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F O R T H E Y E A R E N D E D A U G U S T 3 1 , 2 0 13

Annual Report

The Co-operative Central Bank

T H E C O - O P E R AT I V E C E N T R A L B A N K

75 Park Plaza, Boston, Massachusetts 02116Telephone: (617) 695-0400

E-mail: [email protected]: www.coopcentralbank.com

Deposits in every Massachusetts co-operative bank are insured in full.The Federal Deposit Insurance Corporation (FDIC) insures each depositor to at least $250,000.

All amounts above that are insured by the Share Insurance Fund of The Co-operative Central Bank.

AnnualReport'13 cover3 as spread_TCCB 10/22/13 11:15 AM

TABLE OF CONTENTS

OFFICERS AND BOARD OF DIRECTORS

2

REPORT FROM THE PRESIDENT

3

INSURANCE COVERAGE RATIO SCHEDULE

7

RESERVE FUND AND SHARE INSURANCE FUND

HISTORY OF COMBINED ASSETS

8

INDEPENDENT AUDITORS’ REPORT

9

COMBINING STATEMENTS OF FINANCIAL CONDITION

10

COMBINING STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

11

COMBINING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

12

COMBINING STATEMENTS OF CASH FLOWS

13

NOTES TO COMBINING FINANCIAL STATEMENTS

15

RESERVE FUND INVESTMENT SECURITIES

24

SHARE INSURANCE FUND INVESTMENT SECURITIES

25

CO-OPERATIVE BANK INDUSTRY

SUMMARY

27

MEMBER BANKS

28

“SECTION 1. All the co-operative banks now established under the laws of the commonwealth and subject to the provisions of chapter one hundred

and seventy of the General Laws, hereinafter referred to as member banks, are hereby constituted a corporation under the name of The Co-operative

Central Bank, hereinafter referred to as the central bank, and every co-operative bank hereafter so established shall thereupon become a member

bank thereof. It shall be the purpose of the central bank to promote the elasticity and flexibility of the resources of the co-operative banks of the

commonwealth by centralizing their reserve funds. The assets of the corporation shall be divided into two separate and distinct funds, as follows —

(a) the Reserve Fund, which shall consist of all assessment collected under section six, as amended, and all investments therein and all income thereon;

and (b) the Share Insurance Fund, established by chapter seventy-three of the acts of nineteen hundred and thirty-four, as amended.’’

A part of SECTION 1 from the Act Establishing The Co-operative Central Bank, Including the Reserve Fund, Chapter 45 of the Acts of 1932. (As

amended)

“SECTION 1. The Co-operative Central Bank, established by chapter forty-five of the acts of nineteen hundred and thirty-two, hereinafter referred to

as the corporation, shall in the manner herein provided establish a fund for the insurance of shares in co-operative banks established under the laws of

the commonwealth, hereinafter referred to as member banks.’’

A part of SECTION 1 from the Act Establishing the Share Insurance Fund, Chapter 73 of the Acts of 1934. (As amended)

THE CO-OPERATIVE CENTRAL BANK

EIGHTY-SECOND ANNUAL REPORT

FOR THE YEAR ENDED AUGUST 31, 2013

OPERATED AND WHOLLY OWNED BY ALL 52

MASSACHUSETTS CO-OPERATIVE BANKS, SOLELY FOR THE

MUTUAL BENEFIT OF ALL OF THEIR DEPOSITORS, AS A

SOURCE OF CASH RESERVES AND TO PROVIDE INSURANCE

IN FULL OF DEPOSITS UNDER MASSACHUSETTS LAW.

75 PARK PLAZA, BOSTON, MASSACHUSETTS 02116


. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chairman

Robert J. Hickey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice Chairman

Peter A. Conrad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President and Chief Executive Officer

Andrew J. Calamare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President

Annemarie Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President

Phillip J. Kimball . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President and Comptroller

BOARD OF DIRECTORS TERM EXPIRES

Robert J. Hickey, President & CEO Winchester Co-operative Bank 2015

Janice T. Houghton, President & CEO StonehamBank 2013

John R. Korona, President & CEO Mansfield Bank 2013

Edward F. Manzi, Jr., Chairman & CEO Fidelity Bank 2015

David P. O’Brien, Chairman Braintree Cooperative Bank 2013

John M. O’Donnell, President & CEO Patriot Community Bank 2014

Andrew J. Raczka, President & CEO Abington Bank 2014

Karen Schwartzman, Founder Polaris Public Relations 2014

Robert W. Terravecchia, Jr., President & CEO Weymouth Bank 2014

Darnell L. Williams, President & CEO Urban League of Eastern Massachusetts 2014

2

The Economy

There is a strong temptation to write “please refer to last year’s report” for a description of this year’s economy. Another year has passed in the wake of the financial crisis and our economic malaise now stands at five years and counting. We are still plagued by anemic growth, a low level of interest rates, unacceptably high unemployment and political gridlock.

Although we managed to avoid going over the fiscal cliff at the end of last year, Congressional dysfunction didn’t end. We peered over the edge of the cliff again this October when the government was shut down for two weeks and a U.S. debt default was narrowly avoided by a last-minute compromise on increasing the debt ceiling. The compromise only granted a three month reprieve, so it’s likely we’ll be staring into the abyss again as we welcome in the New Year.

The continued lack of fiscal support still means that economic stimulus rests solely with the Fed. The FOMC has kept short-term interest rates anchored near zero since the end of 2008 and has undertaken three rounds of quantitative easing to keep longer-term rates as low as possible. Federal Reserve monthly purchases of $45 billion of longer-term treasury securities plus an additional $40 billion of mortgage-backed securities drove 30 year mortgage rates into the mid threes earlier this year which produced a banner year for the residential real estate and mortgage markets.

The strength of the housing recovery hasn’t had the desired follow through into the overall economy though and for the first time in years FOMC decisions are no longer unanimous. Voices of dissent question whether continued low rates will ever produce a stronger recovery and urge a reduction in quantitative easing before unintended consequences materialize.

When the market realized this spring that the Fed wouldn’t be buying longer term securities indefinitely, mortgage rates jumped a full percentage point. The refinance market dried up and market valuations of fixed-income portfolios dropped substantially. Although rates came back a little in the third quarter, the year ended with a great deal of confusion regarding monetary policy. Uncertainty doesn’t portend well for either the economy or the financial markets.

Our Member Banks

The strength in the housing market had a very beneficial effect on our industry throughout the year. The combination of higher real estate prices and lower mortgage rates caused pipelines to swell with substantial gains-on-sale following suit. Also, delinquencies, write-downs, impairments and general reserves fell dramatically. While still somewhat high by historical standards, all were substantially lower than in recent years and helped reduce non-interest expenses to more acceptable levels.

3


TO THE DIRECTORS AND OFFICERS OF THE CO-OPERATIVE BANKS OF MASSACHUSETTSBoston, Massachusetts, November 14, 2013

The extended period of low interest rates has offset some of this improvement however. Liability costs have fallen dramatically in recent years, much more rapidly than asset yields. It reached the point where it became difficult to lower interest costs any further. Asset yields still had room to decline though and net interest margins continued to compress.

Through June 30th, the industry’s net interest margin was at an annualized 3.05% down from 3.14% at year end. The ALLL stood at 6 basis points and non-interest income was a strong .64%. Non-interest expense was 2.78%, ROA equaled .58% and ROE was 5.18%. Efficiency was 75.2%. Capital levels stood at 11.60% of the industry’s assets.

Now that asset quality issues are largely a thing of the past, the specter of interest rate risk has raised its ugly head. The spike in interest rates in the second quarter of this year has heightened regulatory concerns about the impact of rising rates on our industry’s net interest margin and the unrealized gain positions in our bond portfolios. If short rates rise quickly margins will be squeezed further and if long rates rise in tandem unrealized gains could easily become unrealized losses. While these are legitimate concerns, the Fed only forecasts an overnight rate of 2% by the end of 2016 at the earliest. This should give the industry ample time to adjust. Also, the industry’s Tier 1 capital ratio that excludes unrealized investment gains stood at 11.53% on June 30th and will provide a strong defense against the impact of rising rates.

The industry finished the year with 52 member banks, one less than at the end of fiscal 2012. Central Co-operative was acquired by Rockland Trust and Community Bank merged into Eastern Bank. On a positive note, we gained a new member on July 1st when HarborOne Credit Union officially converted to the co-operative bank charter as HarborOne Bank. At $2.0 billion, it became our largest member overnight. Although not completed by August 31st, Mutual Federal Savings Bank also became a new member in late September when it changed its federal charter to that of a state chartered cooperative bank. Both are excellent institutions and we are extremely pleased that each chose our charter.

Reserve Fund

Once again, there was very little activity in the Reserve Fund with no member banks borrowing for liquidity purposes. Members only tested their Reserve Fund lines of credit by borrowing small amounts on an overnight basis. The low interest rate environment reduced the average rate paid on deposits during the year to .125% from .375% one year ago. Reserve Fund deposits dropped from $34.7 one year age to $32.7 million at the end of fiscal 2013 after the withdrawals of Central Bank and Community Bank.


4

Share Insurance Fund

Excess deposits grew approximately 18% in the year ended June 30th mostly due to the expiration of the TAG program at year end 2012. While that program was in effect, the FDIC insured 100% of non-interest bearing transaction accounts. Once it expired, coverage on these accounts dropped to $250,000. Since there are slightly more than $1.0 billion of our industry’s deposits in DDAs, the expiration of the TAG program had a major impact on the amount insured by SIF. On June 30th SIF insured $2.0 billion or 17% of the industry’s deposits up from $1.7 billion or 14.4% of deposits one year ago. SIF’s coverage ratio dropped to 4.4 from 5.3 last year.

In addition to providing insurance in full, one of SIF’s more important functions is to offer financial assistance to its members if they can demonstrate the ability to remain viable as an independent organization. Management and the Board must have a reasonable expectation of repayment in full. In January 2009, SIF invested $3.0 million under these conditions into the then $88 million Lowell Co-operative Bank (now Sage Bank).

The investment was made in combination with $5.2 million of private equity after the Commissioner of Banks determined that the bank had no tangible equity left and approved a Supervisory Conversion of the bank from mutual to stockholder form. Sage Bank is now a $200 million dollar institution with $17.9 million in capital after repayment of slightly more than $1.0 million of our original investment. Repayment in full is now much more than a reasonable expectation. It is a remarkable success story and the Co-operative Central Bank is extremely pleased to have played a part in keeping a 125 year old co-operative bank in Lowell in business.

SIF continued to fulfill its other obligations to its members throughout the year. We managed one of our member banks for most of the year and gave technical assistance to other members that requested it. We facilitated several of the member’s strategic planning sessions and made a number of presentations to Boards of Directors on the banking environment.

As the fiscal year ended our industry had survived the worst of the aftermath of the financial crisis without the loss of a penny of depositor money. However, the continued low level of interest rates has limited the ability of SIF to build its reserves in line with the growth in excess deposits and our coverage ratio declined. As such, management and the Board decided not to request the payment of a dividend again this year. While we regret this decision, we think it better not to pay a dividend than to hasten the date after almost 30 years at which it might become necessary to reinstate deposit insurance premiums.


5

Marcum LLP has audited the individual funds and combining statements of financial condition, the individual funds and combining statements of operations and retained earnings, comprehensive income (loss), and cash flows within this report. The schedules of Reserve Fund Investment Securities and Share Insurance Fund Investment Securities were subjected to the auditing procedures applied in the audit of the basic financial statements.

The financial statements were prepared in conformity with generally accepted accounting principles and include, as necessary, best estimates and judgments by management. To ensure the integrity, objectivity and fairness of the information in these financial statements, management has established and maintains internal controls designed to provide reasonable assurance that assets are safeguarded and transactions are executed, recorded and reported in accordance with management’s intentions and authorizations, and to comply with applicable laws and regulations. To enhance the reliability of internal controls, management employs highly qualified personnel and maintains sound risk management practices.

Respectfully submitted,By Order of the Board of Directors

Peter A. ConradPresident & Chief Executive Officer


6


SHARE INSURANCE FUND

7

EXCESS DEPOSIT INSURANCE COVERAGE RATIOAugust 31, 2013

Share Insurance Fund Equity $95,920,566

Less: Capital Assistance 1,963,750

Less: Restricted or Unavailable Assets — Other Assets 5,664,105

Available for Insurance Purposes $88,292,711

Insurance Coverage Ratio 4.4%


RESERVE FUND AND SHARE INSURANCE FUND

8

FISCAL YEAR END COMBINED ASSETS

August Reserve Share Insurance Combined 31st Fund Fund Total

2013 $ 43,611,810 $ 95,940,566 $139,552,376

2012 46,259,442 98,000,612 144,260,054 2011 47,123,869 100,064,786 147,188,655 2010 47,475,131 100,924,937 148,400,068 2009 49,857,447 98,985,155 148,842,602 2008 54,873,028 94,649,968 149,522,996 2007 70,955,336 92,263,073 163,218,409 2006 70,536,846 90,005,321 160,542,167 2005 70,605,261 88,038,030 158,643,291 2004 74,966,389 87,876,363 162,842,752 2003 92,420,098 87,691,686 180,111,784

2002 94,192,561 95,186,733 189,379,294 1998 94,768,657 83,833,715 178,602,372 1994 108,750,383 77,315,394 186,065,777 1990 88,823,320 74,212,980 163,036,300 1986 77,043,460 154,677,159 231,720,619 1982 47,908,523 103,600,484 151,509,007 1978 41,045,827 75,889,045 116,934,872 1974 31,061,630 53,307,780 84,369,410 1970 21,411,441 38,165,393 59,576,834 1966 17,190,948 27,506,170 44,697,118 1962 12,790,124 19,287,103 32,077,227 1958 10,752,634 13,723,828 24,476,462 1954 9,854,273 9,740,615 19,594,888 1950 9,461,424 6,923,455 16,384,879 1946 5,802,585 4,595,557 10,398,142 1942 4,239,619 2,492,193 6,731,812 1938 1,819,930 2,955,693 4,775,623 1934 4,149,520 1,175,198 5,324,718


9

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of The Co-operative Central Bank Boston, Massachusetts

We have audited the accompanying combining financial statements of The Co-operative Central Bank (the Bank), which comprise theindividual funds and combining statement of financial condition as of August 31, 2013, and the related individual funds and combining statements of operations and retained earnings, comprehensive income (loss), and cash flows for the year then ended, andthe related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internalcontrol relevant to the Bank’s preparation and fair presentation of the combined financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internalcontrol. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies usedand the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the 2013 combined financial statements referred to above present fairly, in all material respects, the financial position of The Co-operative Central Bank as of August 31, 2013, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matter

The combined financial statements as of and for the year ended August 31, 2012 were audited by Parent, McLaughlin & Nangle, Certified Public Accountants, Inc., whose practice was combined with Marcum LLP as of February 1, 2013, and whose report dated November 1, 2012, expressed an unmodified opinion on those statements.

Report on Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules of Reserve Fund Investment Securities and Share Insurance Fund Investment Securities are presented for purposes of additional analysis and are not a required part of the combined financial statements. Such information is the responsibility of management and was derivedfrom and relates directly to the underlying accounting and other records used to prepare the combined financial statements. Theinformation has been subjected to the auditing procedures applied in the audit of the combined financial statements and certainadditional procedures, including comparing and reconciling such information directly to the underlying accounting and other recordsused to prepare the combined financial statements or to the financial statements themselves, and other additional procedures inaccordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole.

Boston, MA November 4, 2013

August 31, 2013 2012

Reserve Share Fund Insurance Fund Combined Combined

ASSETSCash and cash equivalents $ 2,326,589 $ 1,788,377 $ 4,114,966 $ 3,134,045Investment securities: Securities available-for-sale 41,026,569 85,276,979 126,303,548 131,376,359Capital assistance — 1,963,750 1,963,750 3,000,000Assessment receivable — 767,088 767,088 —Accrued interest receivable 118,394 459,052 577,446 941,675Office equipment, net — 21,215 21,215 20,670Other assets 140,258 5,664,105 5,804,363 5,787,305 Total Assets $ 43,611,810 $ 95,940,566 $ 139,552,376 $ 144,260,054 LIABILITIES AND EQUITYDeposits by member banks $ 32,671,393 $ — $ 32,671,393 $ 34,673,670Interest payable 20,420 — 20,420 43,342Accrued expenses and other liabilities 301,279 20,000 321,279 277,989 Total Liabilities 32,993,092 20,000 33,013,092 34,995,001

Retained earnings 11,044,397 96,413,650 107,458,047 106,694,067Accumulated other comprehensive income (loss) (425,679) (493,084) (918,763) 2,570,986 Total Equity 10,618,718 95,920,566 106,539,284 109,265,053 Total Liabilities and Equity $ 43,611,810 $ 95,940,566 $ 139,552,376 $ 144,260,054


COMBINING STATEMENTS OF FINANCIAL CONDITION

See notes to financial statements.

10

Year Ended August 31, 2013 2012


Interest Income: Investment securities $ 437,293 $ 1,736,818 $ 2,174,111 $ 2,612,389 Capital assistance — — — 74,795 Total Interest Income 437,293 1,736,818 2,174,111 2,687,184

Interest Expense: Deposits 40,839 — 40,839 131,903 Total Interest Expense 40,839 — 40,839 131,903

Net Interest Income 396,454 1,736,818 2,133,272 2,555,281

Operating Expenses 343,183 2,002,469 2,345,652 2,307,909 53,271 (265,651) (212,380) 247,372

Noninterest Income (Expense) Assessment income — 958,860 958,860 — Other income — 17,500 17,500 523,509 — 976,360 976,360 523,509

Net Income 53,271 710,709 763,980 770,881

Retained Earnings, at beginning of year 10,991,126 95,702,941 106,694,067 107,923,186Dividends Paid — — — (2,000,000 )Retained Earnings, at end of year $ 11,044,397 $ 96,413,650 $ 107,458,047 $ 106,694,067


COMBINING STATEMENTS OF OPERATIONS AND RETAINED EARNINGS


11



Net Income ($ 53,271 $ 710,709 $ 763,980 $ 770,881

Other Comprehensive Income (Loss): Unrealized holding gains (losses) on available-for-sale securities arising during the period (710,994) (2,778,755) (3,489,749) (849,901)

Other Comprehensive Income (Loss) (710,994) (2,778,755) (3,489,749) ( (849,901)

Comprehensive Income (Loss) $ (657,723) $ (2,068,046) $ (2,725,769) ($ (79,020)


COMBINING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


12



Cash flows from operating activities: Interest received ($ 487,352 $ 2,360,362( $ 2,847,714 ($ 3,148,274 Interest paid (63,761) — (63,761) (221,402) Assessment received — 191,772 191,772 — Cash paid for operating expenses (307,451) (1,986,662) (2,294,113) (2,290,363) Net cash provided by operating activities ( 116,140 ( 565,472 ( 681,612 ( 636,509

Cash flows from investing activities: Proceeds from sales and maturities of available-for-sale securities 33,818,182 28,000,000 61,818,182 56,818,151 Purchases of available-for-sale securities (31,078,387) (32,065,669) (63,144,056) (59,298,788) Principal payments received on mortgage-backed securities — 2,599,562 2,599,562 29,174 Principal collected on loans 2,400,000 — 2,400,000 1,300,000 Principal disbursed for loans (2,400,000) — (2,400,000) (1,300,000) Principal payments received from capital assistance — 1,036,250 1,036,250 — Proceeds from death benefits of life insurance policies — — — 2,983,454 Purchase of office equipment — (8,352) (8,352) (23,982) Net cash provided (used) by investing activities ( 2,739,795 (438,209) 2,301,586 508,009Cash flows from financing activities: Deposit repayments (2,002,277) — (2,002,277) (750,530) Dividend paid ( — — — (2,000,000) Net cash used in financing activities (2,002,277) ( — (2,002,277) (2,750,530)

Net increase (decrease) in cash and cash equivalents 853,658 127,263 980,921 (1,606,012)Cash and cash equivalents at beginning of year 1,472,931 1,661,114 3,134,045 ( 4,740,057Cash and cash equivalents at end of year $ 2,326,589 $ 1,788,377 $ 4,114,966 ($ 3,134,045


COMBINING STATEMENTS OF CASH FLOWS


13



Reconciliation of Net Income to Net Cash Provided by Operating Activities

Net Income ($ 53,271 ($ 710,709 ($ 763,980 $ 770,881Adjustments to reconcile net income to net cash provided by operating activities: (Increase) decrease in: Assessment receivable — (767,088) (767,088) — Accrued interest receivable 37,137 327,092 364,229 207,503 Other assets 442 — 442 23,786 Cash surrender value — (17,500) (17,500) (66,000) Increase (decrease) in: Interest payable (22,922) — (22,922) (89,499) Accrued expenses and other liabilities 35,290 8,000 43,290 (9,552) Proceeds from death benefits of life insurance in excess of cash surrender value — — — (457,509) Depreciation — 7,807 7,807 3,312 Amortization and accretion on investments, net ( 12,922 ( 296,452 ( 309,374 ( 253,587 Total adjustments ( 62,869 (145,237) (82,368) ( (134,372)Net cash provided by operating activities ($ 116,140 ($ 565,472 ($ 681,612 ($ 636,509

Supplemental Schedule of Non-Cash Investing Activities

Total decrease in unrealized gain/loss on available-for-sale securities $ (710,994) $ (2,778,755) $ (3,489,749) $ (849,901)


COMBINING STATEMENTS OF CASH FLOWS (Continued)


14

The Co-operative Central Bank (the Bank) was established by an Act of the Massachusetts legislature in 1932, as amended. The Bank is comprised of two separate and distinct funds.

The Reserve Fund was established in 1932 for the purpose of centralizing reserve funds to promote elasticity and flexibility of resources. Member banks maintain deposit balances with the Reserve Fund and may borrow from the Fund on a demand basis from time to time for liquidity or other short term purposes.

The Share Insurance Fund was established in 1934 for the insurance of all deposits in Massa chusetts Co-operative Banks. The Share Insurance Fund insures all deposits in excess of the federal limit for its member banks which are also members of the Federal Deposit Insurance Corporation’s Deposit Insurance Fund (DIF).

The combined financial statements include the financial statements of these two separate and distinct funds.

The following items comprise the significant accounting policies which the Bank follows in preparing and presenting its financial statements.

Method of accountingThe financial statements are prepared on the accrual basis of accounting for all significant items of income and expenses.

Use of estimates in preparation of financial statementsThe 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 amount of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relates to the determination of the accrued loss contingency.

Recognition of incomeGenerally interest income on loans, capital assistance in the form of perpetual preferred stock, income on advances, subordinated debentures and capital certificates to member banks is recognized when earned. Interest income may be recognized when received in those instances where the ultimate collection of interest in uncertain.

Investment securitiesGains and losses on the sale of investment securities are determined using the specific-identification method.

Debt securities that are considered other-than-temporarily impaired and that the Bank does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, the Bank separates the amount of the impairment into the amount that is credit related and the amount due to all other factors. The


NOTES TO COMBINING FINANCIAL STATEMENTS

(Years Ended August 31, 2013 and 2012)

B. SUMMARY OF

SIGNIFICANT

ACCOUNTING

POLICIES

A. ORGANIZATION

15

credit related component is recognized in earnings and the remaining portion is recogized in other comprehensive income.

Premiums and discounts are recognized in interest income using a method which approximates the interest method over the period to contractual maturity, adjusted for anticipated prepayments.

Available-for-sale securitiesAvailable-for-sale securities consist of securities not classified as trading securities nor as held-to-maturity securities. Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by issuers of the securities. Mortgage-backed securities are carried at unpaid principal balances, adjusted for unamortized premiums and unearned discounts.

Unrealized holding gains and losses on available-for-sale securities are reported as accumulated other comprehensive income (loss).

At August 31, 2013, the Bank had no outstanding commitments to sell loans or securities.

Office equipmentOffice equipment is reported at cost, less accumulated depreciation. Depreciation is charged to operations over the estimated useful lives of the respective assets (ranging from three to five years) using the straight-line method. Those items which are not determined to be capital expenditures are immediately expensed.

Contingency loss provisionAn accrued loss contingency is established through a contingency loss provision charged to operations. The accrued loss contingency is an amount that management reasonably believes will be adequate to absorb possible excess deposit insurance losses, net of recoveries and adjustments, if any, from the final disposition of any member banks that have or may fail. The estimated loss provision or recovery has been determined based upon reviews of financial statements and regulatory examination reports of member banks, consultations with bank regulators, and historical experience.

There was no activity in the accrued loss contingency for the years ended August 31, 2013 and 2012.

Insurance assessmentsThe Bank recognizes revenue from insurance assessments at the time a member bank is assessed. The amount of the initial assessment is based on the application of 1.25% to excess deposits at the date of approval for insurance.

Income taxesThe Bank is exempt from federal income taxes under the provisions of Section 501(c)14 of the Internal Revenue Code. The Bank’s policy is to analyze its tax positions for all open years and has not identified any uncertain tax positions.


NOTES TO COMBINING FINANCIAL STATEMENTS (Continued)


16

B. SUMMARY OF

SIGNIFICANT

ACCOUNTING

POLICIES

(Continued)

Cash equivalentsFor purposes of the statements of cash flows, the Bank considers all highly liquid debt instruments, with an initial maturity of three months or less, when purchased, to be cash equivalents.

Comparative financial informationThe financial statements include certain prior-year comparative information in total but not by fund class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization’s financial statements for the year ended August 31, 2012, from which the summarized information was derived.

Comprehensive incomeAccounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, none of which have related tax effects, are reported as a separate component of the equity section of the Combining Statements of Financial Condition, such items, along with net income, are components of comprehensive income.

ReclassificationsCertain reclassifications have been made to the 2012 combined financial statements in order to conform to the 2013 presentation.

Various legal claims may arise from time to time in the normal course of business which, in the opinion of management, have no material effect on the financial position of the Bank.

The Bank may be a party to various financial instruments and agreements with off balance sheet risk in the normal course of business to meet its financial assistance obligations within the Share Insurance Fund.

The Bank has entered into two employment agreements with certain executive officers with employment periods ranging from twelve to twenty-four months. The agreements provide for certain severance benefits to be paid in the event of a change in employment status.

Since 1987, The Bank has executed financial or capital assistance agreements with various member banks under Sections 3A, 3B and 4 of Chapter 73 of the Acts of 1934, as amended. The capital assistance has taken the form of subordinated debentures, mutual capital certificates, capital certificates and perpetual preferred stock. All of the aforementioned instruments are sub ordinated to depositors’ accounts and liabilities of equal or higher priority.

Principal and interest on these instruments are required when earnings and capital levels of the assisted bank exceed certain minimum requirements. All payments of principal and/or interest are subject to the prior consent or approval of the Federal Deposit Insurance Corporation (FDIC) or the Office of the Comptroller




B. SUMMARY OF

SIGNIFICANT

ACCOUNTING

POLICIES

(Continued)

C. COMMITMENTS AND

CONTINGENCIES

D. CAPITAL

ASSISTANCE AND

SUBORDINATED

DEBT

17

of the Currency (OCC). The additional prior approval of the Commissioner of Banks for the Commonwealth of Massachusetts is also required.

As of August 31, 2013, there was $1,963,750 of capital assistance outstanding in the form of 196,375 shares of perpetual preferred stock.

On June 21, 2013, the Bank entered into a new member agreement with HarborOne Bank, as a result of its conversion from a credit union to a Cooperative Bank. The assessment is payable to the Bank in equal annual installments of $191,772 through June 21, 2017.

The amortized cost and approximate fair values of investment securities are summarized as follows as of August 31, 2013:

Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value

Available-for-sale securitiesReserve FundFederal agency obligations $ 41,452,249 $ 96,548 $ (522,228) $ 41,026,569

Share Insurance FundFederal agency obligations 50,210,462 1,042,838 — 51,253,300

Residential mortgage-backed securities 35,559,601 1,530 (1,537,452) 34,023,679

85,770,063 1,044,368 (1,537,452) 85,276,979

Combined $ 127,222,312 $ 1,140,916 $ (2,059,680) $ 126,303,548

No proceeds from sales of available-for-sale securities or gross gains were realized in 2013.

The amortized cost and approximate fair values of investment securities are summarized as follows as of August 31, 2012:

Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value

Available-for-sale securitiesReserve FundFederal agency obligations $ 44,204,966 $ 285,314 $ — $ 44,490,280

Share Insurance FundFederal agency obligations 78,389,936 2,285,735 (251) 80,675,420

Residential mortgage-backed securities 6,210,472 11,149 (10,962) 6,210,659

84,600,408 2,296,884 (11,213) 86,886,079

Combined $ 128,805,374 $ 2,582,198 $ (11,213) $ 131,376,359

No proceeds from sales of available-for-sale securities or gross gains were realized in 2012.

F. INVESTMENT

SECURITIES




18

E. ASSESSMENT

RECEIVABLE

D. CAPITAL

ASSISTANCE AND

SUBORDINATED

DEBT (Continued)

The gross unrealized losses and approximate fair values of investment securities are summarized as follows as of August 31, 2013:

Less Than Twelve Months Twelve Months or Greater Gross Gross Unrealized Fair Unrealized Fair Losses Value Losses Value

Reserve FundFederal agency obligations $ 522,228 $ 30,941,189 $ — $ —

Share Insurance FundResidential mortgage- backed securities 1,332,995 28,468,818 204,457 3,567,081

Combined $ 1,855,223 $ 59,410,007 $ 204,457 $ 3,567,081

The amortized cost and approximate fair values of available-for-sale securities at August 31, 2013, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are shown in total as their maturities are highly variable.

Available-for-sale securities Reserve Fund Share Insurance Fund Amorized Fair Amortized Fair Cost Value Cost Value

Due in one year or less $ 3,998,871 $ 4,028,260 $ 19,028,018 $ 19,229,050Due after one year through five years 37,453,378 36,998,309 31,182,444 32,024,250

41,452,249 41,026,569 50,210,462 51,253,300

Mortgage-backed securities — — 35,559,601 34,023,679

$ 41,452,249 $ 41,026,569 $ 85,770,063 $ 85,276,979

Management periodically reviews the investment portfolio to evaluate securities for other-than-temporary impairment. The investments in the fixed-income portfolio and the mortgage-backed portfolio as of August 31, 2013 consisted of highly-rated securities issued by government sponsored enterprises (GSE’s). As of August 31, 2013, thirty-four of the GSE securities had unrealized losses. These losses are attributable to changes in market interest rates. Management evaluates securities for other-than-temporary impairment and has determined that no securities have an other-than-temporary decline in fair value as of August 31, 2013.

Member banks may borrow from the Reserve Fund to meet their liquidity needs. Such loans are payable on demand at an interest rate of 50 basis points above the target federal funds rate as maintained by the Federal Reserve Bank, adjusted periodically. There were no loans outstanding as of August 31, 2013.




G. RESERVE FUND

LOANS TO

MEMBER BANKS

19

F. INVESTMENT

SECURITIES

(Continued)

J. PENSION,

RETIREMENT AND

OTHER EMPLOYEE

BENEFIT PLANS

A summary of office equipment consisted of the following for the years ended August 31, 2013 and 2012:

Share Reserve Insurance Fund Fund Combined 2013 2013 2013 2012

Office equipment $ — $ 11,843 $ 11,843 $ 3,492Software — 20,490 20,490 20,490 — 32,333 32,333 23,982Less accumulated depreciation — (11,118) (11,118) (3,312)

$ — $ 21,215 $ 21,215 $ 20,670

Depreciation expense for the years ended August 31, 2013 and 2012 amounted to $7,807 and $3,312, respectively.

Operating expenses consisted of the following for the years ended August 31, 2013 and 2012:

Share Reserve Insurance Fund Fund Combined 2013 2013 2013 2012

Salaries and benefits $ 232,346 $ 1,316,700 $ 1,549,046 $ 1,462,860Legal 17,766 144,785 162,551 167,412Occupancy 34,479 195,300 229,779 227,756Director fees 17,810 101,100 118,910 153,642Other 40,782 244,584 285,366 296,239

$ 343,183 $ 2,002,469 $ 2,345,652 $ 2,307,909

The Bank participates in the Co-operative Banks Employees Retirement Association’s (CBERA) pension plans. The Bank has a defined contribution pension plan covering all eligible officers and employees. Under the plan, contributions by employees are doubled by the Bank, up to a maximum of 10% of each employee’s salary. The Bank also participates in a multi-employer defined benefit plan which covers all eligible employees, and is funded currently. The Bank’s contributions to the plans were $171,165 in 2013 and $139,487 in 2012.

The Bank’s required disclosures are contained in the below table.

Name of Plan: The Defined Benefit Plan (Plan C) of the CBERA Retirement Program

Plan’s Tax ID #: 04-6035593

Plan Number: 334

Plan Year End: December 31, 2011 December 31, 2012

Actuarial Valuation: January 1, 2011 January 1, 2012




20

I. OPERATING

EXPENSES

H. OFFICE

EQUIPMENT

FTAP Percentage: 94.7% (Green) 114.3% (Green)(Funded Target Attainment Percentage)

Employer Plan Year Contributions: $41,616 $73,239 Did Not Exceed 5% Did Exceed 5%

Funding Improvement: This employer was not subject to any specific minimum contributions other than amounts, determined by the Trustees of the Plan that maintain the funded status of the Plan in accordance with the requirements of the Pension Protection Act (PPA) and ERISA.

In order to provide key executives with supplemental retirement benefits, the Bank has purchased insurance contracts on behalf of certain past executives. The Bank, by assignment, is entitled to the cash surrender value at policy termination, not to exceed the cumulative premiums paid (first contract) or the single premium plus accrued interest (additional contracts). The remaining insurance proceeds would accrue to the beneficiaries of the insured executives. Of the total annual premiums paid, the portion representing the increase in cash surrender value of the policy has been recorded in Other Assets, and the remainder of the premium has been ex pensed. At August 31, 2013, cash surrender value totaling $5,657,438 in the Share Insurance Fund is included in Other Assets. Miscellaneous income of $17,500 in 2013 and $66,000 in 2012, respectively, has been recognized as the increase in cash surrender values of the policies.

The Bank also provides postretirement medical benefits to certain retired employees and spouses, where applicable, until age 65. Employees who have reached the age of 62 and have met the bank’s minimum service requirements, become eligible for medical benefits under the voluntary early retirement program. The Bank has accrued the expected cost of providing these benefits, which amounted to approximately $130,000 at August 31, 2013.

The Bank is obligated under a non-cancelable lease agreement extension, expiring June 30, 2015, for the office space it occupies. Under the agreement the fixed minimum annual rent is $209,100 from July 1, 2011 through June 30, 2015.

Net rent expense charged to operations for the years ended August 31, 2013 and August 31, 2012 was $209,100 each year.

The carrying amounts for cash and cash equivalents, loans to member banks and deposits by member banks approximate fair value.

Fair values of investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on recent quoted market prices of comparable instruments.

The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is 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. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not




21

K. LEASE

COMMITMENT

J. PENSION,

RETIREMENT AND

OTHER EMPLOYEE

BENEFIT PLANS

(Continued)

L. FAIR VALUE OF

FINANCIAL

INSTRUMENTS

M. FAIR VALUES OF

ASSETS AND

LIABILITIES




available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value hierarchy:

The Bank groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted market prices in active markets for identical assets or liabilities that the Bank has the ability to access at the measurement date. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The valuation must be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

A description of the valuation techniques applied to the Bank’s major categories of assets and liabilities measured at fair value on a recurring basis follows:

Federal agency obligations and mortgage-backed securities are measured at fair value in Level 2 and are based on independent unadjusted market-based prices received from a third-party pricing service that utilizes pricing models that consider standard input factors such as observable market data. These securities include debt and mortgage-backed securities issued by government sponsored enterprises including Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Federal Farm Credit Bank, Federal Home Loan Bank, and Government National Mortgage Association.

Assets and liabilities measured at fair value on a recurring basis:

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level of input that is significant to the fair value measurement in its entirety.

M. FAIR VALUES OF

ASSETS AND

LIABILITIES

(Continued)

22




Fair values of financial instruments measured on a recurring basis at August 31, 2013 and 2012 are as follows:

Fair Value Measurements Using:

Level 1 Level 2 Level 3 Total

August 31, 2013

Securities available-for-sale: Federal agency obligations $ — $ 92,279,869 $ — $ 92,279,869 Mortgage-backed securities — 34,023,679 — 34,023,679 $ — $ 126,303,548 $ — $126,303,548

August 31, 2012

Securities available-for-sale: Federal agency obligations $ — $ 125,165,700 $ — $125,165,700 Mortgage-backed securities — 6,210,659 — 6,210,659 $ — $ 131,376,359 $ — $131,376,359

There were no transfers among the three levels during the years ended August 31, 2013 or 2012. There were no liabilities measured at fair value at either August 31, 2013 or 2012.

On September 3, 2013, the Bank entered into a new member agreement. An estimated assessment of approximately $170,000 will be payable to the Bank. Subsequent events have been evaluated through November 4, 2013, which is the date the combined financial statements were available to be issued and concluded that other than the event described above, there were no other subsequent events requiring adjustment to or disclosure in these financial statements.

23

N. SUBSEQUENT

EVENTS

M. FAIR VALUES OF

ASSETS AND

LIABILITIES

(Continued)

24


RESERVE FUND INVESTMENT SECURITIES

August 31, 2013 Par Amortized FairDescription % Coupon Maturity Value Cost Value

Available-for-sale

Federal Agency Obligations

Federal Farm Credit Banks 1.320 03/10/14 $ 2,000,000 $ 1,998,871 $ 2,012,540Federal Farm Credit Banks 0.490 07/23/15 1,000,000 1,000,000 1,000,010Federal Farm Credit Banks 0.550 08/17/15 1,000,000 1,000,482 999,960Federal Farm Credit Banks 0.350 03/18/16 2,000,000 2,000,831 1,984,720Federal Farm Credit Banks 0.700 04/11/17 2,000,000 2,000,000 1,961,760Federal Farm Credit Banks 0.820 07/11/17 2,000,000 2,000,000 1,959,020Federal Farm Credit Banks 0.970 09/05/17 2,000,000 2,000,000 1,967,500Federal Farm Credit Banks 1.220 06/04/18 2,000,000 2,000,000 1,948,580Federal Home Loan Banks 1.625 12/11/15 1,000,000 1,018,362 1,022,810Federal Home Loan Banks 0.375 06/24/16 2,000,000 1,972,004 1,982,020Federal Home Loan Banks 0.740 08/09/16 363,636 363,636 361,989Federal Home Loan Banks 0.740 08/09/16 1,000,000 1,000,000 995,470Federal Home Loan Banks 0.770 06/27/17 2,000,000 2,000,000 1,948,620Federal Home Loan Banks 0.900 10/05/17 1,000,000 1,000,000 976,330Federal Home Loan Banks 0.875 11/23/17 2,000,000 2,000,000 1,946,320Federal Home Loan Banks 1.000 01/30/18 2,000,000 2,000,000 1,947,000Federal Home Loan Banks 0.950 01/30/18 2,000,000 1,998,196 1,948,340Federal Home Loan Mortgage Corporation 1.350 04/29/14 2,000,000 2,000,000 2,015,720Federal Home Loan Mortgage Corporation 0.750 10/05/16 2,000,000 2,000,000 1,988,780Federal National Mortgage Association 0.350 08/28/15 2,000,000 2,001,968 1,995,700Federal National Mortgage Association 1.875 09/09/15 2,000,000 1,999,595 2,052,280Federal National Mortgage Association 0.750 09/13/16 1,000,000 1,000,000 992,120Federal National Mortgage Association 1.250 09/28/16 2,000,000 2,045,987 2,019,020Federal National Mortgage Association 1.375 11/15/16 2,000,000 2,052,317 2,022,380Federal National Mortgage Association 0.850 06/27/17 1,000,000 1,000,000 977,580 Total Investment Securities $ 41,363,636 $ 41,452,249 $ 41,026,569

Weighted Average Yield on Available-for-Sale Portfolio .868% at August 31, 2013.


SHARE INSURANCE FUND INVESTMENT SECURITIES

25


Available-for-sale

Federal Agency Obligations

Federal Farm Credit Banks 2.125 02/10/14 $ 2,000,000 $ 1,999,701 $ 2,017,320Federal Farm Credit Banks 2.050 02/18/15 2,000,000 2,000,278 2,049,980Federal Farm Credit Banks 2.950 03/29/18 1,000,000 1,019,527 1,058,950Federal Farm Credit Banks 2.750 06/01/18 1,000,000 1,009,570 1,040,620Federal Home Loan Banks 3.625 10/18/13 2,000,000 2,002,458 2,008,800Federal Home Loan Banks 3.125 12/13/13 2,000,000 2,006,107 2,016,900Federal Home Loan Banks 3.125 12/13/13 2,000,000 2,005,741 2,016,900Federal Home Loan Banks 2.375 02/19/14 2,000,000 2,000,845 2,021,020Federal Home Loan Banks 2.375 03/14/14 1,000,000 999,965 1,011,970Federal Home Loan Banks 2.500 08/25/14 2,000,000 2,004,106 2,045,140Federal Home Loan Banks 2.750 03/13/15 1,000,000 1,006,637 1,036,570Federal Home Loan Banks 2.875 06/12/15 2,000,000 2,015,859 2,087,180Federal Home Loan Banks 1.630 08/20/15 2,000,000 1,986,119 2,048,340Federal Home Loan Banks 1.750 09/11/15 1,000,000 1,014,684 1,025,680Federal Home Loan Banks 1.875 12/11/15 1,000,000 1,002,278 1,031,430Federal Home Loan Banks 1.875 12/11/15 2,000,000 1,994,597 2,062,860Federal Home Loan Banks 0.850 03/04/16 2,000,000 2,000,000 2,009,160Federal Home Loan Banks 2.500 03/30/16 2,000,000 2,007,513 2,091,660Federal Home Loan Banks 1.260 03/28/17 2,000,000 2,000,000 2,003,320Federal Home Loan Banks 3.250 03/09/18 2,000,000 2,072,373 2,135,660Federal Home Loan Mortgage Corporation 2.500 04/23/14 2,000,000 2,002,192 2,030,420Federal Home Loan Mortgage Corporation 1.750 09/10/15 2,000,000 1,996,915 2,051,780Federal National Mortgage Association 2.750 03/13/14 2,000,000 2,003,220 2,027,780Federal National Mortgage Association 2.500 05/15/14 2,000,000 2,003,684 2,032,800Federal National Mortgage Association 3.000 09/16/14 2,000,000 2,012,802 2,059,120Federal National Mortgage Association 2.375 07/28/15 2,000,000 2,011,374 2,073,320Federal National Mortgage Association 2.375 07/28/15 2,000,000 2,027,240 2,073,320Federal National Mortgage Association 2.375 04/11/16 2,000,000 2,004,677 2,085,300 Federal Agency Obligations 50,000,000 50,210,462 51,253,300

Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 09/01/27 3,449,544 3,620,404 3,429,434Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 10/01/27 1,793,943 1,874,110 1,783,484Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 02/01/28 1,929,564 2,005,541 1,918,276Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 04/01/28 973,036 1,016,518 966,195Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 04/01/28 1,958,438 2,046,874 1,946,707Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 05/01/28 2,942,624 3,051,133 2,921,937Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 06/01/28 1,980,270 2,025,445 1,968,388

Federal Home Loan Mortgage Corp. GTD Pass Thru 2.500 08/01/28 2,000,000 1,986,250 1,987,780Federal National Mortgage Association GTD Pass Thru 2.500 06/01/27 1,737,590 1,797,863 1,727,164Federal National Mortgage Association GTD Pass Thru 2.500 09/01/27 1,697,855 1,771,075 1,687,685Federal National Mortgage Association GTD Pass Thru 2.500 09/01/27 1,746,720 1,817,681 1,735,175Federal National Mortgage Association GTD Pass Thru 2.500 10/01/27 1,824,069 1,911,852 1,811,976Federal National Mortgage Association GTD Pass Thru 2.500 10/01/27 1,804,453 1,902,006 1,792,507Federal National Mortgage Association GTD Pass Thru 2.500 02/01/28 2,849,744 2,958,836 2,830,850Federal National Mortgage Association GTD Pass Thru 2.500 06/01/28 1,962,009 2,002,475 1,949,040Government National Mortgage Association 2.500 07/20/27 3,589,805 3,771,538 3,567,081

Residential Mortgage Backed Securities 34,239,664 35,559,601 34,023,679

Total Investment Securities $ 84,239,664 $ 85,770,063 $ 85,276,979

Weighted Average Yield on Available-for-Sale Portfolio 1.932% at August 31, 2013.


SHARE INSURANCE FUND INVESTMENT SECURITIES (Continued)


Available-for-sale

Residential Mortgage Backed Securities

26

27


CO-OPERATIVE BANK INDUSTRY SUMMARY

SUMMARY DATA(In Thousands)

Total Return Capital/Surplus Non-performing Assets Operating Expenses Assets on Assets Amount % to Assets Amount % to Assets Amount % to Assets

December 2003 12,595,222 0.814 1,350,432 10.72 18,780 0.15 315,114 2.50 2004 12,602,729 0.723 1,351,388 10.72 15,506 0.12 316,625 2.51 2005 12,735,220 0.724 1,364,755 10.72 20,877 0.16 317,427 2.49 2006 13,182,679 0.601 1,436,494 10.90 66,500 0.50 325,382 2.47 2007 13,090,428 0.404 1,447,201 11.06 91,058 0.70 331,030 2.53 2008 14,063,674 0.061 1,461,909 10.39 276,592 1.97 358,949 2.55 2009 14,594,587 0.192 1,498,861 10.27 316,642 2.17 393,203 2.69 2010 14,118,168 0.490 1,543,062 10.93 302,886 2.15 380,181 2.69 2011 14,461,894 0.540 1,617,485 11.18 225,834 1.56 390,800 2.70December 2012 14,152,762 0.670 1,653,395 11.68 185,401 1.31 386,682 2.73June 2013 14,365,809 0.580 1,666,523 11.60 163,359 1.14 395,522 2.75

Year

TOTAL CAPITAL% TO TOTAL ASSETS

RETURN ON ASSETS% TO TOTAL ASSETS

NON-PERFORMING ASSETS% TO TOTAL ASSETS

Percent

Percent

Year

Percent

0.0

0.5

1.0

1.5

2.0

2.5

Jun1312111009080706050403

Year

9.5

10.0

10.5

11.0

11.5

12.0

Jun1312111009080706050403

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Jun1312111009080706050403

28


MEMBER BANKS

Abington Bank

Avon Co-operative Bank

Bank of Easton

BankGloucester

Beverly Cooperative Bank

Braintree Cooperative Bank

Canton Co-operative Bank

Charles River Bank

Chelsea Bank

Colonial Co-operative Bank

Commonwealth Cooperative Bank

The Cooperative Bank

Dean Bank

Equitable Co-operative Bank

Everett Co-operative Bank

FamilyFirst Bank

Fidelity Bank

MutualOne Bank

Greenfield Co-operative Bank

HarborOne Bank

Haverhill Bank

Holbrook Cooperative Bank

Hometown Bank

Mansfield Bank

Mayflower Bank

Mechanics Cooperative Bank

Meetinghouse Bank

Melrose Cooperative Bank

Methuen Co-operative Bank

Needham Bank

North Cambridge Co-operative Bank

North Shore Bank

Northhampton Cooperative Bank

Norwood Bank

Patriot Community Bank

Pilgrim Bank

Pittsfield Co-operative Bank

Reading Co-operative Bank

Sage Bank

Saugusbank

Savers Bank

S Bank

StonehamBank

Stoughton Co-operative Bank

The Co-operative Bank of Cape Cod

The Village Bank

Wakefield Co-operative Bank

Walpole Co-operative Bank

Wellesley Bank

Weymouth Bank

Winchester Co-operative Bank

Wrentham Co-operative Bank

T H E C O - O P E R AT I V E C E N T R A L B A N K

75 Park Plaza, Boston, Massachusetts 02116Telephone: (617) 695-0400

E-mail: [email protected]: www.coopcentralbank.com

Deposits in every Massachusetts co-operative bank are insured in full.The Federal Deposit Insurance Corporation (FDIC) insures each depositor to at least $250,000.

All amounts above that are insured by the Share Insurance Fund of The Co-operative Central Bank.

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