OFFERING CIRCULAR

FIRST colebrook BANCORP, inc.

132 Main Street

Colebrook, New Hampshire 03576

(603) 237-7016

The date of this Offering Circular is June 24, 2016.

250,000 SHARES OF COMMON STOCK

First Colebrook Bancorp, Inc. (the “Company”, “we”, “us” or “our”) is a Delaware corporation and the sole shareholder of Granite Bank (the “Bank”), a New Hampshire banking corporation. Our common stock is quoted on an electronic inter-dealer quotation system under the symbol “FCNH”. Quotes may be obtained at www.otcmarkets.com/stock/FCNH/quote. Our website address is www.firstcolebrookbancorp.com. We are offering, on the terms stated in this Offering Circular (the “Offering”), to sell up to 250,000 shares of our common stock, par value $1.50 per share (the “Shares”) at the price of $20.00 per share. See “Securities Being Offered” on page 63 for a description of the Shares. Our Offering will commence on the date of this Offering Circular and we are offering our Shares on a best efforts basis. FIG Partners, LLC (the “Placement Agent”) has agreed to act as our selling agent and we have agreed to pay our Placement Agent certain fees and commissions for its services. Our Placement Agent has agreed to use its best efforts to procure potential purchasers for our Shares offered by this Offering Circular, but neither the Placement Agent nor any other person has agreed to purchase any Shares.

All subscription funds (“Subscription Payments”) will be deposited in an interest bearing escrow account established with Bankers’ Bank Northeast (“Escrow Agent”). We plan to conduct an initial closing at 5:00 p.m. on September 30, 2016 (the “Initial Closing Date”), but will not close our Offering until we have received subscriptions for the purchase of 181,150 Shares (the “Minimum Number”) and the Escrow Agent receives Subscription Payments totaling $3,623,000 (the “Escrow Release Condition”). We may conduct an earlier initial closing if we satisfy the Escrow Release Condition before the Initial Closing Date. Thereafter, we may conduct additional closings until the final closing date of December 31, 2016 (the “Expiration Date”). The Escrow Agent will hold all Subscription Payments in escrow until the earlier of the Expiration Date, the date of any initial or subsequent closing permitted by this Offering where the Subscription Payments are accepted, or the date on which we notify the Escrow Agent that the Subscription Payment is rejected in whole or in part. If we do not satisfy the Escrow Release Condition by the Expiration Date, the Offering will not close and the Escrow Agent will promptly return all Subscription Payments to all subscribers, with interest calculated at the federal funds rate. If we notify the Escrow Agent that we have rejected a Subscription Payment in whole or in part, the Escrow Agent will promptly return to the subscriber that portion of the Subscription Payment that was rejected, with interest calculated at the federal funds rate. Your offer to purchase Shares will not be accepted unless you agree to purchase at least 1,250 shares ($25,000), but we reserve the right, in our sole discretion, to accept smaller investments.

See “Risk Factors” starting on page 7 for information about risks you should consider before buying Shares.

⁽¹⁾ Assumes $3 Million Shares placed at a 1% commission and all additional Shares placed at a 6% commission. Depending on the manner in which the Shares are placed, the maximum commission is 6% or $217,380 (Min.) and $300,000 (Max.), which would result in proceeds of $3,405,620 (Min.) and $4,700,000 (Max.) before payment of Offering expenses, and the minimum commission is 1% or $36,230 (Min.) and $50,000 (Max.), which would result in proceeds of $3,586,770 (Min.) and $4,950,000 (Max.) before payment of Offering expenses. See “Plan of Distribution”.

⁽²⁾ Proceeds are prior to payment of expenses of the Offering, estimated to be $133,250 (including reimbursement of Placement Agent’s costs of up to $25,000).

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.

This Offering Circular follows the “Offering Circular” format pursuant to the general instructions of Part II(a)(1)(i) of Form 1-A.

The Shares are not deposits or other obligations of any bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund or any other governmental entity and are subject to investment risk, including the possible loss of principal.

The Shares have not been approved or disapproved by the New Hampshire Banking Department, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Securities and Exchange Commission or any state securities regulator, nor have such entities passed upon the adequacy or accuracy of this Offering Circular. Any representation to the contrary is a criminal offense.

TO RESIDENTS OF THE STATE OF VIRGINIA – VIRGINIA RISK FACTOR:

THE VIRGINIA STATE CORPORATION COMMISSION DOES NOT PASS UPON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT OR UPON THE MERITS OF THIS OFFERING AND THE COMMISSION EXPRESSES NO OPINION AS TO THE QUALITY OF THIS SECURITY.

You should rely only on the information contained in this Offering Circular. We have not, and the Placement Agent has not, authorized anyone to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. We are not, and the Placement Agent is not, making an offer to sell the Shares in any jurisdiction where the offer or sale is not permitted or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

It is important for you to read and consider all of the information contained in this Offering Circular before making your investment decision to purchase shares of our common stock in this Offering.

TABLE OF CONTENTS

OFFERING CIRCULAR SUMMARY

This summary highlights information contained elsewhere in this Offering Circular and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire Offering Circular, including our consolidated financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included elsewhere in this Offering Circular. For convenience, references in this Offering Circular to “we,” “us,” “our,” or the “Company” mean First Colebrook Bancorp, Inc. and its consolidated subsidiary, Granite Bank, except where the context indicates otherwise. References to “Bank” mean Granite Bank.

Our Company and Bank

First Colebrook Bancorp, Inc. is a single bank holding company formed in 1984 and is headquartered in Colebrook, New Hampshire. Its wholly-owned subsidiary, Granite Bank, is a New Hampshire banking corporation. The Bank was established in 1889 and for many years was known as The First Colebrook Bank. The Bank operates four branches located in Colebrook, Concord, Amherst and Portsmouth, New Hampshire. The directors and management of our Company and Bank are focused on providing traditional community banking services, emphasizing the establishment of personalized long-term financial relationships with individuals and small businesses who value the availability of working with experienced, local decision makers. The President and Chief Executive Officer of the Company and Bank is Loyd W. Dollins.

Our services and products consist primarily of taking deposits from, and making loans to, our target customers within our target markets. We provide a broad selection of commercial and retail banking products, including commercial and industrial loans, commercial and residential real estate loans, and a broad range of consumer loans. We also offer a wide range of checking, savings and other banking products and services to our customers, including debit cards, 24-hour ATM access, Internet banking and bill payment services, as well as mobile banking with the ability to make remote deposits. In addition to our traditional banking activities our Bank offers payroll solutions for small businesses, including payroll processing, direct deposit, time tracking and payroll tax filings.

As of December 31, 2015, we had total assets of $262,714,216, total loans of $197,962,652, net of our allowance for loan losses, total deposits of $223,441,715 and stockholders’ equity of $29,292,848. For the years ended December 31, 2014 and December 31, 2015, we reported net income available to common stockholders of $1,495,680 and $1,036,279, respectively, resulting in earnings per common share of $2.00 and $1.38, respectively.

Our Opportunity

The consolidation of banks and other financial institutions in New Hampshire in the 1990s and 2000s resulted in several large national and super-regional banks entering or expanding into our target markets through the acquisition of local banks. We believe this consolidation has left a void in our target markets for banks focused on small business and individual customers.

Our Business Strategy

Our overall business strategy is to become New Hampshire’s community bank of choice for our target customers. We intend to capitalize on our competitive strengths to distinguish us from other banking alternatives in New Hampshire. Through this business strategy, we intend to achieve profitability and build shareholder value. Our specific business strategies are as follows:

Our Competition

We face strong competition in the attraction of deposits, commercial loans, and retail loans. Our most direct competition for deposits, commercial loans, and retail loans comes from other commercial banks and thrifts as well as credit unions located in our primary market areas. We compete for deposits principally by offering depositors a wide variety of savings programs, a market rate of return, and other related services. We do not rely upon any individual, group or entity for a material portion of our deposits. Our competition for commercial and other real estate loans comes from mortgage banking companies, thrift institutions and commercial banks. We compete for loan originations primarily through the interest rates and loan fees we charge and the efficiency and quality of services we provide borrowers, real estate brokers and builders. Our competition for loans varies from time to time depending upon the general availability of lendable funds and credit, general and local economic conditions, current interest rate levels, volatility in the mortgage markets and other factors which are not readily predictable. We currently have eight (8) commercial lenders on staff who call on current and potential business customers and are available on business days and by appointment to service the commercial lending market. Currently, we also have two (2) loan originators on staff who call on real estate agents, follow leads, and are available on business days and by appointment to service the mortgage loan market; and upon completion of our pending acquisition of a residential mortgage origination business, we will have additional residential loan originators on staff.

Our Offering

The following summary contains basic information about our Offering and our Shares and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of our Shares, please see the section of this Offering Circular entitled “Securities Being Offered.”

Risk Factors

There are risks inherent to our business. The material risks and uncertainties that management believes affect us are described below. You should carefully consider the risks described below along with all of the other information contained in this Offering Circular, including our financial statements and the related notes, before deciding whether to purchase our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. This Offering Circular is qualified in its entirety by these risk factors. If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected. As a result, the trading price of our common stock could decline, and you may lose all or part of your investment in our common stock. 

Caution Regarding Forward Looking Statements

Some of the information in this Offering Circular, including the risk factors listed below, contains or incorporates by reference certain forward-looking statements about our financial condition, results of operations and business that are based on our current and future expectations. You can find many of these statements by looking for words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Such statements reflect our current views with respect to future events and are subject to risks and uncertainties, including the risk factors summarized below that could cause actual results to differ materially from those contemplated in such forward-looking statements. See “Special Note Regarding Forward-Looking Statements” on page 20 for a more thorough discussion regarding forward-looking statements.

Risks Related to Our Business

Our success depends significantly on our management team, and the loss of our senior executive officers or other key employees and our inability to recruit or retain suitable replacements could adversely affect our business, results of operations and growth prospects.

Our success depends significantly on the continued service and skills of our existing senior executive management team. Our President and CEO, Loyd W. Dollins, plans to retire on December 31, 2016. We hired Scott A. Cooper to serve as our Executive Vice President/Chief Operating Officer commencing on March 28, 2016, and expect that Mr. Cooper will become our President and CEO when Mr. Dollins retires. From 2011 to 2016, Mr. Cooper served as Executive Vice President and Chief Risk Management Officer for United Prairie Bank, a community bank located in Mankato, Minnesota. From 2008 to 2011, he served as Chief Operating Officer of North American State Bank, a community bank located in West Central, Minnesota. From 1997 until its acquisition in 2007, he served as President and CEO of First Brandon Financial Corporation and First Brandon National Bank, a community bank located in Brandon, Vermont, after which he served as a director of their acquirers, New Hampshire Thrift Bancshares, Inc. (n/k/a Lake Sunapee Bank Group) and Lake Sunapee Bank, respectively, and as Regional President of the First Brandon Division of Lake Sunapee Bank. Mr. Cooper has also served in various other capacities in the banking industry. Consequently, we believe Mr. Cooper has the experience and skills necessary to succeed Mr. Dollins as our President and CEO. The implementation of our business and growth strategies also depends significantly on our ability to retain employees with experience and business relationships within their respective market areas. Our officers may terminate their employment with us at any time, and we could have difficulty replacing such officers with persons who are experienced in the specialized aspects of our business or who have ties to the communities within our market areas. The loss of any of our key personnel could therefore have an adverse impact on our business and growth.

Our business concentration in New Hampshire imposes risks and may magnify the adverse effects and consequences to us resulting from any regional or local economic downturn affecting New Hampshire and its border-states.

There are several distinct regions within our market area. Our market areas include the greater Portsmouth, New Hampshire area; the greater Amherst, New Hampshire area; the greater Concord, New Hampshire area; Coös County; and certain limited areas in Vermont, Maine, and Massachusetts that are adjacent to our bank branches, all of which are located in New Hampshire. The loans in our real estate loan portfolio are secured primarily by properties and collateral located in New Hampshire, and also by some properties and collateral located in the portions of Vermont, Maine, and Massachusetts in which we conduct business. Likewise, the loans in our loan portfolio were made primarily to borrowers who live and/or conduct business in New Hampshire, with the remainder made to borrowers located in the portions of Vermont, Maine, and Massachusetts in which we conduct business. This geographic concentration imposes risks from lack of geographic diversification. The economic conditions in New Hampshire and its bordering states affect our business, financial condition, results of operations, and future prospects, where adverse economic developments, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio. Any regional or local economic downturn that affects New Hampshire, its bordering states, or existing or prospective borrowers or property values in such areas, may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically concentrated.

Our small to medium-sized business customers may have fewer financial resources than larger entities to weather a downturn in the economy, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

We focus our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These small to medium-sized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions negatively impact any of our existing market areas, small to medium-sized businesses may be adversely affected, and our results of operations and financial condition may be negatively affected.

Implementation of our strategic goal of pursuing acquisitions will expose us to financial, execution and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We plan to pursue a growth strategy that may include the acquisition of other financial institutions in target markets. We recognize that it may be difficult for us to succeed with such a strategy given our size and the limited market for our shares. If we were successful, such an acquisition strategy, involves significant risks, including the following:

Acquisitions of financial institutions also involve operational risks and uncertainties, and acquired companies may have unknown or contingent liabilities with no available manner of recourse, exposure to unexpected asset quality problems, key employee and customer retention problems and other problems that could negatively affect our organization. We may not be able to complete future acquisitions or, if completed, we may not be able to successfully integrate the operations, management, products and services of the entities that we acquire and eliminate redundancies. The integration process may also require significant time and attention from our management that they would otherwise direct toward servicing existing business and developing new business. Acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction. Failure to successfully integrate the entities we acquire into our existing operations may increase our operating costs significantly and adversely affect our business and earnings. If we do not manage our growth effectively, our business, financial condition, results of operations and future prospects could be negatively affected, and we may not be able to continue to implement our business strategy and successfully conduct our operations.

New lines of business or new products and services may subject us to additional risks. A failure to successfully manage these risks may have a material adverse effect on our business.

From time to time, we may implement new lines of business, offer new products and services within existing lines of business or shift focus on our asset mix. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services and/or shifting focus of asset mix, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition.

If we do not effectively manage our asset quality and credit risk, we would experience loan losses which could have a material adverse effect on our financial condition and results of operation.

Making any loan involves risk, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt, and risks resulting from changes in economic and market conditions. Our credit risk approval and monitoring procedures may fail to identify or reduce these credit risks, and they cannot completely eliminate all credit risks related to our loan portfolio. If the overall economic climate in the United States, generally, or our market areas, specifically, experience material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for loan losses, which would cause our net income and return on equity to decrease.

Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan losses.

As of December 31, 2015, approximately 75% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral, excluding manufactured housing. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. There are several distinct regions within our market area. Our market areas include the greater Portsmouth, New Hampshire area; the greater Amherst, New Hampshire area; the greater Concord, New Hampshire area; Coös County; and certain limited areas in Vermont, Maine and Massachusetts that are adjacent to our bank branches, all of which are located in New Hampshire. Even though these real estate markets have been more stable than real estate markets in other parts of the country, the market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that would adversely affect credit quality, financial condition, and results of operation. Negative changes in the economy affecting real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in additional expenses being charged against such loans. Such declines, additional expenses, and losses could have a material adverse impact on our business, results of operations and growth prospects. If real estate values decline in any of our markets, it is also more likely that we would be required to increase our allowance for loan losses, which could adversely affect our financial condition, results of operations and cash flows.

Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

We establish our allowance for loan losses and maintain it at a level considered adequate by management to absorb probable loan losses based on our analysis of our portfolio and market environment. The allowance for loan losses represents our estimate of probable losses in the portfolio at each balance sheet date and is based upon relevant information available to us. The allowance contains provisions for probable losses that have been identified relating to specific borrowing relationships, as well as probable losses inherent in the loan portfolio and credit undertakings that are not specifically identified. Additions to the allowance for loan losses, which are charged to earnings through the provision for loan losses, are determined based on a variety of factors, including an analysis of the loan portfolio, historical loss experience and an evaluation of current economic conditions in our market areas. The actual amount of loan losses is affected by changes in economic, operating and other conditions within our markets, as well as changes in the financial condition, cash flows, and operations of our borrowers, all of which are beyond our control, and such losses may exceed current estimates.

As of December 31, 2015, our allowance for loan losses as a percentage of total loans was approximately 0.81% and equaled 1.18 times our total nonperforming loans. Additional loan losses will likely occur in the future and may occur at a rate greater than we have previously experienced. We may be required to take additional provisions for loan losses in the future to further supplement the allowance for loan losses, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our allowance for loan losses and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to recognize future charge-offs. These adjustments may adversely affect our business, financial condition and results of operations.

A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition, and results of operations.

Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, the sale of our investment securities, Federal Home Loan Bank advances, the sale of loans, and other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff. If customers move money out of bank deposits and into other investments, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.

Other primary sources of funds consist of cash flows from operations, investment maturities and sales of investment securities, and proceeds from the issuance and sale of our equity and debt securities to investors. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank of Boston and the Federal Home Loan Bank of Boston. We also may borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.

Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, pay dividends to our shareholders, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.

We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.

We face significant capital and other regulatory requirements as a financial institution. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. In addition, the Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, our earnings are significantly dependent on our net interest income, the principal component of our earnings, which is the difference between interest earned by us from our interest-earning assets, such as loans and investment securities, and interest paid by us on our interest-bearing liabilities, such as deposits and borrowings. We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this “gap” will negatively impact our earnings. The impact on earnings is more adverse when the slope of the yield curve flattens, that is, when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates. Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets.

Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.

Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan in nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to have a cost to service the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.

If short-term interest rates remain at their historically low levels for a prolonged period, and assuming longer term interest rates fall further, we could experience net interest margin compression as our interest earning assets would continue to reprice downward while our interest-bearing liability rates could fail to decline in tandem. Such an occurrence would have a material adverse effect on our net interest income and our results of operations.

We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

While we attempt to invest a significant percentage of our assets in loans (our loan to deposit ratio was approximately 89.1% as of December 31, 2015), we invest a percentage of our total assets (approximately 14.5 % as of December 31, 2015) in investment securities as part of our overall liquidity strategy. As of December 31, 2015, the fair value of our securities portfolio was approximately $38 Million. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities are generally subject to decreases in market value when interest rates rise. Additional factors include, but are not limited to, rating agency downgrades of the securities, defaults by the issuer or individual borrowers with respect to the underlying securities, and continued instability in the credit markets. Any of the foregoing factors could cause an other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our financial condition and results of operations.

We face strong competition from financial services companies and other companies that offer banking services, which could harm our business.

We conduct our operations primarily in New Hampshire, and do a limited amount of cross-border business in certain limited areas of Vermont, Maine and Massachusetts that are adjacent to our bank branches, all of which are located in New Hampshire. Many of our competitors offer the same services or a wider variety of services within our market areas. These competitors include banks with nationwide operations, regional banks and other community banks. We also face competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In addition, a number of out-of-state financial intermediaries have opened production offices, or otherwise solicit deposits, in our market areas. Increased competition in our markets may result in reduced loans and deposits, as well as reduced net interest margin and profitability. Ultimately, we may not be able to compete successfully against current and future competitors. If we are unable to attract and retain banking customers, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations may be adversely affected.

We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area. We may experience operational challenges as we implement these new technology enhancements or products, which could result in us not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.

Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or superior products to those that we will be able to provide, which would put us at a competitive disadvantage. Accordingly, we may not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers.

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes breakdowns or disruptions in our customer relationship management, general ledger, deposit, loan and other systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. In addition, advances in computer capabilities could result in a compromise or breach of the systems we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our financial condition and results of operations.

Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.

We depend on a number of relationships with third-party service providers. Specifically, we receive core systems processing, essential web hosting and other Internet systems, deposit processing and other processing services from third-party service providers. If these third-party service providers experience difficulties, or terminate their services, and we are unable to replace them with other service providers, particularly on a timely basis, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace third party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.

Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, we rely heavily upon information supplied by third parties, including the information contained in credit bureau reports, property appraisals, title information, equipment pricing and valuation and employment and income documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon which we rely is misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to asset funding, the value of the asset may be significantly lower than expected, or we may fund a loan that we would not have funded or on terms we would not have extended. Whether a misrepresentation is made by the applicant or another third party, we generally bear the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations are often difficult to locate, and it is often difficult to recover any of the monetary losses we may suffer.

We could be subject to environmental risks and associated costs on our foreclosed real estate assets, which could materially and adversely affect us.

A significant portion of our loan portfolio is comprised of loans collateralized by real estate. There is a risk that hazardous or toxic waste could be discovered on the properties that secure our loans. If we acquire such properties as a result of foreclosure, we could be held responsible for the cost of cleaning up or removing this waste, and this cost could exceed the value of the underlying properties and materially and adversely affect us.

Risks Related to this Offering and an Investment in our Common Stock

There may be a significant delay between the time you send us your subscription funds and the time that your subscription is accepted and our Shares are issued, or the time that your funds are returned to you if your subscription is not accepted in whole or in part.

All Subscription Payments will be deposited in an interest bearing escrow account established with the Escrow Agent. The Escrow Agent will hold all Subscription Payments in escrow until the Offering Expiration Date on December 31, 2016 if we have not satisfied the Escrow Closing Condition before that date. We do not anticipate rejecting any Subscription Payments prior to our initial closing, and may elect not to reject any Subscription Payments prior to the Offering Expiration Date. It is possible that we will not conduct an initial closing until the Offering Expiration Date, and in such event, it is likely that no Subscription Payments will be accepted or rejected prior to the Offering Expiration Date. Consequently, Subscription Payments may be held by the Escrow Agent until the Offering Expiration Date. If any portion of any Subscription Payment held in escrow by the Escrow Agent exceeds $250,000, such portion will not be FDIC insured. Also, if Shares are issued to you on September 30, 2016 or subsequent to any other dividend record date, you will not receive the dividends, if any, payable on such dividend payment date because the Shares will not have been issued on the record date for such dividends.

The Offer Price of $20.00 per share was determined in the sole discretion of the Board of Directors.

The offering price for our Shares was determined by our Board of Directors, in consultation with our Placement Agent, based upon various factors, including the per share book value of our common stock as of May 31, 2016, the trading history of our common stock, our operating history and our prospects for further earnings, our current performance, and the prices of equity securities of comparable companies. No fairness opinion was issued to us or to our Board of Directors by the Placement Agent or any other person in connection with the pricing of our Shares for this Offering. The price reflects the level at which the Board of Directors believes the Company will be able to raise $5 Million while minimizing the dilutive effect of this Offering on the pro forma tangible book value of the Company’s outstanding shares of common stock.

An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial offering price.

Prior to this Offering there has been a limited market for our common stock in the over-the-counter marketplace. An active trading market for shares of our common stock may never develop or be sustained following this Offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The initial offering price for our common stock was determined by our Board of Directors in consultation with our Placement Agent and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the initial public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration. See “Market Price of Our Common Stock” on page 65 for additional information.

We are dependent upon the Bank for cash flow, and the Bank’s ability to make cash distributions is subject to limitations.

Our primary tangible asset is the Bank. As such, we depend upon the Bank for cash distributions (through dividends on the Bank’s stock) that we use to pay our operating expenses, satisfy our obligations, including the $5 Million subordinated promissory note that we issued on March 22, 2016 (see “Description of Subordinated Note” starting on page 68 for additional information), and to pay dividends on the Company’s common stock. There are numerous laws and banking regulations that limit the Bank’s ability to pay dividends to the Company. If the Bank is unable to pay dividends to the Company, we will not be able to satisfy our obligations or pay dividends on the Company common stock. Federal and state statutes and regulations restrict the Bank’s ability to make cash distributions to the Company. These statutes and regulations require, among other things, that the Bank maintain certain levels of capital in order to pay a dividend. Further, state and federal banking authorities have the ability to restrict the payment of dividends by supervisory action.

The securities purchase agreement between us and the U.S. Department of Treasury in connection with our participation in the Small Business Lending Fund program limits our ability to pay dividends on and repurchase our common stock.

Under the terms of our Non-Cumulative Perpetual Preferred Stock, Series C, par value $0.01 per preferred share (the “Series C Preferred Stock”) issued under the Small Business Lending Fund (“SBLF”) program, our ability to declare or pay dividends or distributions on, or purchase, redeem or otherwise acquire for consideration, shares of common stock is subject to restrictions. No repurchases of common stock may be effected, and no dividends may be declared or paid on the common stock during the current quarter and for the next three quarters following the failure to declare and pay dividends on the Series C Preferred Stock. Under the terms of the Series C Preferred Stock, we may only declare and pay a dividend on the common stock, or repurchase shares of any such class or series of stock, if, after payment of such dividend, the dollar amount of our Tier 1 Capital would be at least 90% of the Signing Date Tier 1 Capital, as set forth in the Certificate of Designation relating to the Series C Preferred Stock, excluding any subsequent net charge-offs and any redemption of the Series C Preferred Stock (the “Tier 1 Dividend Threshold”). The Tier 1 Dividend Threshold is subject to reduction, beginning on the second anniversary of issuance and ending on the 10^th anniversary, by 10% for each one percent increase in small business lending that qualifies over the baseline level.

As of December 31, 2015, we had 8,623 shares of Series C Preferred Stock outstanding under the SBLF program. On March 22, 2016, we redeemed 5,000 shares of Series C Preferred Stock by payment to the U.S. Treasury of the redemption price of $1,000 per share, plus accrued but unpaid dividends of $11,250. We used the net proceeds of a private placement of a $5 Million subordinated promissory note that closed on the same date to fund substantially all of the redemption price. We now have 3,623 shares of Series C Preferred Stock outstanding under the SBLF program which can be redeemed by our payment to the U.S. Treasury of the redemption price of $1,000 per share (i.e. the aggregate sum of $3.623 Million), plus accrued but unpaid dividends. We plan to redeem all remaining issued and outstanding shares of Series C Preferred Stock as promptly as reasonably possible after our Offering ends, but our ability to redeem the issued and outstanding Series C Preferred Stock depends on the success of our Offering and the consent of federal banking regulators.

Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions.

Although we have historically paid dividends to our shareholders, we have no obligation to continue doing so and may change our dividend policy at any time without notice to our shareholders. Holders of our common stock are entitled to receive only such dividends as our Board of Directors may declare out of funds legally available for such payments. Any declaration and payment of dividends on common stock will depend upon the Company’s earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, the Company’s ability to service any equity or debt obligations senior to the common stock and other factors deemed relevant by the Board of Directors. Furthermore, consistent with our strategic plans, growth initiatives, capital availability, projected liquidity needs, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely impact the amount of dividends, if any, paid to our common shareholders.

Until fully redeemed by us, our ability to pay dividends on our common stock is restricted by the provisions of the Series C Preferred Stock we issued under the SBLF program; and is also restricted by the terms of the Subordinated Loan Agreement governing the $5 Million subordinated promissory note that we issued on March 22, 2016. In addition, the Board of Governors of the Federal Reserve System (“FRB”) has indicated that bank holding companies should carefully review their dividend policy in relation to the organization’s overall asset quality, level of current and prospective earnings and level, composition and quality of capital. The guidance provides that the Company inform and consult with the FRB prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in an adverse change to the Company’s capital structure, including interest on the $5 Million subordinated promissory note which the Company issued on March 22, 2016. If required payments on the Company’s $5 Million subordinated promissory note are not made or are suspended, the Company will be prohibited from paying dividends on its common stock. See “Dividend Policy” starting on page 64.

Our management intends to use the proceeds of this offering for the purposes identified in this Offering Circular, but we cannot guaranty that the use of such proceeds for those purposes will benefit investors.

We plan to use $3,623,000 of the net proceeds from our Offering to redeem the outstanding portion of our Series C Preferred Stock; a portion of the net proceeds to pay accrued but unpaid dividends on our Series C Preferred Stock that become due and payable when the Series C Preferred Stock is redeemed; a portion of the net proceeds as a debt service reserve for interest that becomes due and payable on the $5 Million subordinated promissory note we issued on March 22, 2016; and to use any remaining net proceeds for other corporate purposes. There can be no guaranty that our use of the net proceeds from this Offering for those planned purposes will serve to increase our profitability or market value, or yield a favorable return to investors.

The holders of our debt obligations and any shares of our preferred stock that may be outstanding in the future will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and preferred dividends.

In the event of any liquidation, dissolution or winding up of the Company, our common stock would rank below all claims of debt holders against us, including the $5 Million subordinated promissory note that we issued on March 22, 2016 in order to fund substantially all of the cost of redeeming 5,000 shares of Series C Preferred Stock. As of the date of this Offering Circular we also have outstanding 3,623 shares of Series C Preferred Stock which we plan to redeem using approximately $3,623,000 of the anticipated proceeds of this Offering. Although we plan to use the proceeds of this Offering to redeem all of our Series C Preferred Stock that remains issued and outstanding upon the closing of this Offering, we may elect not to do so or we may in the future issue additional preferred stock or incur additional indebtedness without shareholder approval which would have priority over our common stock in the event of a liquidation.

Upon the liquidation, dissolution, or winding up of the Company, holders of our common stock will not be entitled to receive any payment or other distribution of assets until after all of our obligations to our preferred stockholders and debt holders have been satisfied. In addition, before we pay any dividends on our common stock we are required to pay any accrued but unpaid dividends on the Series C Preferred Stock that remains issued and outstanding, and we will also be required to pay interest on the $5 Million subordinated promissory note which the Company issued on March 22, 2016. Furthermore, even if we redeem all of our issued and outstanding Series C Preferred Stock as planned, our Board of Directors may also, in its sole discretion, designate and issue one or more series of preferred stock from our authorized and unissued preferred stock, which may have preferences with respect to common stock in dissolution, dividends, liquidation or otherwise.

The price of our common stock could be volatile following this offering and our stock price may fall below the initial offering price at the time you desire to sell your shares of our common stock, in which case, you would incur a loss on your investment.

The market price of our common stock following this offering may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

We will not be required to file ongoing reports with the Securities and Exchange Commission after the end of this Offering. If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary, the price and trading volume of our common stock could decline.

We will not be required to file ongoing reports with the Securities and Exchange Commission (the “SEC”) after the termination of this Offering. Consequently, after this Offering we will have no obligation to provide investors with reports about our business and publicly available information concerning our business will be limited to the information that is made public by the Bank’s regulators, such as quarterly call reports; and the information we voluntarily publish on the investor’s relations page of our website, or as a condition of having our shares quoted on an electronic inter-dealer quotation system. While we intend to continue furnishing the information and reports that we currently make available through these means, there can be no assurance that we will continue to do so. The trading market for our common stock could be affected by whether and to what extent equity research analysts publish research or reports about us and our business. As of the date of this Offering Circular, only Morningstar publishes such research and reports about us and our business, and we are not aware of any other equity research analysts other than Morningstar who publish such research or reports. We cannot predict at this time whether any research analysts will elect, at any point in the future, to cover us and our common stock or whether they will elect to publish research and reports on us. If Morningstar, or any other equity analysts who elect to cover us and publish research reports about our common stock, issue unfavorable commentary or cease publishing reports about us, the price of our stock could decline.

If Morningstar or any other analysts who may elect to cover us issue unfavorable commentary, our stock price could decline rapidly. If Morningstar or any other analysts ceases coverage of us after the date, if any, on which they elect to commence such coverage, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

Future equity issuances could result in dilution, which could cause our common stock price to decline.

We are generally not restricted from issuing additional shares of our common stock up to the 2,000,000 shares authorized in our Certificate of Incorporation. We may issue additional shares of our common stock in the future pursuant to current or future employee stock option plans or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock or securities convertible into common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.

Future sales of our common stock could depress the market price of our common stock.

Sales of a substantial number of shares of our common stock in the public market following this Offering, or the perception that large sales could occur, could cause the market price of our common stock to decline or limit our future ability to raise capital through an offering of equity securities. After completion of the sale of all Shares offered by this Offering, there will be 999,243 shares of our common stock outstanding. All of the shares of common stock sold in this offering will be freely tradable without restriction or further registration under the federal securities laws unless purchased by our “affiliates” within the meaning of Rule 144 under the Securities Act, which shares will be subject to the resale limitations of Rule 144. Our directors, executive officers, employees, and their respective family members and other affiliates, are required, under our “blackout policy,” not to offer to sell, or otherwise dispose of any shares of our common stock during the term of this Offering and a period of 90 days following the termination of this Offering.

An investment in our common stock is not an insured deposit and is not guaranteed by the Federal Deposit Insurance Corporation (“FDIC”), so you could lose some or all of your investment.

An investment in our common stock is not a bank deposit and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described herein. As a result, if you acquire our common stock, you could lose some or all of your investment.

Risks Related to the Business Environment and Our Industry

Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.

We and our Bank are subject to extensive regulation by multiple federal financial regulatory bodies and the New Hampshire Banking Department. These regulations may affect the manner and terms of delivery of our services. If we do not comply with governmental regulations, we may be subject to fines, penalties, lawsuits or material restrictions on our businesses in the jurisdiction where the violation occurred, which may adversely affect our business operations. Changes in these regulations can significantly affect the services that we provide as well as our costs of compliance with such regulations. In addition, adverse publicity and damage to our reputation arising from the failure or perceived failure to comply with legal, regulatory or contractual requirements could affect our ability to attract and retain customers.

Recent adverse economic conditions, particularly in the financial markets, resulted in government regulatory agencies and political bodies placing increased focus and scrutiny on the financial services industry. In particular, the U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) that significantly changed the regulation of financial institutions and the financial services industry. The Dodd-Frank Act and the regulations thereunder affect large and small financial institutions alike, including several provisions that will affect how community banks, thrifts and small bank and thrift holding companies are regulated.

The Dodd-Frank Act, among other things, imposed new capital requirements on bank holding companies; changed the base for FDIC insurance assessments to a bank’s average consolidated total assets minus average tangible equity, rather than upon its deposit base, and permanently raised the current standard deposit insurance limit to $250,000 and expanded the FDIC’s authority to raise insurance premiums. The legislation also required the FDIC to raise the ratio of reserves to deposits from 1.15% to 1.35% for deposit insurance purposes by September 30, 2020 and to “offset the effect” of increased assessments on insured depository institutions with assets of less than $10.0 billion. The Dodd-Frank Act established the Bureau of Consumer Financial Protection as an independent entity within the Federal Reserve System, which has broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards, and contains provisions on mortgage-related matters, such as steering incentives, determinations as to a borrower’s ability to repay and prepayment penalties. The Dodd-Frank Act also included provisions that affect corporate governance and executive compensation at all publicly traded companies and allowed financial institutions to pay interest on business checking accounts.

New proposals for legislation continue to be introduced in Congress that could further affect regulation of the financial services industry, impose restrictions on the operations and general ability of firms within the industry to conduct business consistent with historical practices, including in the areas of compensation, interest rates, financial product offerings and disclosures, and have an effect on bankruptcy proceedings with respect to consumer residential real estate mortgages, among other things. Federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied. Certain aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations.

The Basel Committee on Banking Supervision, on which the United States serves as a participating member, developed a comprehensive set of reform measures known as Basel III in order to strengthen the regulation, supervision, and risk management of the banking sector. The measures include both liquidity and capital reforms. Effective January 1, 2015 (with a phase-in period through 2019), the Company and the Bank became subject to new capital regulations adopted by the FRB and the FDIC, which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The new regulations implemented changes to what constitutes regulatory capital. Certain instruments will no longer constitute qualifying capital, subject to phase-out periods. The Company and the Bank have elected to permanently opt out of the inclusion of accumulated other comprehensive income in capital calculations, as permitted by the regulations. This opt-out will reduce the impact of market volatility on our regulatory capital ratios. The new regulations also changed the risk weights of certain assets. The Bank has met the regulatory requirements and continues to be well-capitalized.

Monetary policies and regulations of the FRB could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the FRB. An important function of the FRB is to regulate the money supply and credit conditions. Among the instruments used by the FRB to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate and changes in reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

The FRB may require us to commit capital resources to support the Bank.

The FRB, which examines us, requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the FRB may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to the Bank if it experiences financial distress.

A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holder of the $5 Million subordinated promissory note issued on March 22, 2016. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects.

Banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us.

New Hampshire and federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a New Hampshire or federal banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of our operations had become unsatisfactory, or that the Company or its management was in violation of any law or regulation, such banking agencies may take a number of different remedial actions as they deem appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against the Bank, our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance. If we become subject to such regulatory actions, we could be materially and adversely affected.

We may be required to pay higher FDIC deposit insurance assessments in the future, which could materially and adversely affect us.

The deposits of banks are insured by the FDIC through the Deposit Insurance Fund to a maximum of $250,000 per account title. For this protection, a bank must pay quarterly assessments. The FDIC has adopted a risk-based assessment system. Under this system, banks pay insurance premiums at rates based on their risk classification. Banks assigned to higher risk classifications (that is, banks that pose a higher risk of loss to the deposit insurance fund) pay assessments at higher rates than do banks that pose a lower risk. A bank’s risk classification is assigned based on its capital levels and the level of supervisory concern the bank poses to the regulators. In addition, the FDIC can impose special assessments in certain instances. The FDIC may terminate its insurance of deposits if it finds that a bank has engaged in unsafe and unsound practices, is in an unsafe or unsound condition, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. An increase in the assessment rates could materially and adversely affect us.

We may be materially and adversely affected by the creditworthiness and liquidity of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional customers. Many of these transactions expose us to credit risk in the event of a default by a counterparty or customer. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on us.

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

The federal Bank Secrecy Act, the USA PATRIOT Act of 2001 (“USA Patriot Act”), and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

There are substantial regulatory limitations on changes of control of bank holding companies.

With certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the FRB. Accordingly, prospective investors need to be aware of and comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. These provisions could adversely affect the market price of our common stock.

Provisions of our Certificate of Incorporation and Bylaws, as well as Delaware law and certain banking laws, could delay or prevent a takeover of us by a third party.

Provisions of our Certificate of Incorporation and Bylaws, the corporate law of the State of Delaware and state and federal banking laws, including regulatory approval requirements, could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our stockholders, or otherwise adversely affect the market price of our common stock. These provisions include: supermajority voting requirements for certain business combinations; the election of directors to staggered terms of three years; and advance notice requirements for nominations for election to our Board of Directors and for proposing matters that stockholders may act on at stockholder meetings. In addition, we are subject to Delaware law, which among other things prohibits us from engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder unless certain conditions are met. These provisions may discourage potential takeover attempts, discouraging bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors other than candidates nominated by our Board of Directors.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Offering Circular, including the risk factors set forth above, contains or incorporates by reference certain forward-looking projections, goals, assumptions and statements about the Company’s and the Bank’s financial condition, results of operations and business that are based on its current and future expectations. You can find many of these statements by looking for words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Such statements reflect the Company’s and the Bank’s current views with respect to future events and are subject to risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this Offering Circular that could cause actual results to differ materially from those contemplated in such forward-looking statements. Factors that could cause the Company’s and the Bank’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include:

You are cautioned that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements, which speak only as of the date of this Offering Circular. There may be events in the future that the Company or Bank has little control or is unable to accurately predict. These statements are representative only as of the date this Offering Circular. Before you invest in the Shares, you should be aware that the occurrence of the events described in these risk factors, and elsewhere in this Offering Circular, could have a material adverse effect on the Company’s and Bank’s business, operating results and financial condition.

DILUTION

Based on our consolidated, financial results for the year ended December 31, 2015, our actual net tangible book value per common share as of December 31, 2015 is $27.35 per share, which was determined by dividing our total tangible assets, less total liabilities, by the number of shares of our common stock outstanding as of such date (749,243 shares). If you invest in our common stock in this Offering, there will be no immediate dilution in your investment as a result of this Offering. Dilution with respect to net tangible book value per share to purchasers of Shares in this Offering would only result if the amount per share paid by such is greater than the net tangible book value per share of our common stock immediately after this Offering.

On a pro forma basis as of December 31, 2015, and after taking into account our private placement of a $5 Million subordinated promissory note on March 22, 2016, the redemption of all Series C Preferred Stock, and the sale of all 250,000 Shares in this Offering, our net tangible book value per share of common stock will be $25.23 per share, resulting in a dilution of $2.12 per share to each share of common stock outstanding on December 31, 2015. The Company expects this dilution to be temporary and considers it to be necessary for the Company to complete this Offering and the planned redemption of all Series C Preferred Stock that remains outstanding upon the Closing of this Offering.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe that we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of our common stock, including through the sale of securities convertible into or exchangeable or exercisable for common stock, the issuance of these securities could result in dilution to our stockholders, including investors purchasing our Shares in this Offering. If our Board of Directors determines that it is in the best interests of the Company to raise additional capital, it will work with advisors such as our Placement Agent or other appropriate expert advisors who are independent of management to minimize the dilutive effect of any such capital raise, including by determining whether to raise capital by offering debt instruments rather than additional equity, and determining, based on market and other factors deemed relevant, the appropriate pricing for any such offering.

Plan of Distribution

Our Offering will commence on the date of this Offering Circular and we are offering our Shares on a best efforts basis. Our Placement Agent, FIG Partners, LLC, has agreed to act as our selling agent. We have agreed to pay our Placement Agent certain fees and commissions for its services, as described below. Our Placement Agent has agreed to use its best efforts to procure potential purchasers for our Shares offered by this Offering Circular, but neither the Placement Agent nor any other person has agreed to purchase any Shares.

We may sell the Shares in a number of different ways or in a combination of ways, which may include the following (or any combination thereof):

We plan to conduct an initial closing at 5:00 p.m. on the Initial Closing Date, but will not close our Offering until we have received Subscription Payments for the Minimum Number of Shares. We may conduct an earlier initial closing if we receive Subscription Payments for the Minimum Number of Shares before the Initial Closing Date. Thereafter, we may conduct additional interim closings until the Expiration Date. All Subscription Payments will be deposited in an interest bearing escrow account established with the Escrow Agent. The Escrow Agent will hold all Subscription Payments in escrow until the earlier of the Expiration Date, the date of any initial or subsequent closing permitted by this Offering where the Subscription Payments are accepted, or the date on which we notify the Escrow Agent that the Subscription Payment is rejected in whole or in part. If we do not receive Subscription Payments for the Minimum Number of Shares by the Expiration Date, the Offering will not close and the Escrow Agent will promptly return all Subscription Payments to all subscribers, with interest calculated at the federal funds rate. If we notify the Escrow Agent that we have rejected a Subscription Payment in whole or in part, the Escrow Agent will promptly return to the subscriber that portion of the Subscription Payment that was rejected, with interest calculated at the federal funds rate. Your offer to purchase Shares will not be accepted unless you agree to purchase at least 1,250 shares ($25,000), but we reserve the right, in our sole discretion, to accept smaller investments. See first page of Offering Circular for definitions of capitalized terms used in this paragraph.

Fees and Commissions to Placement Agent

We have agreed to pay our Placement Agent a commission equal to 6% of the aggregate gross proceeds received from investors introduced to us by our Placement Agent who purchase Shares in our Offering; and a commission equal to 1% of the aggregate gross proceeds received from all other investors who purchase Shares in our Offering. We have also agreed to reimburse the reasonable, out-of-pocket expenses and disbursements incurred by the Placement Agent in the course of its engagement with respect to our Offering, including, without limitation, legal fees and expenses, marketing, and travel expenses. The Placement Agent may not incur more than $25,000 of reimbursable expenses, in the aggregate, unless we give our consent, which may not be unreasonably withheld (the “Reimbursable Costs”). We have also agreed to indemnify our Placement Agent, certain of its affiliates, and their respective controlling parties, for claims made against them as a result of the services provided to us by the Placement Agent in the course of our Offering, subject to certain limitations set forth in our indemnification agreement (for example, material misstatement, bad faith, willful misconduct or gross negligence on the part of the Placement Agent). We estimate that the total expenses of this Offering, exclusive of the Placement Agent’s commission, will be approximately $133,250.00. This sum is payable by us and includes the Placement Agent’s Reimbursable Costs and the fee for the Escrow Agent’s services.

Minimum and Maximum Investment Amounts

Your offer to purchase Shares will not be accepted unless you agree to purchase at least 1,250 shares ($25,000), but we reserve the right, in our sole discretion, to accept smaller investments. The filing of certain information or applications with bank regulatory agencies may be a prerequisite to the purchase of our Shares in this Offering if you will own more than 5% of our issued and outstanding shares of common stock after the completion of this Offering and if other regulatory control factors are present. If you already own shares of our common stock, you must include the shares you already own for purposes of calculating this 5% ownership limitation. For example, if you already own shares of our common stock that equal 2% of our issued and outstanding common stock, then you may not purchase through this Offering more than that number of Shares representing approximately 3% of the number of our shares of common stock that will be issued and outstanding upon completion of this Offering unless we agree to authorize a larger investment. We may exercise our right to reduce, or reject, in whole or in part, any subscription which would require prior regulatory application or approval if such application or approval is not obtained prior to your offer to subscribe for our Shares. However, we reserve the right to accept larger subscriptions for our Shares.

How to Subscribe for our Shares

In order to subscribe for Shares in our Offering, you must deliver your executed Subscription Agreement and IRS Form W-9, and submit your Subscription Payment in the manner described below. You should do so before our planned Initial Closing Date, which is scheduled for September 30, 2016. If we satisfy the Escrow Release Condition before the Initial Closing Date, we may conduct an earlier initial closing. However, we will not conduct an initial closing until the Escrow Release Condition has been satisfied. If additional Shares remain available through this Offering after our initial closing, we may accept additional subscriptions and conduct additional closings until the earlier of the date on which we have sold all Shares offered in this Offering or the Expiration Date, when this Offering will terminate. Your subscription is not binding on us unless we accept it, the Escrow Agent delivers your Subscription Payment to us, and we issue you the Shares you purchased. Once we receive your Subscription Agreement and Subscription Payment, your subscription is irrevocable by you. We reserve the right to reject any subscription for any reason or to allot to you less than the number of Shares subscribed. For example we may elect, in our discretion, to accept subscriptions primarily from investors in our market area or who subscribe for larger amounts. If our Offering is oversubscribed, you may receive fewer Shares than for which you subscribed because we will allocate the Shares among subscribers in our discretion. See first page of Offering Circular for definitions of capitalized terms used in this paragraph.

How to submit Subscription Payments

Do not make checks for subscription payments payable to us and do not wire subscription funds to us.

If you submit your subscription payment by check, your check should be made payable to “Bankers’ Bank Northeast, as Escrow Agent for First Colebrook Bancorp, Inc. Offering” and sent to the Company at the following address:

First Colebrook Bancorp, Inc.

132 Main Street

Colebrook, New Hampshire, 03576

Attention: Avis E. Brosseau, Senior Vice President/Chief Financial Officer

Please note on the check that it is a “Subscription for Regulation A Common Stock Offering”

If you wish to submit your subscription payment by wire transfer, please have your financial institution wire your funds using the following instructions:

Treatment of Subscription Payments; Terms of Escrow; Issuance of Shares

If you deliver a Subscription Payment to us, the Subscription Payment will be delivered to the Escrow Agent for deposit into the interest bearing escrow account we and the Placement Agent have jointly established with the Escrow Agent (the “Escrow Account”), along with those Subscription Payments that are wired directly to the Escrow Agent, and held and applied by the Escrow Agent pursuant to the terms of a written escrow agreement among us, the Placement Agent and the Escrow Agent (the “Escrow Agreement”). The Escrow Agent is an FDIC insured Connecticut chartered bank that is a member of the Federal Reserve, and is an independent third party that is not affiliated with us or the Placement Agent. Funds in excess of $250,000 deposited with the Escrow Agent will not be FDIC insured.

Under the terms of the Escrow Agreement, we do not have any claims against the Subscription Payments held in the Escrow Account until the Escrow Release Condition has been satisfied, the Escrow Agent notifies applicable state securities administrators that the Escrow Release Condition has been satisfied, and the Escrow Agent actually releases the Subscription Payments to us. Until then, neither we nor our creditors, affiliates, associates or the Placement Agent have any claims to the Subscription Payments held by the Escrow Agent. In addition the Escrow Agreement provides that applicable state securities administrators may inspect and copy the Escrow Agent’s records pertaining to the Escrow Account at any reasonable time and where the records are located.

The Escrow Agent will hold all Subscription Payments in the Escrow Account until:

Consequently, you may not have the use of your Subscription Payment until the Offering Expiration Date. We do not anticipate rejecting any Subscription Payments prior to our initial closing, and may elect not to reject any Subscription Payments prior to the Offering Expiration Date. It is possible that we will not conduct an initial closing until the Offering Expiration Date, and in such event, it is likely that no Subscription Payments will be accepted or rejected prior to the Offering Expiration Date. Consequently, Subscription Payments may be held by the Escrow Agent until the Offering Expiration Date.

The Escrow Agent will invest all Subscription Payments it receives in federal funds. No interest will be paid to you on any portion of any Subscription Payment that the Escrow Agent releases to us in payment of the purchase price for any subscription for Shares that we accept. If we do not sell the Minimum Number of Shares by the Expiration Date, the Offering will not close and the Escrow Agent will promptly return all Subscription Payments directly to all subscribers, with interest calculated at the federal funds rate, and neither the subscribers nor the Company will have any further obligation to each other. In such event, no fees or expenses, including fees of the Escrow Agent, will be deducted from the escrowed Subscription Payments. You will also receive interest earned on any Subscription Payment deposited with the Escrow Agent that is returned to you because we terminated the Offering on or before the Expiration Date without closing. If we notify the Escrow Agent that we have rejected a Subscription Payment in whole or in part, the Escrow Agent will promptly return to the subscriber that portion of the Subscription Payment that was rejected, with interest calculated at the federal funds rate. Interest on Subscription Payments that are returned to subscribers will be calculated by the Escrow Agent using the applicable federal funds rate and paid on a pro-rata basis.

All shares of Stock sold will be issued in book entry form and stock certificates will not be issued unless subscribers indicate on their Subscription Agreements that they wish to receive a stock certificate. If a stock certificate is not issued, a statement reflecting ownership of Shares issued in the Offering will be mailed by our transfer agent to the persons entitled thereto at the registration address noted by them on their Subscription Agreements as soon as practicable following consummation of the Offering. Until a statement reflecting ownership of Shares is available and delivered to purchasers, purchasers might not be able to sell the Shares that they purchased. Your ability to sell your Shares before receiving your statement will depend on arrangements you may make with a brokerage firm. Also, if Shares are issued to you on September 30, 2016 or subsequent to any dividend record date, you will not receive the dividends, if any, payable on such dividend payment date because the Shares will not have been issued on the record date for such dividends.

Share purchases and sales by Our Directors, Executive Officers, Employees, Affiliates and Associates

We have adopted a policy which prohibits our directors, executive officers and other employees from purchasing or selling our stock during certain time periods. Under this policy, we may impose “blackout periods” during which our directors, executive officers and other employees are prohibited by us from directly or indirectly purchasing, selling or otherwise transferring our Shares. As permitted by this policy, we have notified our directors, executive officers and other employees that they are permitted to participate in the Offering and purchase Shares on the same terms and conditions offered to unaffiliated public investors by means of this Offering Circular and are prohibited from selling our stock during the Offering and for a period of 90 days following the Termination Date of our Offering. In addition, if our Employee Stock Option Plan, the Placement Agent or any of our affiliates or associates wish to purchase Stock in our Offering, they will be required to do so on the same terms and conditions offered to unaffiliated public investors by means of this Offering Circular. Subscription Payments deposited with the Escrow Agent by our directors, executive officers and other employees, or by our Employee Stock Option Plan, the Placement Agent or any of our affiliates or associates, will be counted for purposes of determining whether we have satisfied the Escrow Release Condition.

Use of Proceeds

If the Offering is fully subscribed, we plan to use the net proceeds from our Offering to redeem all remaining issued and outstanding shares of Series C Preferred Stock as promptly as reasonably possible after our Offering ends, but our ability to redeem the issued and outstanding Series C Preferred Stock depends on the success of our Offering and the consent of federal banking regulators. We also plan to use a portion of the net proceeds to establish a debt service reserve for the $5 Million subordinated promissory note we issued on March 22, 2016. See “Description of Subordinated Note” on page 68 for additional information. Remaining net proceeds will be used for general corporate purposes such as growing our existing business lines and pursuing opportunities for strategic acquisitions. The proposed uses of the portion of the net proceeds allocated for general corporate purposes are subject to change at our discretion; and such net proceeds may be reallocated, at our discretion, for any business purpose we deem necessary or appropriate, including increasing the size of the debt service reserve for the subordinated promissory note if it is not included in a securitization transaction as anticipated, or providing additional capital to the Bank.

The following table summarizes the anticipated use of proceeds, assuming all of the offered Shares are sold in the Offering, with resulting gross proceeds of $5,000,000:

If we receive subscriptions for only the Minimum Number of Shares required in order to close the Offering, we plan to use the Offering proceeds to redeem the outstanding Series C Preferred Stock. In that event we plan to use our own funds to pay accrued but unpaid dividends due on the redeemed shares of Series C Preferred Stock, and to pay the expenses of the Offering and the Placement Agent’s commission. Consequently, we will not need to raise funds from other sources to achieve the purposes of the Offering or to sustain our proposed activities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation” on page 39, and “Liquidity and Capital Resources” on page 41 for additional information on our capital and liquidity.

The following table summarizes the anticipated use of proceeds, assuming only the Minimum Number of Shares are sold in the Offering, with resulting gross proceeds of $3,623,000:

Description of Business

Our Company and Bank – General Overview

First Colebrook Bancorp, Inc. is a single bank holding company formed in 1984 and is headquartered in Colebrook, New Hampshire. Its wholly-owned subsidiary, Granite Bank, is a New Hampshire chartered bank. Our primary function is and will be to own all of the stock of the Bank. Our profitability is primarily dependent on the financial results of the Bank.

The Bank was established in 1889 and for many years was known as The First Colebrook Bank. The Bank operates four branches located in Colebrook, Concord, Amherst and Portsmouth, New Hampshire. The Bank is a locally managed community bank that seeks to provide personal attention and professional assistance to its customer base, which consists principally of small to medium size businesses, professionals, and individuals. The Bank’s philosophy includes offering direct access to its officers and personnel, providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures, and consistently applied credit policies.

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company is regulated by the Board of Governors of the Federal Reserve System (“FRB”), and the Bank is regulated by the New Hampshire Banking Department and the FDIC. The Company is a member of the Federal Home Loan Bank of Boston (“FHLB”).

Our services and products consist primarily of taking deposits from, and making loans to, our target customers within our target markets. We provide a broad selection of commercial and retail banking products, including commercial and industrial loans, commercial and residential real estate loans, and a broad range of consumer loans. We also offer a wide range of checking, savings and other banking products and services to our customers, including debit cards, 24-hour ATM access, Internet banking and bill payment services, as well as mobile banking with the ability to make remote deposits. In addition to our traditional banking activities our Bank offers payroll solutions for small businesses, including payroll processing, direct deposit, time tracking and payroll tax filings.

As of December 31, 2015, we had total assets of $262,714,216, total loans of $197,962,652, net of our allowance for loan losses, total deposits of $223,441,715 and stockholders’ equity of $29,292,848. For the years ended December 31, 2014 and December 31, 2015, we reported net income available to common stockholders of $1,495,680 and $1,036,279, respectively, resulting in earnings per common share of $2.00 and $1.38, respectively.

Our Employees

As of June 1, 2016, we had a total of 65 full-time employees and 12 part-time employees. These employees are not represented by collective bargaining agents. We believe that our relationship with our employees is good.

Our Market Areas

There are several distinct regions within our market area. Our market areas include the greater Portsmouth, New Hampshire area; the greater Amherst, New Hampshire area; the greater Concord, New Hampshire area; Coös County; and certain limited areas in Vermont, Maine and Massachusetts that are adjacent to our bank branches, all of which are located in New Hampshire.

Our Business Strategy

Our overall business strategy is to become New Hampshire’s community bank of choice for our target customers. We intend to capitalize on our competitive strengths to distinguish us from other banking alternatives in New Hampshire. Through this business strategy, we intend to achieve profitability and build shareholder value. Our specific business strategies are as follows:

Our Competitive Strengths

We believe the following competitive strengths support our strategy:

Our Community Banking Services

Lending Strategy and Types of Loans. Through the Bank, we offer a broad range of commercial and retail lending products to businesses, professionals and individuals. Commercial lending products include owner-occupied commercial real estate loans, interim construction loans, commercial loans (such as SBA guaranteed loans, business term loans, equipment financing and lines of credit) to a diversified mix of small and midsized businesses, and loans to professionals. Retail lending products include residential first and second mortgage loans, and consumer installment loans such as loans to purchase cars, boats and other recreational vehicles.

The following is a discussion of our major types of lending:

Commercial Real Estate Loans. We are primarily a real estate secured lender. We originate real estate loans to finance commercial property that is owner-occupied as well as commercial property owned by real estate investors. The total amount of commercial real estate loans outstanding as of December 31, 2015 was approximately $114.4 Million, or approximately 57.5% of total loans. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied offices/warehouses/production facilities, office buildings, hotels, retail centers, and restaurants.

Commercial real estate loans are often larger and involve greater risks than other types of lending. Adverse developments affecting commercial real estate values in our market areas could increase the credit risk associated with these loans, impair the value of property pledged as collateral for these loans, and affect our ability to sell the collateral upon foreclosure without a loss. Due to the larger average size of commercial real estate loans, we face the risk that losses incurred on a small number of commercial real estate loans could have a material adverse impact on our financial condition and results of operations. In addition, commercial real estate loans have the risk that repayment is subject to the ongoing business operations of the borrower.

Residential Real Estate Loans. We offer first and second mortgage loans to our individual customers for the purchase of primary residences. As of December 31, 2015, the outstanding balance of one-to-four family real estate secured loans, including home equity loans, represented approximately $28.2 Million, or approximately 14.2%, of our total loans.

Like our commercial real estate loans, our residential real estate loans are secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located. Adverse developments affecting real estate values in our market areas could therefore increase the credit risk associated with these loans, impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses.

Single-Family Interim Construction Loans. Our construction loans include single-family interim construction loans to home builders to fund the construction of single family residences with the understanding that such loans will be repaid from the proceeds of the sale of the homes by builders. Such loans are secured by the real property being built and are made based on our assessment of the value of the property on an as-completed basis.

Like our commercial and residential real estate loans, our single-family interim construction loans are secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located. Adverse developments affecting real estate values in our market areas could therefore increase the credit risk associated with these loans, impair the value of property pledged as collateral on loans, and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Further, like our commercial construction and land development loans, the repayment of single-family interim construction loans is dependent upon the ability of the builders who are the borrowers to sell the properties to customers rather than the builders’ ability to repay the loans.

Commercial Loans. We originate commercial, industrial and municipal loans to small and medium sized businesses and municipalities located in our market areas. These loans include term loans to purchase capital equipment, and term loans and lines of credit for working capital and operational purposes. Because we are a community bank with long standing close ties to the businesses and professionals operating in our market areas, we are able to tailor our commercial loan programs to meet the needs of our customers. As of December 31, 2015, we had outstanding commercial industrial and municipal loans, of approximately $44.1 Million, or approximately 22.2% of total loans.

Like our commercial real estate loans, commercial loans have the risk that repayment is subject to the ongoing business operations of the borrower. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan. Further, commercial loans are often secured by personal property, such as inventory, and intangible property, such as accounts receivable, which if the business is unsuccessful, typically have values insufficient to satisfy the loan without a loss.

Consumer Loans. We offer a variety of consumer loans, such as installment loans to purchase cars, boats and other recreational vehicles. Our consumer loans typically are part of an overall customer relationship designed to support the individual consumer borrowing needs of our commercial loan and deposit customers. As of December 31, 2015, we had outstanding approximately $1.1 Million of consumer loans, or approximately 0.5% of our total loan portfolio. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than residential real estate mortgage loans. Consumer loan collections are dependent on the borrower’s continuing financial stability and are therefore more likely to be affected by adverse personal circumstances. Consumer loan collections are dependent on the borrower’s financial stability and therefore involve greater risk of being affected by adverse individual circumstances, such as the loss of employment or unexpected medical costs.

Underwriting. Prudent underwriting is the foundation of our strong credit culture. We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic area and industries in which our business customers are engaged. We adhere to disciplined underwriting standards and offer creative loan solutions in a responsive and timely manner.

In considering a loan, we follow the conservative underwriting principles in our loan policy which include the following:

We implement our underwriting policy through a tiered system of individual loan authority for our loan officers and a loan committee approval structure. Lending officers are assigned various levels of authority based upon their respective levels of experience and expertise. Loans with relationships over the lending authority of the loan officer must be approved by our Officer Loan Committee. Loans exceeding the authority of the Officer Loan Committee must be approved by the Bank’s Director Loan Committee.

We employ appropriate limits on our overall loan portfolio and requirements with respect to certain types of lending. As a general practice, we operate with an internal guideline limiting loans to any single borrowing relationship to $250,000 less than the Bank’s legal lending limit. The Bank’s legal lending limit was $3,972,600 as of March 31, 2016.

We require our nonowner occupied commercial real estate loans to be secured by well-managed income producing property with adequate margins, supported by a history of profitable operations and cash flows, and proven operating stability in the case of commercial loans. Except in very limited circumstances, our commercial real estate loans and commercial loans are supported by personal guarantees from the principals of the borrower.

As part of the underwriting process, we seek to minimize risk in a variety of ways, including the following:

We are a relationship-oriented, rather than transaction-oriented, lender. Accordingly, our loans are made primarily to borrowers located or operating in our primary market areas.

Credit Risk Management

Managing credit risk is a company-wide process. Our strategy for credit risk management includes the conservative underwriting process described above, and ongoing risk monitoring and review processes for all credit exposures. Our Credit Administration Department provides bank-wide credit oversight and periodically reviews the loan portfolio to ensure that the risk identification processes are functioning properly and that our credit standards are followed. In addition, a third party biannually performs a loan review which includes a review of our loan policy and a sampling of our loans to determine compliance with the requirements of our loan policy, including credit standards and the risk rating and risk management procedures contained in our loan policy. We strive to identify potential problem loans early in an effort to aggressively seek resolution of these situations before the loans become a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable loan losses inherent in the loan portfolio.

Credit risk management involves a partnership between our lenders and our credit administration group. The manager of this group has significant prior experience working in credit administration. The members of our credit administration group primarily focus their efforts on credit analysis, underwriting and monitoring new credits and providing management reporting to executive management and the board of directors. In general, whenever a particular loan or overall borrower relationship is downgraded to special mention or substandard based on one or more standard loan grading factors, our Credit Administration Manager will make a determination with the loan officer on how best to manage the relationship going forward.

Deposits

Deposits are our principal source of funds for use in lending and other general banking purposes. We provide a full range of deposit products and services, including a variety of checking and savings accounts, debit cards, online banking, mobile banking, remote deposit capture, electronic statements, bank-by-mail and direct deposit services. We also offer business accounts, including business checking and business savings. We solicit deposits through our relationship-driven team of dedicated and accessible bankers. Given the diverse nature of our branch network and our relationship-driven approach to our customers, we believe our deposit base is less sensitive to our competitor’s interest rates. Nevertheless, we attempt to price our deposit products to promote core deposit growth.

Our ability to gather deposits is an important aspect of our business franchise, and we believe this is a significant driver of franchise value. As of December 31, 2015, we held $223,441,715 of total deposits. At the request of our customers, we place a small percentage of our total deposits with other financial institutions and receive reciprocal deposits using the services of the Promontory Interfinancial Network, LLC. Such deposits are classified as brokered deposits. Other than deposits obtained through this program, we do not have brokered deposits.

Our Competition

We face strong competition in the attraction of deposits, commercial loans and retail loans. Our most direct competition for deposits, commercial loans and retail loans comes from other commercial banks and thrifts as well as credit unions located in our primary market areas. We compete for deposits principally by offering depositors a wide variety of savings programs, a market rate of return, and other related services. We do not rely upon any individual, group or entity for a material portion of our deposits. Our competition for commercial and other real estate loans comes from mortgage banking companies, thrift institutions and commercial banks. We compete for loan originations primarily through the interest rates and loan fees we charge and the efficiency and quality of services we provide borrowers, real estate brokers and builders. Our competition for loans varies from time to time depending upon the general availability of lendable funds and credit, general and local economic conditions, current interest rate levels, volatility in the mortgage markets and other factors which are not readily predictable. We currently have eight (8) commercial lenders on staff who call on current and potential business customers and are available on business days and by appointment to service the commercial lending market. Currently, we also have two (2) loan originators on staff who call on real estate agents, follow leads, and are available on business days and by appointment to service the mortgage loan market; and upon completion of our pending acquisition of a residential mortgage origination business, we will have additional residential loan originators on staff.

Litigation

There is no material litigation pending in which the Company or the Bank is a party or of which any of their property is subject, other than ordinary routine litigation incidental to the Bank’s business.

Regulation and Supervision

The U.S. banking industry is highly regulated under federal and state law. Consequently, the growth and earnings performance of the Company and the Bank will be affected not only by management decisions and general and local economic conditions, but also by the statutes administered by, and the regulations and policies of, various governmental regulatory authorities. These authorities include the FRB, the FDIC, the New Hampshire Banking Department (“NH Banking Department”), the Internal Revenue Service (“IRS”), and state taxing authorities. The effect of these statutes, regulations and policies, and any changes to such statutes, regulations and policies, can be significant and cannot be predicted.

The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system and to facilitate the conduct of sound monetary policy. The system of supervision and regulation applicable to the Company and the Bank establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s deposit insurance fund, the Bank’s depositors and the public, rather than the Company’s shareholders or creditors. The description below summarizes certain elements of the applicable bank regulatory framework. This description is not intended to describe all laws and regulations applicable to the Company and the Bank, and the description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described herein.

The Company as a Bank Holding Company

As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act of 1956, (“BHC Act”), and to supervision, examination and enforcement by the FRB. The BHC Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. The FRB’s jurisdiction also extends to any company that the Company directly or indirectly controls, such as the Company’s nonbank subsidiaries and other companies in which the Company owns a controlling investment.

Regulatory Restrictions on Dividends; Source of Strength. The Company is regarded as a legal entity separate and distinct from the Bank. The principal source of the Company’s revenues is dividends received from the Bank. As described in more detail below, New Hampshire state law places limitations on the amount that state banks may pay in dividends, which the Bank must adhere to when paying dividends to the Company. The FRB has issued a policy statement that provides that a bank holding company should not pay dividends unless (a) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends, (b) the prospective rate of earnings retention appears to be consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries, and (c) the bank holding company will continue to meet minimum required capital adequacy ratios. Accordingly, the Company should not pay cash dividends that exceed its net income in any year or that can only be funded in ways that weaken its financial strength, including by borrowing money to pay dividends.

Under FRB’s policy, bank holding companies have historically been required to act as a source of financial and managerial strength to each of its banking subsidiaries, and the Dodd–Frank Act codified this policy as a statutory requirement. Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. As discussed below, a bank holding company, in certain circumstances, could be required to guarantee the capital restoration plan of an undercapitalized banking subsidiary. If the capital of the Bank were to become impaired, the FRB could assess the Company for the deficiency. If the Company failed to pay the assessment within three months, the FRB could order the sale of the Company’s stock in the Bank to cover the deficiency.

In the event of a bank holding company’s bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee will be deemed to have assumed and will be required to cure immediately any deficit under any commitment by the debtor holding company to any of the federal banking agencies to maintain the capital of an insured depository institution, and any claim for breach of such obligation will generally have priority over most other unsecured claims.

Scope of Permissible Activities. Under the BHC Act, the Company is prohibited from acquiring a direct or indirect interest in or control of more than 5% of the voting shares of any company that is not a bank or financial holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to or performing services for its subsidiary banks, except that the Company may engage in, directly or indirectly, and may own shares of companies engaged in certain activities found by the FRB to be so closely related to banking or managing and controlling banks as to be a proper incident thereto. These activities include, among others, operating a mortgage, finance, credit card or factoring company; performing certain data processing operations; providing investment and financial advice; acting as an insurance agent for certain types of credit-related insurance; leasing personal property on a full-payout, nonoperating basis; and providing certain stock brokerage and investment advisory services. In approving acquisitions or the addition of activities, the FRB considers, among other things, whether the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.

Safe and Sound Banking Practices. Bank holding companies are not permitted to engage in unsafe and unsound banking practices. The FRB’s Regulation Y, for example, generally requires a bank holding company to provide the FRB with prior notice of any redemption or repurchase of its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to 10% or more of the bank holding company’s consolidated net worth. The FRB may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate any law or regulation. In certain circumstances, the FRB could take the position that paying a dividend would constitute an unsafe or unsound banking practice.

The FRB has broad authority to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws or regulations, and can assess civil money penalties for certain activities conducted on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as one Million dollars ($1,000,000) for each day the activity continues.

Anti-Tying Restrictions. Bank holding companies and their affiliates are prohibited from tying the provision of certain services, such as extensions of credit, to other nonbanking services offered by a bank holding company or its affiliates.

Minimum Capital Requirements. As a small bank holding company, the Company is exempt from the capital requirements of the FRB applicable to bank holding companies with assets greater than $1 Billion. The FRB has a small bank holding company capital policy which allows qualified small bank holding companies, such as the Company, to make greater use of leverage in their consolidated capital structure.

Acquisitions by Bank Holding Companies. The BHC Act requires every bank holding company to obtain the prior approval of the FRB before it acquires all or substantially all of the assets of any bank, or ownership or control of any voting shares of any bank if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. In approving bank acquisitions by bank holding companies, the FRB is required to consider, among other things, the effect of the acquisition on competition, the financial condition, managerial resources and future prospects of the bank holding company and the banks concerned, the convenience and needs of the communities to be served, including the record of performance under the Community Reinvestment Act (“CRA”), the effectiveness of the applicant in combating money laundering activities, and the extent to which the proposed acquisition would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. Our ability to make future acquisitions will depend on our ability to obtain approval for such acquisitions from the FRB. The FRB could deny our application based on the above criteria or other considerations. For example, we could be required to sell banking centers as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of a proposed acquisition.

Control Acquisitions. Federal and state laws, including the BHC Act and the Change in Bank Control Act (“CBCA”), impose additional prior notice or approval requirements and ongoing regulatory requirements on any investor that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or bank holding company. Whether an investor “controls” a depository institution is based on all of the facts and circumstances surrounding the investment. As a general matter, an investor is deemed to control a depository institution or other company if the investor owns or controls 25% or more of any class of voting securities. Subject to rebuttal, an investor is presumed to control a depository institution or other company if the investor owns or controls 10% or more of any class of voting securities and either the depository institution or company is a public company or no other person will hold a greater percentage of that class of voting securities after the acquisition. If an investor’s ownership of the Company’s voting securities were to exceed certain thresholds, the investor could be deemed to “control” the Company for regulatory purposes, which could subject such investor to regulatory filings or other regulatory consequences.

Regulation of the Bank

Regulatory Authorities. The Bank is a New Hampshire-chartered bank, the deposits of which are insured by the deposit insurance fund of the FDIC. The Bank is not a member of the Federal Reserve System; therefore, the Bank is subject to supervision and regulation by the FDIC and the NH Banking Department. Such supervision and regulation subject the Bank to special restrictions, requirements, potential enforcement actions and periodic examination by the FDIC and the NH Banking Department.

General Regulatory Powers and Duties of NH Banking Department. The New Hampshire Bank Commissioner (“Bank Commissioner”) is required to supervise and examine each New Hampshire-chartered depository bank. The approval of the Bank Commissioner is required to establish or close branches, to merge with another bank, to form a holding company, to issue Bank stock or to undertake many other activities. Any bank that does not operate in accordance with the regulations, policies and directives of the Bank Commissioner may be sanctioned. The Bank Commissioner may suspend or remove directors, trustees or officers of a bank who have violated the law, conducted a bank’s business in a manner which is unsafe, unsound or contrary to the depositors’ interests, or been negligent in the performance of their duties.

Equivalence to National Bank Powers. The New Hampshire banking statutes presently in effect provide that a New Hampshire-chartered bank has the same rights and privileges that are or may be granted to national banks domiciled in New Hampshire. To the extent that the New Hampshire laws and regulations may have allowed state-chartered banks to engage in a broader range of activities than national banks, the Federal Deposit Insurance Corporation Improvement Act of 1991, or the FDICIA, has operated to limit this authority. The FDICIA provides that no state bank or subsidiary thereof may engage as a principal in any activity not permitted for national banks, unless the institution complies with applicable capital requirements and the FDIC determines that the activity poses no significant risk to the deposit insurance fund of the FDIC. In general, statutory restrictions on the activities of banks are aimed at protecting the safety and soundness of depository institutions.

Branching. New Hampshire law provides that a New Hampshire-chartered bank can establish a branch anywhere in New Hampshire or any other state provided that the branch is approved in advance by the Bank Commissioner and other applicable state authorities. The branch must also be approved by the FDIC, which considers a number of factors, including financial history, capital adequacy, earnings prospects, character of management, needs of the community and consistency with corporate powers. The Dodd-Frank Act permits insured state banks to engage in de novo interstate branching if the laws of the state where the new branch is to be established would permit the establishment of the branch if it were chartered by such state. New Hampshire has no restrictions on out-of-state banks establishing branch offices in the state other than requiring the approval of the Bank Commissioner.

Restrictions on Transactions with Affiliates and Insiders. Transactions between the Bank and its nonbanking subsidiaries and/or affiliates, including the Company, are subject to Section 23A of the Federal Reserve Act. In general, Section 23A of the Federal Reserve Act imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated parties. It also limits the amount of advances to third parties which are collateralized by the securities or obligations of the Company or the Bank. Covered transactions with any single affiliate may not exceed 10% of the capital stock and surplus of the Bank, and covered transactions with all affiliates may not exceed, in the aggregate, 20% of the Bank’s capital and surplus. For a bank, capital stock and surplus refers to the bank’s Tier 1 Capital and Tier 2 Capital, as calculated under the risk-based capital guidelines, plus the balance of the allowance for credit losses excluded from Tier 2 Capital. The Bank’s transactions with all of its affiliates in the aggregate are limited to 20% of the foregoing capital. “Covered transactions” are defined by statute to include a loan or extension of credit to an affiliate, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the FRB) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. In addition, in connection with covered transactions that are extensions of credit, the Bank may be required to hold collateral to provide added security to the Bank, and the types of permissible collateral may be limited. The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates, including an expansion of what types of transactions are covered transactions to include credit exposures related to derivatives, repurchase agreement and securities lending arrangements and an increase in the amount of time for which collateral requirements regarding covered transactions must be satisfied.

Affiliate transactions are also subject to Section 23B of the Federal Reserve Act which generally requires that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons. The FRB has also issued Regulation W which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretive guidance with respect to affiliate transactions.

The restrictions on loans to directors, executive officers, principal shareholders and their related interests (collectively referred to herein as “insiders”) contained in the Federal Reserve Act and in Regulation O promulgated by the FRB apply to all insured institutions and their subsidiaries and bank holding companies. These restrictions include limits on loans to one borrower and conditions that must be met before such a loan can be made. There is also an aggregate limitation on all loans to insiders and their related interests. Generally, these loans cannot exceed the institution’s total unimpaired capital and surplus, and the FDIC may determine that a lesser amount is appropriate. Loans to senior executive officers of a bank are even further restricted, generally limited to $100,000 per senior executive officer. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions.

Restrictions on Distribution of Subsidiary Bank Dividends and Assets. Dividends paid by the Bank have provided a substantial part of the Company’s operating funds, and for the foreseeable future, it is anticipated that dividends paid by the Bank to the Company will continue to be the Company’s principal source of operating funds. However, capital adequacy requirements serve to limit the amount of dividends that may be paid by the Bank. Under federal law, the Bank cannot pay a dividend if, after paying the dividend, the Bank would be undercapitalized or does not maintain an appropriate amount of a capital conservation buffer. The FDIC may declare a dividend payment to be unsafe and unsound even though the Bank would continue to meet its capital requirements after payment of the dividend.

Because the Company is a legal entity separate and distinct from the Bank, its right to participate in the distribution of assets of any subsidiary upon the subsidiary’s liquidation or reorganization will be subject to the prior claims of the subsidiary’s creditors. The Federal Deposit Insurance Act, or the FDI Act, provides that, in the event of a “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If the Bank fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including the Company, with respect to any extensions of credit we have made to the Bank.

Examinations. The FDIC periodically examines and evaluates state nonmember banks. Based on such an evaluation, the FDIC may revalue the assets of the institution and require that it establish specific reserves to compensate for the difference between the FDIC determined value and the book value of such assets. The NH Banking Department also conducts examinations of state banks. The FDIC and the NH Banking Department have worked out arrangements to alternate examinations.

Audit Reports. New Hampshire insured institutions must submit annual audit reports prepared by independent auditors to federal and state regulators. In some instances, the audit report of the institution’s holding company can be used to satisfy this requirement. Auditors must receive examination reports, supervisory agreements and reports of enforcement actions.

Capital Adequacy Requirements. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the agencies that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Effective January 1, 2015 (with a phase-in period through 2019), the Bank became subject to new capital regulations adopted by the FRB and the FDIC, which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The new regulations require a new common equity Tier 1 (“CETI”) capital ratio of 4.5%, increase the minimum Tier 1 capital to risk-weighted assets ratio to 6.0% from 4.0%, require a minimum total capital to risk-weighted assets ratio of 8.0% and require a minimum Tier 1 leverage ratio of 4.0%. CETI generally consists of common stock and retained earnings, subject to applicable adjustments and deductions. Under new prompt corrective action regulations, in order to be considered “well capitalized,” the Bank must maintain a CETI capital ratio of 6.5% (new) and a Tier 1 ratio of 8.0% (increased from 6.0%), a total risk based capital ratio of 10.0% (unchanged) and a Tier 1 leverage ratio of 5.0% (unchanged). In addition, the regulations establish a capital conservation buffer above the required capital ratios that phases in beginning January 1, 2016, at 0.625% of risk-weighted assets and increases each year by 0.625% until it is fully phased in at 2.5% effective January 1, 2019. Beginning January 1, 2016, failure to maintain the capital conservation buffer will limit the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses to executive officers and similar employees.

The new regulations implemented changes to what constitutes regulatory capital. Certain instruments will no longer constitute qualifying capital, subject to phase-out periods. In addition, Tier 2 Capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of CETI will be deducted from capital. The Bank has elected to permanently opt out of the inclusion of accumulated other comprehensive income in capital calculations, as permitted by the regulations. This opt-out will reduce the impact of market volatility on our regulatory capital ratios.

The new regulations also changed the risk weights of certain assets, including an increase in the risk weight of certain high volatility commercial real estate acquisition, development and construction loans and non-residential mortgage loans that are 90 days past due or on non-accrual status to 150% from 100%, a credit conversion factor for the unused portion of commitments with maturities of less than one year that are not cancellable to 20% from 0%, an increase in the risk weight for mortgage servicing and deferred tax assets that are not deducted from capital to 250% from 100%, and an increase in the risk weight for equity exposures to 600% from 0%.

Payout Restrictions and Capital Conservation Buffer: In addition to the minimum capital requirements, a bank must hold common equity Tier 1 Capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limits on capital distributions, such as dividend payments, discretionary payments on Tier 1 instruments, share buybacks and certain discretionary bonus payments to executive officers. This is known as the capital conservation buffer. This capital conservation buffer also will be phased in over a transition period.

Imposition of Liability for Undercapitalized Subsidiaries. Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized banks. The extent of the regulators’ powers depends on whether the bank in question is “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized. Federal regulations define these capital categories as follows:

Depending upon the capital category to which a bank is assigned, the regulators’ corrective powers include requiring the submission of a capital restoration plan; placing limits on asset growth and restrictions on activities; requiring the bank to issue additional capital stock (including additional voting stock) or to be acquired; restricting transactions with affiliates; restricting the interest rates the bank may pay on deposits; ordering a new election of directors; requiring that senior executive officers or directors be dismissed; prohibiting the bank from accepting deposits from correspondent banks; prohibiting the payment of principal or interest on subordinated debt; and ultimately, appointing a receiver for the bank.

The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5.0% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be adequately capitalized.

Deposit Insurance Assessments. The deposits of banks are insured by the FDIC through the Deposit Insurance Fund to a maximum of $250,000 per account title. For this protection, a bank must pay quarterly assessments. The FDIC has adopted a risk-based assessment system. Under this system, banks pay insurance premiums at rates based on their risk classification. Banks assigned to higher risk classifications (that is, banks that pose a higher risk of loss to the deposit insurance fund) pay assessments at higher rates than do banks that pose a lower risk. A bank’s risk classification is assigned based on its capital levels and the level of supervisory concern the bank poses to the regulators. In addition, the FDIC can impose special assessments in certain instances. The FDIC may terminate its insurance of deposits if it finds that a bank has engaged in unsafe and unsound practices, is in an unsafe or unsound condition, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. An increase in the assessment rates could materially and adversely affect us.

Brokered Deposit Restrictions. Adequately capitalized institutions cannot accept, renew or roll over brokered deposits, without receiving a waiver from the FDIC, and are subject to restrictions on the interest rates that can be paid on any deposits. Undercapitalized institutions may not accept, renew, or roll over brokered deposits.

Concentrated Commercial Real Estate Lending Regulations. The federal banking agencies, have promulgated guidance governing financial institutions with concentrations in commercial real estate lending. The guidance provides that a bank has a concentration in commercial real estate lending if (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multifamily and nonfarm residential properties and loans for construction, land development, and other land represent 300% or more of total capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. Owner occupied loans are excluded from this second category. If a concentration is present, management must employ heightened risk management practices that address the following key elements: including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

Cross-Guarantee Provisions. The Financial Institutions Reform, Recovery and Enforcement Act of 1989, (“FIRREA”), contains a “cross-guarantee” provision which generally makes commonly controlled insured depository institutions liable to the FDIC for any losses incurred in connection with the failure of a commonly controlled depository institution.

Community Reinvestment Act. The CRA and the regulations issued thereunder are intended to encourage banks to help meet the credit needs of their entire service area, including low and moderate income neighborhoods, consistent with the safe and sound operations of such banks. These regulations also provide for regulatory assessment of a bank’s record in meeting the needs of its service area when considering applications to establish branches, merger applications and applications to acquire the assets and assume the liabilities of another bank. The FIRREA requires federal banking agencies to make public a rating of a bank’s performance under the CRA. In the case of a bank holding company, the CRA performance record of the banks involved in the transaction are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other bank holding company. An unsatisfactory CRA record could substantially delay approval or result in denial of an application.

Consumer Laws and Regulations. In addition to the laws and regulations discussed herein, the Bank is also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth herein is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, and the Fair Housing Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of their ongoing customer relations. The Dodd-Frank Act created a new independent Consumer Financial Protection Bureau, which has broad authority to regulate and supervise retail financial services activities of banks, such as the Bank, and will have the authority to promulgate regulations, issue orders, guidance and policy statements, conduct examinations and bring enforcement actions with regard to consumer financial products and services. In general, however, banks with assets of $10 billion or less, such as the Bank, will continue to be examined for consumer compliance by their primary bank regulator.

The USA Patriot Act. The USA Patriot Act is intended to strengthen U.S. law enforcement’s and the intelligence community’s ability to work cohesively to combat terrorism on a variety of fronts. The potential impact of the USA Patriot Act on financial institutions of all kinds is significant and wide ranging. The USA Patriot Act requires financial institutions to prohibit correspondent accounts with foreign shell banks, establish an anti-money laundering program that includes employee training and an independent audit, follow minimum standards for identifying customers and maintaining records of the identification information and make regular comparisons of customers against agency lists of suspected terrorists, their organizations and money launderers.

Anti-Money Laundering and Anti-Terrorism Legislation. A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA Patriot Act, substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued and, in some cases, proposed a number of regulations that apply various requirements of the USA Patriot Act to financial institutions. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Certain of those regulations impose specific due diligence requirements on financial institutions that maintain correspondent or private banking relationships with non-U.S. financial institutions or persons. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

Office of Foreign Assets Control Regulation. The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These are typically known as the “OFAC” rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control, or OFAC. The OFAC-administered sanctions targeting certain countries take many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to a U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

Privacy and Data Security Requirements. The Gramm-Leach-Bliley Act of 1999, among other provisions, places limitations on the sharing of consumer financial information with unaffiliated third parties. This Act requires a bank to provide customers with the bank’s privacy policy and allows such customers the opportunity to ‘opt out’ of the sharing of personal financial information with unaffiliated third parties under certain circumstances. The Fair and Accurate Credit Transactions Act of 2003 permits consumers to opt out of information sharing for marketing purposes among affiliated companies. This Act also requires a bank to notify its customers if it reports negative information about them to a credit bureau or if they are granted credit on terms less favorable than those generally available.

The Gramm-Leach-Bliley Act also establishes standards for banks relating to administrative, technical and physical safeguards for customer records and information. The Standards for Safeguarding Customer Information, known as the “Safeguards Rule” requires a bank to develop a written information security program that is appropriate to its size and complexity, the nature and scope of its activities, and the sensitivity of the customer information at issue. Financial institutions, however, are required to comply with state law if it is more protective of customer privacy than the GLB Act.

Dodd-Frank Act. In July 2010, Congress enacted the Dodd-Frank Act regulatory reform legislation, which President Obama signed into law on July 21, 2010. This new law broadly affects the financial services industry by implementing changes to the financial regulatory landscape aimed at strengthening the sound operation of the financial services sector, including provisions that, among other things, created a new agency, the Consumer Financial Protection Bureau (as discussed above). More specifically, it:

In addition, the Dodd-Frank Act addressed many investor protection, corporate governance and executive compensation matters that have affected publicly traded companies. However, under the JOBS Act there are certain exceptions to these requirements for so long as a publicly traded qualifies as an emerging growth company.

Provisions in the Dodd-Frank Act that affect deposit insurance assessments and payment of interest on demand deposits could increase the costs associated with deposits as well as place limitations on certain revenues those deposits may generate. Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over a number of years, making it difficult to anticipate the overall financial impact on the Company, its customers or the financial industry more generally.

Incentive Compensation. In June 2010, the federal banking agencies issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Subsequently the FDIC issued an interagency rule to implement certain incentive compensation requirements of the Dodd-Frank Act. Under the rule, financial institutions must prohibit incentive-based compensation arrangements that encourage inappropriate risk taking that are deemed excessive or that may lead to material losses. The FRB will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

Changes in Laws, Regulations or Policies

From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures. Such initiatives may change banking statutes and the operating environment of the Company and the Bank in substantial and unpredictable ways. The Company cannot determine the ultimate effect that any potential legislation, if enacted, or implementing regulations with respect thereto, would have, upon the financial condition or results of operations of the Company or the Bank. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material effect on the financial condition, results of operations or business of the Company and the Bank.

Enforcement Powers of Federal and State Banking Agencies

The federal banking agencies have broad enforcement powers, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver. Failure to comply with applicable laws, regulations and supervisory agreements could subject the Company or the Bank and their subsidiaries, as well as their respective officers, directors, and other institution-affiliated parties, to administrative sanctions and potentially substantial civil money penalties. In addition to the grounds discussed above under “Corrective Measures for Capital Deficiencies,” the appropriate federal banking agency may appoint the FDIC as conservator or receiver for a banking institution (or the FDIC may appoint itself, under certain circumstances) if any one or more of a number of circumstances exist, including, without limitation, the fact that the banking institution is undercapitalized and has no reasonable prospect of becoming adequately capitalized, fails to become adequately capitalized when required to do so, fails to submit a timely and acceptable capital restoration plan or materially fails to implement an accepted capital restoration plan. The NH Banking Department also has broad enforcement powers over the Bank, including the power to impose orders, remove officers and directors, impose fines and appoint supervisors and conservators.

Effect on Economic Environment

The policies of regulatory authorities, including the monetary policy of the FRB, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the FRB to affect the money supply are open market operations in U.S. government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid for deposits.

The FRB’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effect of such policies on the business and earnings of the Company and the Bank cannot be predicted.

Description of Property

The principal executive office of the Company and our Bank is located in Colebrook, New Hampshire, at 132 Main Street. Our Bank owns this property. Our Bank operates the three additional branch offices at the following locations:

The Concord, New Hampshire branch lease was renewed for a ten year term that commenced on April 1, 2016 and ends on March 31, 2026; and is renewable for two additional terms of five years each. We believe that our existing facilities are sufficient for our current needs.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included as exhibits to this Offering Circular. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS,” “RISK FACTORS” and elsewhere in this Offering Circular, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements, except as required by law.

Overview

Our profitability is derived from the Bank. The Bank’s earnings are primarily generated from the difference between the yield on its loans and investments and the cost of its deposit accounts and borrowings. Loan origination fees, retail-banking service fees, and gains on security and loan transactions supplement these core earnings. The following discussion is intended to assist in understanding our financial condition and results of operations. This discussion should be read in conjunction with our Consolidated Financial Statements and accompanying notes included as exhibits to this Offering Circular.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) and practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Actual results could differ from those estimates.

Critical accounting estimates are necessary in the application of certain accounting policies and procedures, and are particularly susceptible to significant change. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. For additional information on our critical accounting policies, please refer to the information contained in Note 1 of our Consolidated Financial Statements included as exhibits to this Offering Circular.

Single Operating Segment – Banking

The Company’s primary activity is to act as the holding company for the Bank. Our Bank’s operations consist of a single reportable segment that represents our Company’s core business: Banking. The Banking segment provides a wide array of lending and depository-related products and services as well as related fee-based services to individuals, businesses and municipal enterprises.

Results of Operations – Comparison of Audited Operating Results for Fiscal Year-Ended December 31, 2015 to Audited Operating Results for Fiscal Year-Ended December 31, 2014

Highlights. For the year ended December 31, 2015, the Company recorded a modest increase in assets and deposits, experienced continued pressure on interest margins and earnings, and experienced trends of increased lending activity and asset quality. Net income available to common stockholders and earnings per share of common stock at December 31, 2015 decreased from December 31, 2014. For the year ended December 31, 2015, our:

Total Assets; Loans and Investments. The increase in our total assets at December 31, 2015, as compared to December 31, 2014, resulted primarily from the growth in our loan portfolio described above. Commercial loan originations were principally responsible for the increase in total assets during this time period. During the year ended December 31, 2015, the volume of secondary market residential loans was reduced, as compared to the year ended December 31, 2014. For the year ended December 31, 2015, investments in available-for-sale securities (at fair value) decreased 4.6% to $38,145,458 from $40,003,324 at December 31, 2014. The Bank used investment cash flows to fund loan growth.

Deposits. The increase in deposits at December 31, 2015, as compared to December 31, 2014, resulted from growth in noninterest-bearing deposits, partially offset by a decrease in interest-bearing deposits. At December 31, 2015, as compared to December 31, 2014, noninterest-bearing deposits grew 16.5% and represented 21.3% of total deposits. At December 31, 2015, the remaining 78.7% of total deposits were interest-bearing deposits, and were comprised of a mixture of transaction accounts, savings accounts and certificates of deposit (“CDs”). We believe that the decrease in interest-bearing deposits is due in part to the low interest rate environment we have experienced for several years. The continued historically low interest rate environment gives traditional bank depositors almost no yield on interest-bearing accounts and we believe that this has caused a significant number of depositors to invest funds elsewhere in search of higher returns. On December 16, 2015, the Federal Open Market Committee of the Federal Reserve Board increased its target for federal funds interest rates by one-quarter of one percent (0.25%). However, given subsequent economic data, the implementation of quantitative easing by the European Union, the government of Japan and others, we are not confident that the Federal Reserve Board will make additional increases in its target for federal funds interest rates during 2016, and remain concerned that our interest rate margins will continue to be adversely impacted by government policies in the U.S. and abroad.

Stockholder’s Equity. At December 31, 2015, stockholder’s equity increased by 2.6% to $29,292,848 from $28,542,514 at December 31, 2014. The increase was achieved primarily through earnings in the form of net income.

Net Income. The decreases in net income and earnings per share for the year ended December 31, 2015, as compared to the year ended December 31, 2014, resulted primarily from our expenses associated with the rebranding of the Bank’s name and our decision not to liquidate securities in our portfolio and realize the appreciation in value that had occurred during this time period. For the year ended December 31, 2015, total interest and dividend income decreased marginally to $9,455,696 from $9,563,074, when compared to the same period during 2014; and noninterest income also decreased 25.9% to $1,094,315 from $1,476,671 during the same comparative time period due to fewer securities gains, as described above.

Asset Management. The methodology used is an outcome of regulatory guidance and the results are reviewed by federal regulators and independent loan review consultants. The risk rating of loans considered special mention or substandard increased to $15,982,637 at December 31, 2015, from $12,217,017 at December 31, 2014, an increase of approximately 30.8%. For the year ended December 31, 2015, the provision for loan losses increased by $30,000, compared to no provision for the year ended December 31, 2014. At December 31, 2015, the allowance for loan and lease losses increased to $1,598,346 as compared to a reserve of $1,579,437 at December 31, 2014.

Non-Interest Income and Expenses. For the year ended December 31, 2015, noninterest income decreased 25.9% to $1,094,315 from $1,476,671 for the year ended December 31, 2014 primarily due to the significant decrease in gains on sales of securities. For the year ended December 31, 2015, noninterest expense increased by 4.8% to $8,074,648 from $7,703,609 when compared to the same period during 2014. Expense increases during this period were related to rebranding, occupancy, equipment, data processing, and salaries and employee expenses.

Regulatory Capital. The Bank’s Tier 1 capital to average assets ratio at December 31, 2015, showed improvement from the year ended December 31, 2014, and was significantly above the regulatory minimum of 5% which is required in order for the Bank to be considered “Well Capitalized”. The Bank’s capital ratios at December 31, 2015 were all significantly above the regulatory minimums to be considered “Well Capitalized”.

Liquidity and Capital Resources

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2015 and 2014, the Bank meets all capital adequacy requirements to which it is subject. See “Regulation and Supervision” starting on page 29.

As of December 31, 2015, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Bank’s and the Company’s actual capital amounts and ratios are also presented in the table under “Capital Adequacy Requirements” on page 33. The Company is subject to similar minimum capital requirements, except bank holding companies are not subject to prompt corrective action provisions.

At December 31, 2015, all of the Bank’s liquidity measures remained within policy guidelines. Operating liquidity stayed fairly consistent throughout 2015. The Core Deposit ratio at December 31, 2015 decreased slightly to 82.2% from 82.5% at December 31, 2014, and remained strong. Secondary liquidity ratios reflect ample sources of funds to meet liquidity needs.

At December 31, 2015, all of the Bank’s liquidity measures remained within policy guidelines. Operating liquidity stayed fairly consistent throughout 2015. The Core Deposit ratio at December 31, 2015 decreased slightly to 82.2% from 82.5% at December 31, 2014, and remained strong. Secondary liquidity ratios reflect ample sources of funds to meet liquidity needs.

Additional Financial Information

Our common stock is quoted on an electronic inter-dealer quotation system under the symbol “FCNH”. Quotes may be obtained at www.otcmarkets.com/stock/FCNH/quote. The disclosure guidelines of this electronic inter-dealer quotation system require us to make certain ongoing financial and other disclosures as a condition to having our Stock quoted on that system and you may review these disclosures, which include unaudited quarterly financial information, at our website address, which is www.firstcolebrookbancorp.com, and on the website of the electronic inter-dealer quotation system, which can be found at the following website address: http://www.otcmarkets.com/stock/FCNH/profile.

In accordance with SEC Industry Guide 3, we are also providing the supplemental financial information that commences on the next page of this Offering Circular. This financial information is derived from unaudited financial statements of the Company, and should be read in conjunction with the preceding sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited financial statements and notes accompanying this Offering Circular.

[Remainder of page intentionally blank. See following page for Industry Guide 3 disclosures.]

Consolidated Balance Sheets – Average Balances and Interest Rates

The following tables present our consolidated average balance sheets, including the average yields earned on our interest-earning assets, and the average rates paid on interest-bearing liabilities, in each case at the dates indicated. These balance sheets have been condensed from the detail included in our audited consolidated financial statements and show only significant categories of assets and liabilities, including all major categories of interest-earning assets and interest-bearing liabilities.

For purposes of the computations shown in the table above, non-accruing loans are included in the daily average loan amounts outstanding.

The Bank does not have any assets that constitute securities purchased with agreements to resell or other short-term investments.

See notes accompanying “Assets” table shown above.

The following table shows, at the dates indicated, the average yield on all interest-earning assets and the average effective rate on all interest-bearing liabilities for the assets and liabilities shown on the foregoing consolidated average balance sheets.

The following table shows the variance in our interest income and expense caused by differences in average balances and rates at the dates indicated.

Investment Portfolio

The following table shows the book value of our investment securities at the dates indicated.

The following table sets forth the stated maturities and weighted average yields of our investment securities at December 31, 2015.

Loan Portfolio

Types of Loans

The following table shows the Bank’s loan portfolio at the dates indicated.

² Includes commercial, industrial, and municipal loans.

³ Includes commercial & residential construction loans.

⁴ Includes commercial, residential, and manufactured housing mortgages.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table sets forth certain information at December 31, 2015 regarding the dollar amount of the loan principal repayments becoming due during the periods indicated.

The following table sets forth all loans at December 31, 2015 that are due after December 31, 2016 and have either a fixed interest rate or adjustable interest rates.

Our financial statements are prepared on the accrual basis of accounting, including the recognition of interest income on our loan portfolio, unless a loan is placed on a non-accrual basis. Loans are placed on non-accrual when there are serious doubts regarding the collectability of all principal and interest due under the terms of the loan. Amounts received on non-accrual loans generally are applied first to principal and then to interest after all principal has been collected. The classification of a loan on non-accrual status does not necessarily indicate that the principal is uncollectible, in whole or in part. A determination as to collectability is made by the Bank on a case-by-case basis. The Bank considers both the adequacy of the collateral and the other resources of the borrower in determining the steps to be taken to collect non-accrual loans. The final determination as to these steps is made on a case-by-case basis. Alternatives that are considered are foreclosure, collecting on guaranties, restructuring the loan, or initiating collection lawsuits.

Risk Elements

The following table provides information with respect to the Bank’s non-performing assets at the dates indicated.

Loan Concentrations

As of December 31, 2015

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance for loan losses when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses consists of general, allocated and unallocated components.

Other Interest Bearing Assets:

We have determined that, as of December 31, 2015, we have nothing to disclose regarding the nature and amounts of any other interest bearing assets that would be required to be disclosed under “Risk Elements/Nonaccrual, Past Due and Restructured Loans” or “Risk Elements/Potential Problem Loans” if such assets were loans.

Summary of Loan Loss Experience (5 Years)

The following table sets forth an analysis of the activity in the Bank’s allowance for loan losses for the periods indicated.

Deposits

The following table sets forth the Bank’s average amount of deposits and average rates for the dates indicated.

Jumbo C.D.’s as of December 31, 2015

Return on Equity and Assets

The following table sets forth certain information regarding return on equity and assets at the dates indicated:

Short-Term Borrowings

The following table sets forth our outstanding borrowings and weighted averages for the dates indicated.

Directors and Executive Officers

The following table sets forth the name, age and position with the Company of each of our directors and executive officers. All of the executive officers are full-time employees. The Company and Bank have no employees that would be classified as significant employees for purposes of Item 10(b) of Form 1-A. The business address for all of these individuals is 132 Main Street, Colebrook, New Hampshire 03576.

The Company and Bank each have adopted policies that require their respective Boards of Directors to maintain at least two Independent Directors on their respective Boards of Directors at all times. As of the date of this Offering Circular, Malcolm R. Washburn, David M. Atkinson, George M. Bald, Sharon B. Lane and John E. Lyons, Jr. serve as Independent Directors on the Boards of Directors of the Company and Bank. A director is not considered to be independent unless that director qualifies as an “Independent Director” as that term is defined in the North American Securities Administrators Association, Inc. (“NASAA”) Statement of Policy Regarding Corporate Securities Definitions, as adopted by NASAA on April 27, 1997, and amended on September 28, 1999, and further amended on March 31, 2008 (the “NASAA Corporate Securities Definitions”).