adjustments to historical loss experience are based on evaluation of
several factors, including primarily changes in lending policies and procedures;
changes in collection, charge-off and recovery practices; changes in the nature
and volume of the loan portfolio; changes in the volume and severity of
nonperforming loans; the existence and effect of any concentrations of credit
and changes in the level of such concentrations; and changes in current national
and local economic and business conditions.




30




BEACON FEDERAL BANCORP,
INC.




We
recorded a provision for loan losses of $1.8 million for the quarter ended March
31, 2010 compared to a provision for loan losses of $2.6 million for the quarter
ended March 31, 2009.  The provision for loan losses was lower as a
result of a decline in net charge-offs, when compared to the same period a year
ago and maintaining relative stability within the loan portfolio as a whole for
the quarter.




Net loan
charge-offs were $263,000 for the quarter ended March 31, 2010, compared to net
charge-offs of $548,000 for the quarter ended March 31, 2009.




The
allowance for loan losses was $17.1 million, or 2.07% of total loans at March
31, 2010 compared to $15.6 million, or 1.89%, of total loans at December 31,
2009.  Total nonperforming loans increased by $3.2 million to $16.9
million at March 31, 2010, compared to $13.7 million at December 31,
2009.  Nonperforming loans at March 31, 2010 and December 31, 2009
were primarily secured by commercial real estate, multi-family and 1-4 family
residential real estate and commercial business assets.We
used the same methodology in assessing the allowances for both
periods.  To the best of our knowledge, we have recorded all losses
that are both probable and reasonable to estimate as of March 31,
2010.





Noninterest
Income.  Noninterest income increased $317,000, or 39.6%, for
the quarter ended March 31, 2010 to $1.1 million from $0.8 million for the
quarter ended March 31, 2009 resulting primarily from $167,000 less
other-than-temporary impairment credit loss on debt securities for the first
quarter 2010 as compared to the first quarter of 2009.





Noninterest
Expense.  Noninterest expense increased by $722,000, or 16.8%,
to $5.0 million for the quarter ended March 31, 2010 from $4.3 million for the
quarter ended March 31, 2009.  The increase in noninterest expense was
due primarily to increases in salaries and benefits, occupancy and equipment and
FDIC premium expense.




Salaries
and employee benefits increased by $271,000, or 11.5%, to $2.6 million for the
quarter ended March 31, 2010 from $2.4 million for the quarter ended March 31,
2009 due primarily to standard wage increases and a 7.7% increase in FTE
staff.





Occupancy
and equipment expense increased by $265,000, or 81%, to $592,000 for the quarter
ended March 31, 2010 from $327,000 for the quarter ended March 31, 2009 due
primarily to the operating costs of the Company’s new branch and corporate
headquarters that were leased beginning in June 2009.





FDIC
premium expense increased by $155,000, or 95%, to $318,000 for the quarter ended
March 31, 2010 from $163,000 for the quarter ended March 31, 2009 due primarily
to growth of the Bank and a higher regular, risk-based assessment for all
institutions, which considers the supervisory rating and certain financial
ratios of each financial institution.





Income Tax
Expense.  The provision for income taxes was $763,000 for the
quarter ended March 31, 2010, compared to $231,000 for the quarter ended March
31, 2009.  The increase was due to $1.4 million higher pre-tax income
and slightly higher effective tax rate.  Our effective tax rate was
37.0% for the quarter ended March 31, 2010 compared to 34.6% for the quarter
ended March 31, 2009.





31




BEACON FEDERAL BANCORP,
INC.




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





For
      the Three Months Ended March 31,2010
              
              
              2009Average
      Outstanding Balance
              
              
              Interest
      Earned/Paid
              
              
              Yield
      / Rate
              
              
              Average
      Outstanding Balance
              
              
              Interest
      Earned/Paid
              
              
              Yield
      / Rate(Dollars
      in thousands)Interest-earning
      assets:Loans
              
              $
              835,956
              
              
              $
              11,612
              
              
              
              5.63
              %
              
              $
              796,621
              
              
              $
              11,342
              
              
              
              5.77
              %Securities
              
              
              180,939
              
              
              
              1,967
              
              
              
              4.41
              
              
              
              163,198
              
              
              
              2,355
              
              
              
              5.85FHLB
      stock
              
              
              11,557
              
              
              
              167
              
              
              
              5.86
              
              
              
              13,052
              
              
              
              99
              
              
              
              3.08Interest-earning
      deposits
              
              
              8,420
              
              
              
              5
              
              
              
              0.24
              
              
              
              20,873
              
              
              
              16
              
              
              
              0.31Total
      interest-earning assets
              
              
              1,036,872
              
              
              
              13,751
              
              
              
              5.38
              
              
              
              993,744
              
              
              
              13,812
              
              
              
              5.64Non-interest-earning
      assets
              
              
              31,666
              
              
              
              
              
              
              
              
              
              
              
              29,182Total
      assets
              
              $
              1,068,538
              
              
              
              
              
              
              
              
              
              
              $
              1,022,926Interest-bearing
      liabilities:Savings
              
              $
              60,153
              
              
              
              45
              
              
              
              0.30
              
              
              $
              56,755
              
              
              
              58
              
              
              
              0.41Money
      market accounts
              
              
              165,914
              
              
              
              559
              
              
              
              1.37
              
              
              
              143,773
              
              
              
              906
              
              
              
              2.56NOW
      accounts
              
              
              48,887
              
              
              
              74
              
              
              
              0.61
              
              
              
              51,633
              
              
              
              222
              
              
              
              1.74Time
      accounts
              
              
              384,986
              
              
              
              2,500
              
              
              
              2.63
              
              
              
              349,541
              
              
              
              3,061
              
              
              
              3.55Total
      deposits
              
              
              659,940
              
              
              
              3,178
              
              
              
              1.95
              
              
              
              601,702
              
              
              
              4,247
              
              
              
              2.86FHLB
      advances
              
              
              190,464
              
              
              
              1,976
              
              
              
              4.21
              
              
              
              215,375
              
              
              
              2,294
              
              
              
              4.32Reverse
      repurchase agreements
              
              
              70,000
              
              
              
              668
              
              
              
              3.87
              
              
              
              70,000
              
              
              
              543
              
              
              
              3.15Lease
      obligation
              
              
              7,736
              
              
              
              196
              
              
              
              10.28
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
      interest-bearing liabilities
              
              
              928,140
              
              
              
              6,018
              
              
              
              2.63
              
              
              
              887,077
              
              
              
              7,084
              
              
              
              3.24Non-interest-bearing
      deposits
              
              
              33,432
              
              
              
              
              
              
              
              
              
              
              
              30,617Other
      non-interest-bearing liabilities
              
              
              4,835
              
              
              
              
              
              
              
              
              
              
              
              6,073Total
      liabilities
              
              
              966,407
              
              
              
              
              
              
              
              
              
              
              
              923,767Stockholders'
      equity
              
              
              102,131
              
              
              
              
              
              
              
              
              
              
              
              99,159Total
      liabilities and equity
              
              $
              1,068,538
              
              
              
              
              
              
              
              
              
              
              $
              1,022,926Net
      interest income
              
              
              
              
              
              $
              7,733
              
              
              
              
              
              
              
              
              
              
              $
              6,728Net
      interest rate spread
              
              
              
              
              
              
              
              
              
              
              2.75
              %
              
              
              
              
              
              
              
              
              
              
              2.40
              %Net
      interest-earning assets
              
              $
              108,732
              
              
              
              
              
              
              
              
              
              
              $
              106,667Net
      interest margin
              
              
              
              
              
              
              
              
              
              
              3.02
              %
              
              
              
              
              
              
              
              
              
              
              2.75
              %Average
      of interest-earning assets tointerest-bearing
      liabilities
              
              
              
              
              
              
              
              
              
              
              111.72
              %
              
              
              
              
              
              
              
              
              
              
              112.02
              %





32




BEACON FEDERAL BANCORP,
INC.




Liquidity
and Capital Resources





Our primary sources of funds consist of
deposit inflows, loan repayments, advances from the Federal Home Loan Bank of
New York, and maturities and sales of securities.  In addition, we
have the ability to collateralize borrowings in the wholesale
markets.  While maturities and scheduled amortization of loans and
securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.  We seek to maintain a liquidity ratio of
8.0% or greater.  For the three months ended March 31, 2010, our
liquidity ratio averaged 10.0%.  We believe that we have enough
sources of liquidity to satisfy our short- and long-term liquidity needs as of
March 31, 2010.  Excess liquid assets have been invested generally in
interest-earning deposits and short- and intermediate-term
securities.




Our most
liquid assets are cash and cash equivalents.  The levels of these
assets are dependent on our operating, financing, lending and investing
activities during any given period.  At March 31, 2010, cash and cash
equivalents totaled $22.4 million.  Securities classified as
available-for-sale, which provide additional sources of liquidity, totaled
$166.6 million at March 31, 2010.  On that date, we had $188.9 million
of Federal Home Loan Bank advances outstanding and $1.7 million in limited
recourse obligations related to loans sold, with the ability to borrow an
additional $43.9 million.




At March
31, 2010, we had $55.6 million in loan commitments outstanding.  In
addition to commitments to originate loans, we had $59.7 million in unused lines
of credit to borrowers. Certificates of deposit due within one year of March 31,
2010 totaled $235.6 million, or 33.7% of total deposits. If these deposits do not
remain with us, we will be required to seek other sources of funds, including
loan and security sales, brokered deposits, CDARS, BIC and Federal Home Loan
Bank advances. 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, 2010.  We believe,
however, based on past experience that a significant portion of such deposits
will remain with us.  We have the ability to attract and retain
deposits by adjusting the interest rates offered.




Our
primary investing activity is originating loans.  During the three
months ended March 31, 2010, we originated $46.8 million of loans, and during
the three months ended March 31, 2009, we originated $103.7 million of
loans.  We purchased $15.4 million of securities during the three
months ended March 31, 2010, compared to $6.0 million for the three months ended
March 31, 2009.




Financing
activities consist primarily of activity in deposit accounts and Federal Home
Loan Bank advances.  We experienced a net increase in total deposits
of $5.9 million for the three months ended March 31, 2010 compared to $30.4
million for the three months ended March 31, 2009.  Deposit flows are
affected by the overall level of interest rates, the interest rates and products
offered by us and our local competitors, and by other factors.




Net
Federal Home Loan Bank advances decreased by $2.2 million for the three months
ended March 31, 2010, compared to a decrease of $10.0 million for the three
months ended March 31, 2009.  Historically, Federal Home Loan Bank
advances have primarily been used to fund loan demand. At March 31, 2010, we had
the ability to borrow up to $234.5 million from the Federal Home Loan Bank of
New York.




Banks are
subject to regulatory capital requirements administered by federal banking
agencies.  Capital adequacy guidelines and prompt corrective action
regulations involve quantitative measures of assets, liabilities, and certain
off-balance sheet items calculated under regulatory accounting
practices.  Capital amounts and classifications are also subject to
qualitative judgments by regulators.  Failure to meet capital
requirements can initiate regulatory action.  At March 31, 2010 the
Bank met all capital adequacy requirements.




33




BEACON FEDERAL BANCORP,
INC.




Prompt
corrective action regulations provide five classifications:  well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition.  If an institution is
only adequately capitalized, regulatory approval is required to accept brokered
deposits.  If an institution is undercapitalized, capital
distributions are limited, as is asset growth and expansion, and capital
restoration plans are required.  At March 31, 2010 and December 31,
2009, the most recent regulatory notification categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action.  There are no conditions or events since that notification
that management believes have changed the institution's category.





Actual
and required capital amounts and ratios for the Bank are presented below
(dollars in thousands):





To
      Be WellCapitalized
      UnderFor
      Capital
              
              
              Prompt
      CorrectiveActual
              
              
              Adequacy
      Purposes
              
              
              Action
      ProvisionsMarch 31, 2010
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              RatioEquity
              
              $
              89,625Unrealized
      loss on AFS securities
              
              
              4,107Tier
      1 (Core) Capital and Tangible Capital
              
              
              93,732
              
              
              
              8.67
              %
              
              $
              16,212
              
              
              
              1.50
              %General
      valuation allowance  (1)
              
              
              10,180Deduction
      for low-level recourse
              
              
              (1,665
              )Total
      Capital to risk-weighted assets
              
              $
              102,247
              
              
              
              12.55
              %
              
              $
              65,152
              
              
              
              8.00
              %
              
              $
              81,440
              
              
              
              10.00
              %Tier
      1 (Core) Capital to risk-weighted
      assets
              
              $
              92,067
              
              
              
              11.30
              %
              
              $
              32,576
              
              
              
              4.00
              %
              
              $
              48,864
              
              
              
              6.00
              %Tier
      1 (Core) Capital to adjustedtotal
      assets
              
              $
              93,732
              
              
              
              8.73
              %
              
              $
              43,232
              
              
              
              4.00
              %
              
              $
              54,040
              
              
              
              5.00
              %(1)  Limited
      to 1.25% of risk-weighted assets.




34




BEACON FEDERAL BANCORP,
INC.




To
      Be WellCapitalized
      UnderFor
      Capital
              
              
              Prompt
      CorrectiveActual
              
              
              Adequacy
      Purposes
              
              
              Action
      ProvisionsDecember 31, 2009
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              RatioEquity
              
              $
              86,597Unrealized
      loss on AFS securities
              
              
              5,462Tier
      1 (Core) Capital and Tangible Capital
              
              
              92,059
              
              
              
              8.56
              %
              
              $
              16,140
              
              
              
              1.50
              %General
      valuation allowance  (1)
              
              
              10,175Deduction
      for low-level recourse
              
              
              (1,665
              )Total
      Capital to risk-weighted assets
              
              $
              100,569
              
              
              
              12.35
              %
              
              $
              65,121
              
              
              
              8.00
              %
              
              $
              81,401
              
              
              
              10.00
              %Tier
      1 (Core) Capital to risk-weighted
      assets
              
              $
              90,394
              
              
              
              11.10
              %
              
              $
              32,561
              
              
              
              4.00
              %
              
              $
              48,841
              
              
              
              6.00
              %Tier
      1 (Core) Capital to adjustedtotal
      assets
              
              $
              92,059
              
              
              
              8.56
              %
              
              $
              43,041
              
              
              
              4.00
              %
              
              $
              53,801
              
              
              
              5.00
              %(1)  Limited
      to 1.25% of risk-weighted assets.




Asset
Quality





Classification of
Assets.We regularly review our asset portfolio to determine
whether any assets require classification in accordance with applicable
regulations.  On the basis of our review of our assets at March 31,
2010, classified assets included substandard loans of $16.9 million and doubtful
loans of $2.4 million.  Substandard loans and doubtful loans were
$13.5 million and $2.4 million, respectively, at December 31,
2009.  As of March 31, 2010, we had $13.4 million of loans designated
as special mention, compared to $16.7 million at December 31, 2009.




As of
March 31, 2010, our largest borrower under the substandard asset category had
loans secured by undeveloped land located in New York, with a principal balance
of $3.0 million.  As of March 31, 2010, our largest doubtful loan was
secured by first mortgage liens on two commercial properties, with a principal
balance of $0.8 million.  As of March 31, 2010, our largest loan
designated as special mention was secured by a commercial property located in
New Hampshire, with a principal balance of $3.4 million.




Off-Balance
Sheet Arrangements


In our
2009 Annual Report, incorporated by reference in our 2009 Form 10-K, we
disclosed our off-balance sheet arrangements and contractual obligations. At
March 31, 2010, there have been no material changes to these off-balance
sheet arrangements and contractual obligations outside the ordinary course of
business except as disclosed above.




35





BEACON FEDERAL BANCORP,
INC.





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Not
required for smaller reporting companies.  See the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009 for discussion of
interest rate risk at December 31, 2009.





ITEM
4.  CONTROLS AND PROCEDURES.





As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and
procedures.  Based on this evaluation, the Company’s 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 to ensure that information required to be disclosed in
the reports that the Company files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and
forms.  It should be noted that the design of any system of controls
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.





In
addition, there have been no changes in the Company’s internal control over
financial reporting during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.





36





BEACON FEDERAL BANCORP,
INC.





PART
II – OTHER INFORMATION





Item
1 - Legal Proceedings.





There are
no material legal proceedings to which the Company is a party or of which any of
its property is subject.  From time to time, the Company is a party to
various legal proceedings incident to its business.





Item
1A – Risk Factors.





Not
required for smaller reporting companies.  See the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009 for discussion of risk
factors at December 31, 2009.





Item
2 – Unregistered Sales of Equity Securities and Use of Proceeds.




Not
applicable.


Item
3 - Defaults Upon Senior Securities.





Not
applicable.


Item
4 - Other Information.





None





Item
5 – Exhibits.





(a)
            Exhibits.3.1
            
            Articles
      of Incorporation of Beacon Federal Bancorp, Inc. (1)3.2
            
            Bylaws
      of Beacon Federal Bancorp, Inc.(1)4.0
            
            Form
      of Common Stock Certificate of Beacon Federal Bancorp, Inc. (1)10.1
            
            Form
      of Employee Stock Ownership Plan (1)10.2
            
            Employment
      Agreement with Ross J. Prossner (2)10.3
            
            Employment
      Agreement with J. David Hammond (2)10.4
            
            Employment
      Agreement with Darren T. Crossett (2)10.5
            
            Form
      of Change in Control Agreement (2)10.6
            
            Beacon
      Federal Excess Benefit Plan (3)10.7
            
            Beacon
      Federal Annual Cash Incentive Plan (1)10.8
            
            Beacon
      Federal Supplemental Executive Retirement Plan (4)10.9
            
            Beacon
      Federal 2008 Equity Incentive Plan (5)21.0
            
            Subsidiaries
      of Registrant (1)31.1
            
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of  200231.2
            
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.0
            
            Statement
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the  Sarbanes-Oxley Act of
2002





37




BEACON FEDERAL BANCORP,
INC.





(1)
            Incorporated
      by reference to the Registration Statement on Form S-1 of Beacon Federal
      Bancorp, Inc. (File No. 333-143522), originally filed with the Securities
      and Exchange Commission on June 5, 2007.(2)
            Filed
      with the Securities and Exchange Commission on October 4, 2007 on Form
      8K.(3)
            Filed
      with the Securities and Exchange Commission on October 31, 2008 on Form
      8K.(4)
            Filed
      with the Securities and Exchange Commission on December 28,
      2007.(5)
            Incorporated
      by reference to Appendix A of the Company’s Definitive Proxy Statement for
      the Special Meeting of Stockholders (File No. 001-33713), as filed with
      the Securities and Exchange Commission on October 9,
  2008.





38




BEACON FEDERAL BANCORP,
INC.




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.





BEACON FEDERAL BANCORP,
INC.(Registrant)DATE:
      May
      14,2010
            
            BY:  Ross J.
      ProssnerRoss
      J. Prossner, President and Chief Executive OfficerBY:  Lisa M.
      JonesLisa
      M. Jones, Vice-President and Principal Financial andAccounting
      Officer