(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for completing with any or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

17,804,039 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of ~~February 6,~~May 10, 2019.

	December 31,			June 30,			March 31,			June 30,
	2018			2018			2019			2018
ASSETS
Cash and due from banks	$	141,569		$	60,684		$	85,875		$	60,684
Federal funds sold		1,550			1,461			1,230			1,461
Total cash and cash equivalents		143,119			62,145			87,105			62,145
Held to maturity debt securities, at amortized cost (fair value of $351,701 and $343,188, respectively)		359,777			353,183
Held to maturity debt securities, at amortized cost (fair value of $351,184 and $343,188, respectively)								354,000			353,183
Available for sale debt securities, at fair value		92,686			105,472			86,014			105,472
Total investment securities		452,463			458,655			440,014			458,655
Loans receivable, net of allowance for loan losses of $4,943 and $4,904, respectively		904,377			902,336
Loans receivable, net of allowance for loan losses of $4,945 and $4,904, respectively								935,680			902,336
Accrued interest receivable		4,457			4,358			5,037			4,358
Federal Home Loan Bank stock		2,385			2,050			2,384			2,050
Premises and equipment, net		11,429			11,598			11,497			11,598
Deferred tax asset, net		2,436			2,622			2,372			2,622
Foreclosed real estate		572			460			653			460
Bank-owned life insurance		24,026			23,747			24,157			23,747
Goodwill		6,106			6,106			6,106			6,106
Other intangible assets		376			433			348			433
Other assets		5,569			5,677			8,405			5,677
Total assets	$	1,557,315		$	1,480,187		$	1,523,758		$	1,480,187
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits	$	1,063,211		$	1,025,574		$	1,064,294		$	1,025,574
Non-interest bearing deposits		162,113			131,883			137,899			131,883
Total deposits		1,225,324			1,157,457			1,202,193			1,157,457
Mortgage escrow funds		9,085			8,803			7,675			8,803
Advances from Federal Home Loan Bank		26,279			18,841			26,248			18,841
Other liabilities		7,845			7,527			9,326			7,527
Total liabilities		1,268,533			1,192,628			1,245,442			1,192,628
Commitments and contingencies		-			-			-			-
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of December 31, 2018 and June 30, 2018)		-			-
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 and 18,165,110 shares issued, and 18,490,225 and 18,165,110 shares outstanding as of December 31, 2018 and June 30, 2018)		187			182
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2019 and June 30, 2018)								-			-
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 and 18,165,110 shares issued, and 17,804,039 and 18,165,110 shares outstanding as of March 31, 2019 and June 30, 2018, respectively)								187			182
Additional paid in capital		180,003			179,045			181,066			179,045
Retained earnings		131,993			128,365			133,483			128,365
Unearned compensation - ESOP		(12,594	)		(13,083	)		(12,364	)		(13,083	)
Accumulated other comprehensive loss, net of income taxes		(6,471	)		(6,950	)		(5,751	)		(6,950	)
Treasury stock, at cost (222,070 shares as of December 31, 2018 and no shares as of June 30, 2018)		(4,336	)		-
Treasury stock, at cost (908,256 shares as of March 31, 2019 and no shares as of June 30, 2018)								(18,305	)		-
Total shareholders' equity		288,782			287,559			278,316			287,559
Total liabilities and shareholders' equity	$	1,557,315		$	1,480,187		$	1,523,758		$	1,480,187

	Three Months Ended December 31,				Six Months Ended December 31,				Three Months Ended March 31,				Nine Months Ended March 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Interest and dividend income
Loans receivable	$	10,321	$	9,171	$	20,219	$	17,989	$	10,413	$	9,103	$	30,632	$	27,092
Investment securities		2,428		2,269		4,794		4,514		2,619		2,368		7,413		6,882
Federal funds and other		491		217		836		451		614		177		1,450		628
Total interest and dividend income		13,240		11,657		25,849		22,954		13,646		11,648		39,495		34,602
Interest expense
Deposits		2,375		1,307		4,431		2,574		2,741		1,380		7,172		3,954
FHLB advances		121		164		210		318		168		125		378		443
Total interest expense		2,496		1,471		4,641		2,892		2,909		1,505		7,550		4,397
Net interest income		10,744		10,186		21,208		20,062		10,737		10,143		31,945		30,205
Provision for loan losses		6		200		64		335		7		54		71		389
Net interest income after provision for loan losses		10,738		9,986		21,144		19,727		10,730		10,089		31,874		29,816
Noninterest income
Fees and service charges		457		412		875		793		436		352		1,311		1,145
Bank-owned life insurance		139		145		279		294		131		136		410		430
Gain on sale of securities, net		55		-		55		173		-		-		55		173
Other		269		135		352		146		12		24		364		170
Total noninterest income		920		692		1,561		1,406		579		512		2,140		1,918
Noninterest expense
Salaries and employee benefits		5,444		4,870		10,584		9,730		5,757		4,800		16,341		14,530
Occupancy and equipment		1,284		1,296		2,525		2,578		1,340		1,326		3,865		3,904
Communicating and data processing		482		479		954		970		476		477		1,430		1,447
Professional fees		417		379		786		792		396		465		1,182		1,257
Postage, printing, stationary and supplies		178		142		316		274		138		161		454		435
FDIC assessment		124		64		217		142		105		93		322		235
Advertising		131		179		218		344		131		112		349		456
Amortization of intangible assets		28		33		56		65		29		32		85		97
Other operating expenses		492		683		932		1,124		326		367		1,258		1,491
Total noninterest expense		8,580		8,125		16,588		16,019		8,698		7,833		25,286		23,852
Net income before income tax expense		3,078		2,553		6,117		5,114		2,611		2,768		8,728		7,882
Income tax expense		754		2,551		1,464		3,356		625		591		2,089		3,947
Net income	$	2,324	$	2	$	4,653	$	1,758	$	1,986	$	2,177	$	6,639	$	3,935
Earnings per common share:
Basic	$	0.14	$	-	$	0.28	$	0.10	$	0.12	$	0.13	$	0.40	$	0.23
Diluted	$	0.14	$	-	$	0.28	$	0.10	$	0.12	$	0.13	$	0.40	$	0.23
Weighted average common shares:
Basic		16,852,718		16,791,305		16,860,942		16,773,883		16,204,393		16,820,726		16,645,287		16,789,131
Diluted		16,868,464		16,791,305		16,868,815		16,773,883		16,261,755		16,820,726		16,659,746		16,789,131

	Three Months Ended December 31,						Six Months Ended December 31,						Three Months Ended March 31,						Nine Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Net income	$	2,324		$	2		$	4,653		$	1,758		$	1,986		$	2,177		$	6,639		$	3,935

Other comprehensive (loss) income:
Other comprehensive income (loss):

Unrealized gains (losses) on available for sale debt securities:
Net change in unrealized gains/losses before reclassification adjustment		506			(717	)		353			(930	)		757			(705	)		1,110			(1,635	)
Reclassification adjustment for gains realized in net income		(55	)		-			(55	)		(139	)		-			-			(55	)		(139	)
Net change in unrealized gains/losses		451			(717	)		298			(1,069	)		757			(705	)		1,055			(1,774	)
Tax effect		(94	)		243			(62	)		363			(160	)		149			(222	)		512
Net of tax		357			(474	)		236			(706	)		597			(556	)		833			(1,262	)

Defined benefit pension plan:
Net gain (loss) arising during the period		-			-			-			-			-			-			-			-
Reclassification adjustment for amortization of prior service cost and net gain (loss) included in net periodic pension cost		145			181			290			362
Reclassification adjustment for amortization of prior service cost and net gain included in net periodic pension cost														145			182			435			544
Tax effect		(31	)		(61	)		(61	)		(123	)		(30	)		(39	)		(91	)		(162	)
Net of tax		114			120			229			239			115			143			344			382

Supplemental retirement plans:
Reclassification adjustment for amortization of prior service cost and net gain included in net periodic pension cost		9			8			18			16			9			10			27			26
Tax effect		(2	)		(2	)		(4	)		(4	)		(1	)		(3	)		(5	)		(7	)
Net of tax		7			6			14			12			8			7			22			19

Total other comprehensive income (loss)		478			(348	)		479			(455	)		720			(406	)		1,199			(861	)

Comprehensive income (loss)	$	2,802		$	(346	)	$	5,132		$	1,303
Comprehensive income													$	2,706		$	1,771		$	7,838		$	3,074

Number of Shares

Common Stock

Additional Paid-in Capital

Retained Earnings

Unallocated Common Stock of ESOP

Treasury Stock, at cost

Accumulated Other Comprehensive Loss

Total
Equity

Balance at July 1, 2018

18,165,110

$
182

$
179,045

$
128,365

$
(13,083
)

$
-

$
(6,950
)

$
287,559

Net income

-

-

-

4,653

-

-

-

4,653

Other comprehensive income

-

-

-

-

-

-

479

479

Common stock dividends declared ⁽¹⁾

-

-

-

(1,025
)

-

-

-

(1,025
)
Repurchase of common stock

(222,070
)

-

-

-

-

(4,336
)

-

(4,336
)
Restricted stock awards granted

547,185

5

(5
)

-

-

-

-

-

Stock-based compensation

-

-

482

-

-

-

-

482

ESOP shares committed to be released (48,838 shares)

-

-

481

-

489

-

-

970

Balance at December 31, 2018

18,490,225

$
187

$
180,003

$
131,993

$
(12,594
)

$
(4,336
)

$
(6,471
)

$
288,782

Balance at July 1, 2017

18,165,110

$
182

$
177,993

$
121,148

$
(14,262
)

$
-

$
(5,215
)

$
279,846

Net income

-

-

-

1,758

-

-

-

1,758

Other comprehensive loss

-

-

-

-

-

-

(455
)

(455
)
Issuance of common stock⁽²⁾

-

-

(17
)

-

-

-

-

(17
)
ESOP shares committed to be released (69,906 shares)

-

-

580

-

699

-

-

1,279

Balance at December 31, 2017

18,165,110

$
182

$
178,556

$
122,906

$
(13,563
)

$
-

$
(5,670
)

$
282,411

⁽¹⁾ Dividends declared were $0.03 and $0.06 per common share for the three and six months ended December 31, 2018, respectively.

⁽²⁾ Represents costs incurred in association with the Company's initial public offering.

	Number of Shares			Common Stock		Additional Paid-in Capital			Retained Earnings			Unallocated Common Stock of ESOP			Treasury Stock, at cost			Accumulated Other Comprehensive Loss			Total Equity
Balance at July 1, 2018		18,165,110		$	182	$	179,045		$	128,365		$	(13,083	)	$	-		$	(6,950	)	$	287,559
Net income		-			-		-			2,329			-			-			-			2,329
Other comprehensive income		-			-		-			-			-			-			1			1
Common stock dividends declared ($0.03 per share)		-			-		-			(505	)		-			-			-			(505	)
ESOP shares committed to be released (24,419 shares)		-			-		249			-			244			-			-			493
Balance at September 30, 2018		18,165,110			182		179,294			130,189			(12,839	)		-			(6,949	)		289,877
Net income		-			-		-			2,324			-			-			-			2,324
Other comprehensive income		-			-		-			-			-			-			478			478
Common stock dividends declared ($0.03 per share)		-			-		-			(520	)		-			-			-			(520	)
Repurchase of common stock		(222,070	)		-		-			-			-			(4,336	)		-			(4,336	)
Restricted stock awards granted		547,185			5		(5	)		-			-			-			-			-
Stock-based compensation		-			-		482			-			-			-			-			482
ESOP shares committed to be released (24,419 shares)		-			-		232			-			245			-			-			477
Balance at December 31, 2018		18,490,225			187		180,003			131,993			(12,594	)		(4,336	)		(6,471	)		288,782
Net income		-			-		-			1,986			-			-			-			1,986
Other comprehensive income		-			-		-			-			-			-			720			720
Common stock dividends declared ($0.03 per share)		-			-		-			(496	)		-			-			-			(496	)
Repurchase of common stock		(686,186	)		-		-			-			-			(13,969	)		-			(13,969	)
Stock-based compensation		-			-		829			-			-			-			-			829
ESOP shares committed to be released (23,092 shares)		-			-		234			-			230			-			-			464
Balance at March 31, 2019		17,804,039		$	187	$	181,066		$	133,483		$	(12,364	)	$	(18,305	)	$	(5,751	)	$	278,316

	Number of Shares		Common Stock		Additional Paid-in Capital			Retained Earnings		Unallocated Common Stock of ESOP			Treasury Stock, at cost		Accumulated Other Comprehensive Loss			Total Equity
Balance at July 1, 2017		18,165,110	$	182	$	177,993		$	121,148	$	(14,262	)	$	-	$	(5,215	)	$	279,846
Net income		-		-		-			1,756		-			-		-			1,756
Other comprehensive loss		-		-		-			-		-			-		(107	)		(107	)
Issuance of common stock⁽¹⁾		-		-		(17	)		-		-			-		-			(17	)
ESOP shares committed to be released (34,953 shares)		-		-		258			-		349			-		-			607
Balance at September 30, 2017		18,165,110		182		178,234			122,904		(13,913	)		-		(5,322	)		282,085
Net income		-		-		-			2		-			-		-			2
Other comprehensive loss		-		-		-			-		-			-		(348	)		(348	)
ESOP shares committed to be released (34,953 shares)		-		-		322			-		350			-		-			672
Balance at December 31, 2017		18,165,110		182		178,556			122,906		(13,563	)		-		(5,670	)		282,411
Net income		-		-		-			2,177		-			-		-			2,177
Other comprehensive loss		-		-		-			-		-			-		(406	)		(406	)
Reclassification of certain tax effects on other comprehensive income ⁽²⁾		-		-		-			1,117		-			-		(1,117	)		-
ESOP shares committed to be released (23,888 shares)		-		-	239				-	239				-		-			478
Balance at March 31, 2018	$	18,165,110	$	182	$	178,795		$	126,200	$	(13,324	)	$	-	$	(7,193	)	$	284,660

⁽¹⁾ Represents costs incurred in association with the Company's initial public offering.
⁽²⁾ The adoption of ASU 2018-02 requires the reclassification from accumulated income to retained earnings of stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017.

	Six Months Ended December 31,						Nine Months Ended March 31,
	2018			2017			2019			2018
OPERATING ACTIVITIES
Net income	$	4,653		$	1,758		$	6,639		$	3,935
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan loss		64			335			71			389
Depreciation and amortization		591			760			877			1,110
Amortization of net premiums on securities and net deferred loan origination costs		744			941			1,055			1,293
Net increase in accrued interest receivable		(99	)		(308	)		(679	)		(765	)
Net loss (gain) on sale of foreclosed real estate		(24	)		21
Net (gain) loss on sale of foreclosed real estate								(24	)		7
Net gains on sales of securities		(55	)		(173	)		(55	)		(173	)
Net gains on sales of real estate		(156	)		-
Write-downs on other real estate owned		45			-
Net (gain) loss on sales of real estate								(156	)		13
Write-down on other real estate owned								21			-
Stock-based compensation		482			-			1,311			-
ESOP Compensation		970			1,279			1,434			1,757
Earnings from cash surrender value of BOLI		(279	)		(294	)		(410	)		(430	)
Net accretion of purchase account adjustments		(188	)		(361	)		(276	)		(464	)
Other adjustments, principally net changes in other assets and liabilities		793			2,416			(535	)		2,928
Net cash provided by operating activities		7,541			6,374			9,273			9,600
INVESTING ACTIVITIES
Purchases of investment securities:
Held to maturity		(42,226	)		(27,463	)		(49,220	)		(43,055	)
Available for sale		-			(15,651	)		-			(23,537	)
Sales of investment securities available for sale		2,069			6,100			2,069			6,100
Maturities and calls of investment securities:
Held to maturity		35,346			43,060			47,968			59,772
Available for sale		10,943			17,603			18,314			20,107
Principal repayments (disbursement), net		(2,429	)		17,792
Principal (disbursements) repayments, net								(20,789	)		10,724
Purchase of loans		-			(46,657	)		(13,398	)		(88,605	)
Net (purchase) redemption of FHLB stock		(335	)		737
Purchases net of sales of bank premises and equipment		(209	)		(362	)
Net purchases of FHLB stock								(334	)		(980	)
Purchases of bank premises and equipment, net of sales								(535	)		(577	)
Proceeds from sale of foreclosed real estate		48			956			487			1,160
Net cash provided by (used in) investing activities		3,207			(3,885	)
Net cash used in investing activities								(15,438	)		(58,891	)
FINANCING ACTIVITIES
Net increase in deposits		67,867			25,881
Net decrease in short-term FHLB advances		-			(11,818	)
Net increase (decrease) in deposits								44,672			(459	)
Net increase in short-term FHLB advances								-			26,364
Proceeds from long-term FHLB advances		12,500			-			12,500			-
Repayment of long-term FHLB advances		(5,062	)		(60	)		(5,093	)		(90	)
Net increase in mortgage escrow funds		282			145
Net decrease in mortgage escrow funds								(1,128	)		(488	)
Common stock dividends paid		(1,025	)		-			(1,521	)		-
Issuance of common stock		-			(17	)		-			(17	)
Repurchase of common stock		(4,336	)		-			(18,305	)		-
Net cash used in financing activities		70,226			14,131
Net increase in cash and cash equivalents		80,974			16,620
Cash and cash equivalents:
Net cash provided by financing activities								31,125			25,310
Net increase (decrease) in cash and cash equivalents								24,960			(23,981	)
Cash and cash equivalents at beginning of period		62,145			60,486			62,145			60,486
Cash and cash equivalents at end of period	$	143,119		$	77,106		$	87,105		$	36,505

	Six Months Ended December 31,				Nine Months Ended March 31,
	2018		2017		2019		2018
Supplemental information:
Cash paid for:
Interest	$	4,620	$	2,844	$	7,491	$	4,354
Income taxes		1,640		2,010		1,718		2,066
Loans transferred to foreclosed real estate		181		-		677		345

Nature of Operations: PCSB Financial Corporation (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Maryland corporation organized by PCSB Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank's conversion to stock ownership on April 20, 2017. ~~The Company’s shares of common stock are traded on the NASDAQ Capital Market under the symbol “PCSB”.~~ At ~~December~~March 31, ~~2018,~~2019, the significant assets of the Holding Company were the capital stock of the Bank, cash deposited in the Bank, and a loan to the PCSB Bank Employee Stock Ownership Plan (“ESOP”). The liabilities of the Holding Company were insignificant. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended and regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the New York State Department of Financial Services (the “NYSDFS”).

PCSB Bank is a community-oriented financial institution that provides financial services to individuals and businesses within its market area of Putnam, Southern Dutchess, Rockland and Westchester Counties in New York. The Bank is a commercial bank and its deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s primary regulators are the FDIC and the NYSDFS.

Basis of Presentation: The unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Holding Company, the Bank and the Bank's two subsidiaries – PCSB Funding Corp. and UpCounty Realty Corp. (formerly PCSB Realty Ltd.). PCSB Funding Corp. is a real estate investment trust that holds certain mortgage assets. UpCounty Realty Corp. is a corporation that holds certain properties foreclosed upon by the Bank. On ~~December~~March 31, ~~2018,~~2019, in conjunction with the Bank’s charter conversion from a stock savings bank to a commercial bank, the Bank’s wholly-owned subsidiary, PCSB Commercial Bank, merged with and into PCSB Bank. All intercompany transactions and balances have been eliminated in consolidation. ~~Financial information for the periods before the Company’s initial public offering (“IPO”) on April 20, 2017 are those of the Bank and its subsidiaries.~~

The unaudited consolidated financial statements contained herein reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments reflected in the consolidated financial statements contained herein. The ~~annualized~~ results of operations for the current period presented are not necessarily indicative of the results of operations that may be expected for the entire current fiscal year. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended June 30, 2018, included in the Company's ~~annual report~~Annual Report on Form 10-K.

Certain prior period amounts have been reclassified to conform to the current presentation. Reclassifications had no effect on prior period net income or equity.

Use of Estimates: To prepare financial statements in conformity with GAAP management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

The pronouncements discussed below are not intended to be an all-inclusive list, but rather only those pronouncements that could potentially have a material impact on our financial position, results of operations or disclosures.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers,” and was later amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and 2016-20. These updates provide a comprehensive framework for addressing revenue

recognition issues that can be applied to all contracts with customers. The amendments also include improved disclosures to enable users of financial statements to better understand the nature, amount, timing and uncertainty of revenue that is recognized.

While the guidance in ASU 2014-09 supersedes most existing industry-specific revenue recognition accounting guidance, much of the Company’s revenue comes from financial instruments such as debt securities and loans that are outside the scope of the guidance. The Company’s material revenue streams that are in the scope of ASU 2014-09 are fees on deposit accounts (including interchange fees) and foreclosed real estate gains and losses. All other revenue streams are immaterial or are in the scope of other GAAP requirements which take precedence and therefore are not in the scope of ASU 2014-09. Based on the Company’s analysis, ASU 2014-09 will not materially change the recognition of revenue on service fees on deposit accounts as the contracts are day to day and recognized as the service is provided. Gains and losses on the sale of foreclosed real estate are generally accounted for under ASC 610. However, ASU 2014-09 also added a new Subtopic 610-20 which addresses the recognition of gains and losses on the transfer of nonfinancial and in-substance nonfinancial assets. Gain and loss recognition is not expected to change except for foreclosed real estate and other nonfinancial asset sales that are financed by the Company. In the case of financed sales, the Company will need to evaluate each contract to determine whether each contract criteria are met, including whether it is probable that it will collect substantially all consideration to which it is entitled. The Company will also need to evaluate whether the financing terms offered to the buyer of the nonfinancial asset are market terms when determining the transaction price.

The Company has evaluated the impact of ASU 2014-09 and the amendments upon adoption as of July 1, 2018. In evaluating this standard, management has determined that the majority of revenue earned by the Company is from revenue streams not included in the scope of this standard and for in scope revenue streams management determined that, based on the modified retrospective method, a cumulative-effect adjustment to opening retained earnings as a result of adopting this standard is not needed. Additional disclosures required under ASU 2014-09 are contained in Note ~~12.~~11.

In January 2016, the FASB issued ASU 2016-01, an amendment to “Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01 are intended to improve the recognition, measurement, presentation and disclosure of financial assets and liabilities to provide users of financial statements with information that is more useful for decision-making purposes. Among other changes, ASU 2016-01 would: (1) require equity securities to be reclassified out of available for sale and measured at fair value with changes in fair value recognized through net income but would allow equity securities that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of an impairment, (2) simplify the impairment assessment of such equity securities and would require enhanced disclosure about these investments, (3) require separate presentation of financial assets and liabilities by measurement category and type of instrument, such as securities or loans, on the balance sheet or in the notes, and would eliminate certain other disclosures relating to the methods and assumptions used to estimate fair value for financial assets measured at amortized cost on the balance sheet, and (4) require the use of an exit price notion when measuring the fair value of financial instruments. The adoption of ASU 2016-01, and subsequent amendments, on July 1, 2018 did not have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07 “Compensation – Retirement Benefits”. The ASU requires companies that offer employee defined pension plans, other postretirement benefit plans, or other types of benefit plans accounted for under Topic 715 to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The adoption of ASU 2017-07 resulted in credits to non-service cost ~~credits~~ of ~~$83,000~~$73,000 and ~~$166,000,~~$239,000, and ~~$47,000~~$45,000 and ~~$94,000~~$139,000 to be included in other operating expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

In February 2016, the FASB issued ASU 2016-02 “Leases.” ASU 2016-02 affects any entity that enters into a lease and is intended to increase the transparency and comparability of financial statements among organizations. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset would represent the right to use the underlying asset for the lease term and the lease liability would represent the discounted value of the required lease payments to the lessor. The ASU would also require entities to disclose key information about leasing arrangements. The

amendments in this update will be effective for the Company for the fiscal year beginning on July 1, 2019, including interim periods within that fiscal year. The Company currently leases eleven branches and two administrative offices. ASU 2016-02 will result in the establishment of a right to use asset and corresponding lease obligation. The impact to the Company’s consolidated financial position has yet to be determined by management, however the ASU is not expected to have a material impact on the Company’s consolidated results of operations or disclosures.

In June 2016, the FASB issued ASU 2016-13 “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 affects entities holding financial assets that are not accounted for at fair value through net income, including loans, debt securities, and other financial assets. The ASU requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected by recording an allowance for current expected credit losses. The amendments in this update will be effective for the Company for the fiscal year beginning on July 1, 2020, including interim periods within that fiscal year. Early adoption is permitted beginning after December 15, 2018, including interim periods within those fiscal years. The Company is actively working through the provisions of the Update. Management has established a steering committee which is identifying the methodologies and the additional data requirements necessary to implement the Update and is evaluating the need for a third-party software service provider to assist in the Company's implementation. Management is currently evaluating the impact that ASU 2016-13 will have on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350).” ASU 2017-04 simplifies the test for goodwill impairment, which eliminates the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The amendments in this update will be effective for the Company for the fiscal year beginning on July 1, 2019, including interim periods within that fiscal year. Management expects ASU 2017-04 will not have a significant impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08 "Receivables - Non-Refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities." The ASU requires premiums on callable debt securities to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update will be effective for the Company for the fiscal year beginning on July 1, 2020, including interim periods within that fiscal year. Early adoption is permitted beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2017-08 will not have a material impact on the Company’s consolidated financial position, results of operations or disclosures.

In association with the adoption of ASU 2016-01, available-for-sale and held-to-maturity debt securities are referred to as investment securities.

The amortized cost, gross unrealized/unrecognized gains and losses and fair value of available for sale and held to maturity debt securities at ~~December~~March 31, ~~2018~~2019 and June 30, 2018 were as follows:

	December 31, 2018									March 31, 2019
	Amortized		Gross Unrealized/Unrecognized					Fair		Amortized		Gross Unrealized/Unrecognized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
			(in thousands)									(in thousands)
Available for sale:
U.S. Government and agency obligations	$	56,376	$	5	$	(733	)	$	55,648	$	49,977	$	36	$	(401	)	$	49,612
Corporate and other debt securities		8,378		-		(166	)		8,212		8,364		-		(48	)		8,316
Mortgage-backed securities – residential		29,576		14		(764	)		28,826		28,560		9		(483	)		28,086
Total available for sale	$	94,330	$	19	$	(1,663	)	$	92,686	$	86,901	$	45	$	(932	)	$	86,014
Held to maturity:
U.S. Government and agency obligations	$	112,545	$	22	$	(1,696	)	$	110,871	$	106,544	$	84	$	(882	)	$	105,746
Corporate and other debt securities		34,037		18		(358	)		33,697		34,035		229		(122	)		34,142
Mortgage-backed securities – residential		136,582		42		(3,950	)		132,674		135,352		225		(1,647	)		133,930
Mortgage-backed securities – collateralized mortgage obligations		47,972		-		(1,470	)		46,502		49,538		54		(698	)		48,894
Mortgage-backed securities – commercial		28,641		22		(706	)		27,957		28,531		139		(198	)		28,472
Total held to maturity	$	359,777	$	104	$	(8,180	)	$	351,701	$	354,000	$	731	$	(3,547	)	$	351,184

	June 30, 2018									June 30, 2018
	Amortized		Gross Unrealized/Unrecognized					Fair		Amortized		Gross Unrealized/Unrecognized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
			(in thousands)									(in thousands)
Available for sale:
U.S. Government and agency obligations	$	64,389	$	-	$	(959	)	$	63,430	$	64,389	$	-	$	(959	)	$	63,430
Corporate and other debt securities		8,406		-		(171	)		8,235		8,406		-		(171	)		8,235
Mortgage-backed securities – residential		34,619		81		(893	)		33,807		34,619		81		(893	)		33,807
Total available for sale	$	107,414	$	81	$	(2,023	)	$	105,472	$	107,414	$	81	$	(2,023	)	$	105,472
Held to maturity:
U.S. Government and agency obligations	$	122,048	$	-	$	(2,274	)	$	119,774	$	122,048	$	-	$	(2,274	)	$	119,774
Corporate and other debt securities		4,000		-		(126	)		3,874		4,000		-		(126	)		3,874
Mortgage-backed securities – residential		140,478		32		(4,846	)		135,664		140,478		32		(4,846	)		135,664
Mortgage-backed securities – collateralized mortgage obligations		53,547		-		(1,815	)		51,732		53,547		-		(1,815	)		51,732
Mortgage-backed securities – commercial		33,110		11		(977	)		32,144		33,110		11		(977	)		32,144
Total held to maturity	$	353,183	$	43	$	(10,038	)	$	343,188	$	353,183	$	43	$	(10,038	)	$	343,188

No securities were sold during the three months ended March 31, 2019 and March 31, 2018, respectively. During the ~~three and six~~nine months ended ~~December~~March 31, ~~2018,~~2019, $2.1 million of securities were sold resulting in $55,000 of net realized gains. ~~No securities were sold during~~During the ~~three~~nine months ended ~~December~~March 31, ~~2017.~~ ~~During the six months ended December 31, 2017,~~2018, $6.6 million of securities were sold resulting in $173,000 of net realized gains. Included in the net realized gain for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2018, was a ~~the~~ disposal of $681,000 of securities classified as held to maturity, resulting in net realized gains of $34,000. These securities were comprised of seasoned mortgage-backed securities where the Company collected a substantial portion (at least 85%) of the principal outstanding at acquisition due to prepayments or scheduled payments payable in equal installments, comprising both principal and interest, over the terms.

The following table presents the fair value and carrying amount of debt securities at ~~December~~March 31, ~~2018,~~2019, by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Held to maturity				Available for sale				Held to maturity				Available for sale
	Carrying		Fair		Amortized		Fair		Carrying		Fair		Amortized		Fair
	Amount		Value		Cost		Value		Amount		Value		Cost		Value
	(in thousands)								(in thousands)
December 31, 2018:
March 31, 2019:
1 year or less	$	26,002	$	25,792	$	18,417	$	18,261	$	27,550	$	27,389	$	18,007	$	17,907
1 to 5 years		91,544		90,080		44,337		43,636		83,994		83,419		40,334		40,021
5 to 10 years		25,037		24,989		2,000		1,963		25,035		25,155		-		-
Mortgage-backed securities and other		217,194		210,840		29,576		28,826		217,421		215,221		28,560		28,086
Total	$	359,777	$	351,701	$	94,330	$	92,686	$	354,000	$	351,184	$	86,901	$	86,014

Securities pledged had carrying amounts of ~~$124.7~~$112.2 million and $140.5 million at ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively, and were pledged principally to secure FHLB advances and public deposits.

The following table provides information regarding investment securities with unrealized/unrecognized losses, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position at ~~December~~March 31, ~~2018~~2019 and June 30, 2018:

	December 31, 2018															March 31, 2019
	Less than 12 months					12 months or greater					Total					Less than 12 months					12 months or greater					Total
			Unrealized/					Unrealized/					Unrealized/					Unrealized/					Unrealized/					Unrealized/
	Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized
	Value		Loss			Value		Loss			Value		Loss			Value		Loss			Value		Loss			Value		Loss
	(in thousands)															(in thousands)
Available for sale:
U.S. Government and agency obligations	$	7,893	$	(32	)	$	43,784	$	(701	)	$	51,677	$	(733	)	$	-	$	-		$	44,657	$	(401	)	$	44,657	$	(401	)
Corporate and other debt securities		1,983		(31	)		6,229		(135	)		8,212		(166	)		-		-			8,316		(48	)		8,316		(48	)
Mortgage-backed securities – residential		-		-			26,235		(764	)		26,235		(764	)		-		-			25,806		(483	)		25,806		(483	)
Total available for sale	$	9,876	$	(63	)	$	76,248	$	(1,600	)	$	86,124	$	(1,663	)	$	-	$	-		$	78,779	$	(932	)	$	78,779	$	(932	)
Held to maturity:
U.S. Government and agency obligations	$	14,824	$	(169	)	$	90,026	$	(1,527	)		104,850	$	(1,696	)	$	-	$	-		$	95,669	$	(882	)		95,669	$	(882	)
Corporate and other debt securities		4,971		(65	)		3,708		(293	)		8,679		(358	)		2,453		(47	)		3,925		(75	)		6,378		(122	)
Mortgage-backed securities – residential		25,472		(440	)		102,502		(3,510	)		127,974		(3,950	)		-		-			111,881		(1,647	)		111,881		(1,647	)
Mortgage-backed securities – collateralized mortgage obligations		2,547		(21	)		43,955		(1,449	)		46,502		(1,470	)		-		-			40,744		(698	)		40,744		(698	)
Mortgage-backed securities – commercial		8,662		(55	)		17,545		(651	)		26,207		(706	)		-		-			18,099		(198	)		18,099		(198	)
Total held to maturity	$	56,476	$	(750	)	$	257,736	$	(7,430	)	$	314,212	$	(8,180	)	$	2,453	$	(47	)	$	270,318	$	(3,500	)	$	272,771	$	(3,547	)

	June 30, 2018															June 30, 2018
	Less than 12 months					12 months or greater					Total					Less than 12 months					12 months or greater					Total
			Unrealized/					Unrealized/					Unrealized/					Unrealized/					Unrealized/					Unrealized/
	Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized
	Value		Loss			Value		Loss			Value		Loss			Value		Loss			Value		Loss			Value		Loss
	(in thousands)															(in thousands)
Available for sale
U.S. Government and agency obligations	$	41,762	$	(569	)	$	21,668	$	(390	)	$	63,430	$	(959	)	$	41,762	$	(569	)	$	21,668	$	(390	)	$	63,430	$	(959	)
Corporate and other debt securities		6,258		(148	)		1,977.00		(23.00	)		8,235		(171	)		6,258		(148	)		1,977		(23	)		8,235		(171	)
Mortgage-backed securities – residential		13,397		(379	)		14,718		(514	)		28,115		(893	)		13,397		(379	)		14,718		(514	)		28,115		(893	)
Total available for sale	$	61,417	$	(1,096	)	$	38,363	$	(927	)	$	99,780	$	(2,023	)	$	61,417	$	(1,096	)	$	38,363	$	(927	)	$	99,780	$	(2,023	)
Held to maturity
U.S. Government and agency obligations	$	46,163	$	(871	)	$	71,611	$	(1,403	)	$	117,774	$	(2,274	)	$	46,163	$	(871	)	$	71,611	$	(1,403	)	$	117,774	$	(2,274	)
Corporate and other debt securities		3,874		(126	)		-		-			3,874		(126	)		3,874		(126	)		-		-			3,874		(126	)
Mortgage-backed securities – residential		102,496		(3,338	)		32,490		(1,508	)		134,986		(4,846	)		102,496		(3,338	)		32,490		(1,508	)		134,986		(4,846	)
Mortgage-backed securities – collateralized mortgage obligations		31,124		(884	)		20,608		(931	)		51,732		(1,815	)		31,124		(884	)		20,608		(931	)		51,732		(1,815	)
Mortgage-backed securities – commercial		21,762		(582	)		8,629		(395.00	)		30,391		(977	)		21,762		(582	)		8,629		(395	)		30,391		(977	)
Total held to maturity	$	205,419	$	(5,801	)	$	133,338	$	(4,237	)	$	338,757	$	(10,038	)	$	205,419	$	(5,801	)	$	133,338	$	(4,237	)	$	338,757	$	(10,038	)

As of ~~December~~March 31, ~~2018,~~2019, the Company’s ~~security~~securities portfolio consisted of ~~$452.5~~$440.0 million in securities, of which ~~237~~205 securities with a fair value of ~~$400.3~~$351.6 million were in an unrealized loss position.

As of June 30, 2018, the Company’s ~~security~~securities portfolio consisted of $458.7 million in securities, of which 254 securities with a fair value of $438.5 million were in an unrealized loss position.

There were no securities as of ~~December~~March 31, ~~2018~~2019 or June 30, 2018 for which the Company believes it is not probable that it will collect all amounts due according to the contractual terms of the security. Management believes the unrealized losses are primarily a result of changes in interest rates. The Company has determined that it does not intend to sell, or it is not more likely than not that it will be required to sell, its securities that are in an unrealized loss position prior to the recovery of its amortized cost basis. Therefore, the Company did not consider any securities to be other-than-temporarily impaired as of ~~December~~March 31, ~~2018~~2019 or June 30, 2018.

	December 31,			June 30,			March 31,			June 30,
	2018			2018			2019			2018
Mortgage loans:
Residential	$	248,575		$	250,578		$	261,970		$	250,578
Commercial		499,930			495,265			499,284			495,265
Construction		16,023			17,352			16,302			17,352
Net deferred loan origination costs		842			1,041			843			1,041
Total mortgage loans		765,370			764,236			778,399			764,236
Commercial and consumer loans:
Commercial loans		107,899			104,135			126,514			104,135
Home equity lines of credit		35,029			37,395			34,525			37,395
Consumer and overdrafts		321			745			459			745
Net deferred loan origination costs		701			729			728			729
Total commercial and consumer loans		143,950			143,004			162,226			143,004
Total loans receivable		909,320			907,240			940,625			907,240
Allowance for loan losses		(4,943	)		(4,904	)		(4,945	)		(4,904	)
Loans receivable, net	$	904,377		$	902,336		$	935,680		$	902,336

In 2015, the Company completed a merger with CMS Bancorp and its wholly owned subsidiary, CMS Bank. References to acquired loans in this note pertain only to those loans acquired as part of the merger.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended December 31, 2018												Three Months Ended March 31, 2019
	Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance		Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance
Originated:
Residential	$	359	$	17		$	-		$	3	$	379	$	379	$	8		$	-		$	2	$	389
Commercial		3,130		245			(114	)		-		3,261		3,261		(26	)		-			-		3,235
Construction		493		(331	)		-			96		258		258		(58	)		-			-		200
Commercial loans		825		55			-			-		880		880		69			-			2		951
Home equity lines of credit		69		13			-			-		82		82		(8	)		-			-		74
Consumer and overdrafts		10		7			(9	)		2		10		10		6			(11	)		2		7
Acquired:
Residential		73		-			-			-		73		73		16			-			-		89
Total	$	4,959	$	6		$	(123	)	$	101	$	4,943	$	4,943	$	7		$	(11	)	$	6	$	4,945

	Three Months Ended December 31, 2017												Three Months Ended March 31, 2018
	Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance		Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance
Originated:
Residential	$	407	$	(5	)	$	-		$	-	$	402	$	402	$	(20	)	$	(47	)	$	-	$	335
Commercial		2,709		(23	)		-			-		2,686		2,686		131			-			-		2,817
Construction		1,160		237			(997	)		-		400		400		90			-			-		490
Commercial loans		889		(45	)		-			-		844		844		(186	)		(23	)		210		845
Home equity lines of credit		77		(3	)		-			-		74		74		35			(60	)		19		68
Consumer and overdrafts		-		-			-			-		-		-		4			-			-		4
Acquired:
Residential		26		39			-			-		65		65		-			-			-		65
Total	$	5,268	$	200		$	(997	)	$	-	$	4,471	$	4,471	$	54		$	(130	)	$	229	$	4,624

	Six Months Ended December 31, 2018												Nine Months Ended March 31, 2019
	Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance		Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance
Originated:
Residential	$	386	$	(12	)	$	-		$	5	$	379	$	386	$	(4	)	$	-		$	7	$	389
Commercial		3,073		302			(114	)		-		3,261		3,073		276			(114	)		-		3,235
Construction		505		(343	)		-			96		258		505		(401	)		-			96		200
Commercial loans		780		100			-			-		880		780		169			-			2		951
Home equity lines of credit		80		2			-			-		82		80		(6	)		-			-		74
Consumer and installment loans		7		15			(16	)		4		10		7		21			(27	)		6		7
Acquired:
Residential		73		-			-			-		73		73		16			-			-		89
Total	$	4,904	$	64		$	(130	)	$	105	$	4,943	$	4,904	$	71		$	(141	)	$	111	$	4,945

	Six Months Ended December 31, 2017												Nine Months Ended March 31, 2018
	Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance		Beginning Allowance		Provision (credit)			Charge-offs			Recoveries		Ending Allowance
Originated:
Residential	$	360	$	59		$	(17	)	$	-	$	402	$	360	$	39		$	(64	)	$	-	$	335
Commercial		2,589		97		-				-		2,686		2,589		228			-			-		2,817
Construction		1,150		247			(997	)		-		400		1,150		337			(997	)		-		490
Commercial loans		949		(105	)		-			-		844		949		(291	)		(23	)		210		845
Home equity lines of credit		76		(2	)		-			-		74		76		33			(60	)		19		68
Consumer and installment loans		-		-			-			-		-		-		4			-			-		4
Acquired:
Residential		26		39			-			-		65		26		39			-			-		65
Total	$	5,150	$	335		$	(1,014	)	$	-	$	4,471	$	5,150	$	389		$	(1,144	)	$	229	$	4,624

The following tables present the balance in the allowance for loan losses and the recorded investment in loans, excluding net deferred fees and accrued interest, by portfolio segment, and based on impairment method as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018 (in thousands):

	December 31, 2018																March 31, 2019
	Loans								Allowance for Loan Losses								Loans								Allowance for Loan Losses
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired With Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired With Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired With Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired With Deteriorated Credit Quality		Total
Residential	$	2,367	$	244,925	$	1,283	$	248,575	$	123	$	256	$	73	$	452	$	1,785	$	258,905	$	1,280	$	261,970	$	132	$	257	$	89	$	478
Commercial		1,413		497,044		1,473		499,930		-		3,261		-		3,261		1,403		496,410		1,471		499,284		-		3,235		-		3,235
Construction		-		16,023		-		16,023		-		258		-		258		-		16,302		-		16,302		-		200		-		200
Commercial loans		1,913		105,986		-		107,899		2		878		-		880		1,883		124,631		-		126,514		2		949		-		951
Home equity lines of credit		685		34,182		162		35,029		13		69		-		82		699		33,667		159		34,525		7		67		-		74
Consumer and overdrafts		-		321		-		321		-		10		-		10		-		459		-		459		-		7		-		7
Total	$	6,378	$	898,481	$	2,918	$	907,777	$	138	$	4,732	$	73	$	4,943	$	5,770	$	930,374	$	2,910	$	939,054	$	141	$	4,715	$	89	$	4,945

	June 30, 2018
	Loans								Allowance for Loan Losses
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired With Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired With Deteriorated Credit Quality		Total
Residential	$	2,360	$	246,913	$	1,305	$	250,578	$	154	$	232	$	73	$	459
Commercial		1,683		492,105		1,477		495,265		-		3,073		-		3,073
Construction		2,260		15,092		-		17,352		276		229		-		505
Commercial loans		2,451		101,684		-		104,135		9		771		-		780
Home equity lines of credit		360		36,867		168		37,395		12		68		-		80
Consumer and overdrafts		-		745		-		745		-		7		-		7
Total	$	9,114	$	893,406	$	2,950	$	905,470	$	451	$	4,380	$	73	$	4,904

The following tables present information related to loans individually evaluated for impairment (excluding loans acquired with deteriorated credit quality) by class of loans as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018 (in thousands):


	December 31, 2018						March 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses
With no related allowance recorded:
Residential	$	1,969	$	1,923	$	-	$	1,064	$	1,037	$	-
Commercial		1,490		1,413		-		1,481		1,403		-
Commercial loans		5,164		1,851		-		5,146		1,853		-
Home equity lines of credit		665		596		-		679		613		-
With a related allowance recorded:
Residential		384		444		123		726		748		132
Commercial loans		62		62		2		30		30		2
Home equity lines of credit		90		89		13		89		86		7
Total	$	9,824	$	6,378	$	138	$	9,215	$	5,770	$	141

The ~~table~~tables below ~~presents~~present the average recorded investment and interest income recognized on loans individually evaluated for impairment, by class of loans, for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three months ended				Three months ended				Three months ended				Three months ended
	December 31, 2018				December 31, 2017				March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential	$	1,927	$	4	$	3,027	$	124	$	1,317	$	9	$	2,776	$	13
Commercial		1,417		13		2,454		27		1,408		11		2,440		37
Commercial loans		2,110		47		3,488		77		1,862		42		3,027		68
Home equity lines of credit		597		1		571		20		616		-		452		-
With a related allowance recorded:
Residential		445		3		778		3		750		4		452		4
Construction		1,130		-		3,008		-		-		-		2,260		-
Commercial loans		63		1		1,439		13		39		-		1,417		14
Home equity lines of credit		89		-		11		-		87		-		11		-
Total	$	7,778	$	69	$	14,776	$	264	$	6,079	$	66	$	12,835	$	136

	Six Months Ended				Six Months Ended				Nine Months Ended				Nine Months Ended
	December 31, 2018				December 31, 2017				March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential	$	1,968	$	11	$	3,431	$	166	$	1,516	$	20	$	3,360	$	179
Commercial		1,532		26		2,447		54		1,494		37		2,447		91
Construction		-		-		173		17		2,131		138		121		17
Commercial loans		2,226		96		4,002		160		628		9		3,704		228
Home equity lines of credit		612		9		593		20		-		-		549		20
With a related allowance recorded:
Residential		446		7		686		7		752		11		454		11
Construction		1,614		-		3,115		-		1,130		-		2,858		-
Commercial loans		63		1		1,448		31		40		1		1,439		45
Home equity lines of credit		89		-		11		-		88		-		11		-
Total	$	8,550	$	150	$	15,906	$	455	$	7,779	$	216	$	14,943	$	591

The following table presents the recorded investment in nonaccrual loans and in loans past due over 90 days and still on accrual status, by class of loans as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018 (in thousands):

					Loans Past Due Over 90 Days								Loans Past Due Over 90 Days
	Nonaccrual				and Still Accruing				Nonaccrual				and Still Accruing
	December 31,		June 30,		December 31,		June 30,		March 31,		June 30,		March 31,		June 30,
	2018		2018		2018		2018		2019		2018		2019		2018
Originated:
Residential	$	635	$	604	$	-	$	-	$	541	$	604	$	-	$	-
Commercial		-		262		-		-		-		262		-		-
Construction		-		2,260		-		-		-		2,260		-		-
Commercial loans		278		788		158		-		273		788		-		-
Home equity lines of credit		374		45		-		-		391		45		-		-
Consumer and overdrafts		-		-		-
Acquired:
Residential		1,288		1,308		-		-		802		1,308		-		-
Commercial		543		532		-		-		543		532		-		-
Home equity lines of credit		299		303		-		-		296		303		-		-
Total	$	3,417	$	6,102	$	158	$	-	$	2,846	$	6,102	$	-	$	-

Nonperforming loans include both smaller-balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The table above excludes acquired loans past due over 90 days that are accounted for as purchased credit impaired loans totaling $1.1 million as of both ~~December~~March 31, ~~2018~~2019 and June 30, 2018. Such loans are excluded because the loans are in pools that are considered performing. The discounts arising from recording these loans at fair value upon acquisition were due in part to credit quality and the accretable yield is being recognized as interest income over the life of the loans based on expected cash flows.

The following tables present the aging of the recorded investment in past due loans by class of loans as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018 (in thousands):

	December 31, 2018												March 31, 2019
	30-59		60-89		90 Days or								30-59		60-89		90 Days or
	Days Past		Days Past		More Past		Total Past						Days Past		Days Past		More Past		Total Past
	Due		Due		Due		Due		Current		Total		Due		Due		Due		Due		Current		Total
Originated:
Residential	$	24	$	-	$	553	$	577	$	197,263	$	197,840	$	-	$	-	$	461	$	461	$	212,028	$	212,489
Commercial		-		-		-		-		436,430		436,430		-		-		-		-		440,114		440,114
Construction		-		-		-		-		16,023		16,023		-		-		-		-		16,302		16,302
Commercial loans		-		-		159		159		107,546		107,705		158		-		-		158		126,169		126,327
Home equity lines of credit		18		297		-		315		30,424		30,739		-		-		316		316		29,581		29,897
Consumer and overdrafts		-		-		-		-		321		321		-		1		-		1		443		444
Total originated		42		297		712		1,051		788,007		789,058		158		1		777		936		824,637		825,573
Acquired:
Residential		116		-		1,488		1,604		49,131		50,735		-		-		1,010		1,010		48,471		49,481
Commercial		-		-		1,122		1,122		62,378		63,500		-		-		1,122		1,122		58,048		59,170
Commercial loans		-		-		-		-		194		194		-		-		-		-		187		187
Home equity lines of credit		70		-		296		366		3,924		4,290		-		69		296		365		4,263		4,628
Consumer and overdrafts														-		-		-		-		15		15
Total acquired		186		-		2,906		3,092		115,627		118,719		-		69		2,428		2,497		110,984		113,481
Total	$	228	$	297	$	3,618	$	4,143	$	903,634	$	907,777	$	158	$	70	$	3,205	$	3,433	$	935,621	$	939,054

	June 30, 2018
	30-59		60-89		90 Days or
	Days Past		Days Past		More Past		Total Past
	Due		Due		Due		Due		Current		Total
Originated:
Residential	$	-	$	394	$	210	$	604	$	194,986	$	195,590
Commercial		-		-		262		262		420,320		420,582
Construction		-		-		2,260		2,260		15,092		17,352
Commercial loans		-		-		500		500		102,767		103,267
Home equity lines of credit		-		-		45		45		32,311		32,356
Consumer and overdrafts		-		-		-		-		733		733
Total originated		-		394		3,277		3,671		766,209		769,880
Acquired:
Residential		-		232		1,806		2,038		52,950		54,988
Commercial		-		-		1,112		1,112		73,571		74,683
Commercial loans		-		-		-		-		868		868
Home equity lines of credit		30		-		296		326		4,713		5,039
Consumer and overdrafts		-		-		-		-		12		12
Total acquired		30		232		3,214		3,476		132,114		135,590
Total	$	30	$	626	$	6,491	$	7,147	$	898,323	$	905,470

The terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

As of ~~December~~both March 31, ~~2018~~2019 and June 30, 2018, the Company had ~~13 and~~ 12 loans classified as troubled debt restructurings totaling ~~$4.0~~$3.5 million and $3.8 million, respectively. The Company has allocated ~~$130,000~~$129,000 and $139,000, respectively, of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of ~~December~~March 31, ~~2018~~2019 and June 30, ~~2018 and~~2018. The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

The Company modified two loans with a total carrying amount of $428,000, one residential mortgage and one home equity line of credit, in troubled debt restructurings during the ~~six~~nine months ended ~~December~~March 31, ~~2018.~~2019. The Company did not modify any loans as troubled debt restructuring during the three months ended ~~December~~March 31, ~~2018~~2019 or during the three or ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018.

The Company had no troubled debt restructurings for which there was a payment default in the three or ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 that were modified in the twelve months prior to default. There were no such defaults during the three months ended March 31, 2018. There were two troubled debt restructuring with a total carrying amount of $1.1 million at ~~December~~March 31, ~~2017~~2018 for which there was a payment default in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2018 and resulted in ~~$66,000~~a $2,000 increase to the allowance for loan losses. One default with a carrying amount of ~~$823,000, has been~~$807,000, was cured as of ~~December~~March 31, ~~2017. There were no such defaults during the three months ended December 31, 2017.~~2018.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial and

commercial real estate loans. This analysis is performed on a monthly basis. The Company utilized the same grading process for acquired loans as it does for originated loans. The Company uses the following definitions for risk ratings:

Special Mention – Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process and loans in groups of homogenous loans are considered to be pass rated loans. These loans are monitored based on delinquency and performance. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

	December 31, 2018										March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total		Pass		Special Mention		Substandard		Doubtful			Total
Originated:
Residential	$	196,542	$	553	$	745	$	-	$	197,840	$	210,771	$	1,143	$	575	$	-		$	212,489
Commercial		436,290		-		140		-		436,430		439,642		342		130		-			440,114
Construction		16,023		-		-		-		16,023		16,302		-		-		-			16,302
Commercial loans		103,489		158		4,058		-		107,705		116,129		6,607		3,591		-			126,327
Home equity lines of credit		30,200		165		374		-		30,739		29,438		92		367		-			29,897
Consumer and overdrafts		321		-		-		-		321		444		-		-		-			444
Total originated		782,865		876		5,317		-		789,058		812,726		8,184		4,663		-			825,573
Acquired:
Residential		47,934		358		2,443		-		50,735		47,312		214		1,955		-			49,481
Commercial		60,653		831		2,016		-		63,500		56,330		825		2,015		-			59,170
Commercial loans		188		6		-		-		194		184		3		-		-			187
Home equity lines of credit		3,828		71		391		-		4,290		3,768		474		386		-	��		4,628
Consumer and overdrafts												15		-		-		-			15
Total acquired		112,603		1,266		4,850		-		118,719		107,609		1,516		4,356		-			113,481
Total	$	895,468	$	2,142	$	10,167	$	-	$	907,777	$	920,335	$	9,700	$	9,019	$	-		$	939,054

	June 30, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
Originated:
Residential	$	194,341	$	571	$	678	$	-	$	195,590
Commercial		418,370		-		2,212		-		420,582
Construction		15,092		-		2,260		-		17,352
Commercial loans		98,205		167		4,895		-		103,267
Home equity lines of credit		32,167		144		45		-		32,356
Consumer and overdrafts		733		-				-		733
Total originated		758,908		882		10,090		-		769,880
Acquired:
Residential		51,858		249		2,881		-		54,988
Commercial		71,832		842		2,009		-		74,683
Commercial loans		857		11		-		-		868
Home equity lines of credit		4,641		-		398		-		5,039
Consumer and overdrafts		12		-		-		-		12
Total acquired		129,200		1,102		5,288		-		135,590
Total	$	888,108	$	1,984	$	15,378	$	-	$	905,470

The Company has acquired loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018 is as follows (in thousands):

	December 31,		June 30,		March 31,		June 30,
	2018		2018		2019		2018
Residential	$	1,210	$	1,232	$	1,191	$	1,232
Commercial		1,473		1,477		1,471		1,477
Home equity lines of credit		162		168		159		168
Carrying amount, net of allowance of $73 and $73, respectively	$	2,845	$	2,877
Carrying amount, net of allowance of $89 and $73, respectively					$	2,821	$	2,877

The allowance for loan losses on purchased credit impaired loans ~~was unchanged~~increased $16,000 during the three and ~~six~~nine months ended ~~December~~March 31, ~~2018.~~2019.

Accretable yield, or income expected to be collected, for acquired loans is as follows (in thousands):

	Three Months Ended December 31,						Six Months Ended December 31,						Three Months Ended March 31,						Nine Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Beginning balance	$	232		$	532		$	245		$	578		$	219		$	238		$	245		$	403
New loans acquired		-			-			-			-			-			-			-			-
Accretion income		(13	)		(46	)		(26	)		(92	)		(14	)		(7	)		(40	)		(59	)
Reclassification from non-accretable difference		-			-			-			-			-			-			-			-
Disposals		-			-			-			-			-			-			-			(113	)
Ending balance	$	219		$	486		$	219		$	486		$	205		$	231		$	205		$	231

The following is a summary of the accumulated other comprehensive income (loss) balances, net of tax (in thousands):

	Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total			Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total
Balance at October 1, 2018	$	(1,657	)	$	(5,035	)	$	(257	)	$	(6,949	)
Balance at January 1, 2019													$	(1,300	)	$	(4,921	)	$	(250	)	$	(6,471	)
Other comprehensive income before reclassifications		506			-			-			506			757			-			-			757
Amounts reclassified from accumulated other comprehensive income		(55	)		145			9			99			-			145			9			154
Less tax effect		(94	)		(31	)		(2	)		(127	)		(160	)		(30	)		(1	)		(191	)
Net other comprehensive income		357			114			7			478			597			115			8			720
Balance at December 31, 2018	$	(1,300	)	$	(4,921	)	$	(250	)	$	(6,471	)
Balance at March 31, 2019													$	(703	)	$	(4,806	)	$	(242	)	$	(5,751	)

	Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total			Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total
Balance at October 1, 2017	$	(195	)	$	(4,883	)	$	(244	)	$	(5,322	)
Balance at January 1, 2018													$	(669	)	$	(4,763	)	$	(238	)	$	(5,670	)
Other comprehensive loss before reclassifications		(717	)		-			-			(717	)		(705	)		-			-			(705	)
Amounts reclassified from accumulated other comprehensive income		-			181			8			189			-			182			10			192
Less tax effect		243			(61	)		(2	)		180			149			(39	)		(3	)		107
Net other comprehensive (loss) income		(474	)		120			6			(348	)		(556	)		143			7			(406	)
Balance at December 31, 2017	$	(669	)	$	(4,763	)	$	(238	)	$	(5,670	)
Reclassification of certain tax effects on other comprehensive income ⁽¹⁾														(132	)		(938	)		(47	)		(1,117	)
Balance at March 31, 2018													$	(1,357	)	$	(5,558	)	$	(278	)	$	(7,193	)

	Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total			Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total
Balance at July 1, 2018	$	(1,536	)	$	(5,150	)	$	(264	)	$	(6,950	)	$	(1,536	)	$	(5,150	)	$	(264	)	$	(6,950	)
Other comprehensive income before reclassifications		353			-			-			353			1,110			-			-			1,110
Amounts reclassified from accumulated other comprehensive income		(55	)		290			18			253			(55	)		435			27			407
Tax effect		(62	)		(61	)		(4	)		(127	)		(222	)		(91	)		(5	)		(318	)
Net other comprehensive income		236			229			14			479			833			344			22			1,199
Balance at December 31, 2018	$	(1,300	)	$	(4,921	)	$	(250	)	$	(6,471	)
Balance at March 31, 2019													$	(703	)	$	(4,806	)	$	(242	)	$	(5,751	)

	Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total			Net unrealized gain (loss) on available for sale securities			Unrealized loss on pension benefits			Unrealized loss on SERP benefits			Total
Balance at July 1, 2017	$	37		$	(5,002	)	$	(250	)	$	(5,215	)	$	37		$	(5,002	)	$	(250	)	$	(5,215	)
Other comprehensive loss before reclassifications		(930	)		-			-			(930	)		(1,635	)		-			-			(1,635	)
Amounts reclassified from accumulated other comprehensive income		(139	)		362			16			239			(139	)		544			26			431
Tax effect		363			(123	)		(4	)		236			512			(162	)		(7	)		343
Net other comprehensive (loss) income		(706	)		239			12			(455	)		(1,262	)		382			19			(861	)
Balance at December 31, 2017	$	(669	)	$	(4,763	)	$	(238	)	$	(5,670	)
Reclassification of certain tax effects on other comprehensive income ⁽¹⁾														(132	)		(938	)		(47	)		(1,117	)
Balance at March 31, 2018													$	(1,357	)	$	(5,558	)	$	(278	)	$	(7,193	)

Employee Pension Plan: The Company maintains a non-contributory defined benefit pension plan that covers employees meeting specific requirements as to age and length of service. The Company’s contributions to this qualified plan are determined on the basis of (i) the maximum amount that can be deducted for federal income tax purposes, and (ii) the amount determined by a consulting actuary as necessary to avoid an accumulated funding deficiency as defined by the Employee Retirement Income Security Act of 1974 (“ERISA”). Contributions are intended to provide for benefits attributed to service to date. On February 15, 2017, the Board of Directors approved the freezing of the defined benefit pension plan effective May 1, 2017.

Supplemental Executive Retirement Plans: The Company also maintains unfunded and non-qualified supplemental executive retirement plans ("SERP") to provide pension benefits in addition to those provided under the qualified pension plan.

Net periodic benefit cost and other amounts recognized in other comprehensive income for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended					Three Months Ended					Three Months Ended					Three Months Ended
	December 31, 2018					December 31, 2017					March 31, 2019					March 31, 2018
	Defined Benefit Plan			Supplemental Retirement Plans		Defined Benefit Plan			Supplemental Retirement Plans		Defined Benefit Plan			Supplemental Retirement Plans		Defined Benefit Plan			Supplemental Retirement Plans
Service cost	$	-		$	147	$	-		$	107	$	-		$	78	$	-		$	149
Interest cost		250			26		242			25		250			36		242			26
Expected return on plan assets		(513	)		-		(503	)		-		(513	)		-		(505	)		-
Amortization of prior net loss		145			9		-			-		145			9		-			-
Amortization of prior service cost		-			-		181			8		-			-		182			10
Net periodic (benefit) cost	$	(118	)	$	182	$	(80	)	$	140	$	(118	)	$	123	$	(81	)	$	185

	Six Months Ended					Six Months Ended					Nine Months Ended					Nine Months Ended
	December 31, 2018					December 31, 2017					March 31, 2019					March 31, 2018
	Defined Benefit Plan			Supplemental Retirement Plan		Defined Benefit Plan			Supplemental Retirement Plan		Defined Benefit Plan			Supplemental Retirement Plan		Defined Benefit Plan			Supplemental Retirement Plan
Service cost	$	-		$	295	$	-		$	220	$	-		$	373	$	-		$	369
Interest cost		500			52		484			50		750			88		726			76
Expected return on plan assets		(1,026	)		-		(1,006	)		-		(1,539	)		-		(1,511	)		-
Amortization of prior net loss		290			18		-			0		435			27		544			26
Amortization of prior service cost		-			-		362			16		-			-		-			-
Net periodic (benefit) cost	$	(236	)	$	365	$	(160	)	$	286	$	(354	)	$	488	$	(241	)	$	471

The Company made no contributions to the defined benefit plan during the three and ~~six~~nine months ended ~~December~~March 31, ~~2018 and expects to make no contributions to the plan for the year ending June 30,~~ 2019.

On January 1, 2017, the Company established an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. The plan is a tax-qualified retirement plan for the benefit of Company employees. On April 20, 2017 Company granted a loan to the ESOP for the purchase of 1,453,209 shares of the Company’s common stock at a price of $10.00 per share. The loan obtained by the ESOP from the Company to purchase the common stock is payable annually over 15 years at a rate per annum equal to the Prime Rate, reset annually on January 1st ~~(4.5%~~(5.5% at ~~December~~March 31, ~~2018)~~2019). Loan payments are principally funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. The balance of the ESOP loan at ~~December~~March 31, ~~2018~~2019 was $12.6 million. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares committed to be released annually is 96,881 through 2032.

	December 31, 2018		June 30, 2018		March 31, 2019		June 30, 2018
Allocated to participants		193,762		144,923		216,854		144,923
Unearned		1,259,447		1,308,286		1,236,355		1,308,286
Total ESOP shares		1,453,209		1,453,209		1,453,209		1,453,209

Fair value of unearned shares	$	24,635	$	25,996	$	24,647	$	25,996

Total compensation expense recognized in connection with the ESOP for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 was ~~$477,000~~$464,000 and ~~$970,000,~~$1.4 million, respectively, and for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017 $672,000~~2018 was $478,000 and ~~$1.3~~$1.8 million, respectively.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as general classification of such instruments pursuant to the valuation hierarchy, is set forth below. While management believes the Company’s valuation methodologies are appropriate and consistent with other financial institutions, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Investment Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs), or a broker's opinion of value (Level 3 inputs).

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. Appraisals are generally obtained annually and may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Management performs a review of all appraisals, including any such adjustments.

Foreclosed Real Estate: Assets acquired through or instead of loan foreclosure are initially recorded at fair value, less estimated costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value, less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for both collateral-dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Credit Department, as well as a third-party specialist, where deemed appropriate, reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Once appraisals are considered appropriate, management discounts the appraised value for estimated selling costs, such as legal, broker, and property maintenance and insurance costs. The most recent analysis performed indicated discount rates ranging between 10% and 20% should be applied to properties with appraisals performed.

Derivatives: The Company’s derivative assets and liabilities consist of transactions as part of management’s strategy to manage interest rate risk. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy.

Assets and liabilities measured at fair value are summarized below (in thousands):

	Fair Value Measurements								Fair Value Measurements
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
December 31, 2018
March 31, 2019
Measured on a recurring basis:
Available for sale securities:
U.S. Government and agency obligations	$	-	$	55,648	$	-	$	55,648	$	-	$	49,612	$	-	$	49,612
Corporate and other debt securities		-		8,212		-		8,212		-		8,316		-		8,316
Mortgage-backed securities – residential		-		28,826		-		28,826		-		28,086		-		28,086
Derivatives – interest rate contracts		-		343		-		343		-		526		-		526
Total assets at fair value	$	-	$	93,029	$	-	$	93,029	$	-	$	86,540	$	-	$	86,540

Derivatives – interest rate contracts	$	-	$	343	$	-	$	343	$	-	$	526	$	-	$	526
Total liabilities at fair value	$	-	$	343	$	-	$	343	$	-	$	526	$	-	$	526

Measured on a non-recurring basis:
Impaired loans:
Residential mortgages	$	-	$	-	$	526	$	526	$	-	$	-	$	698	$	698
Commercial loans		-		-		62		62		-		-		28		28
Home equity lines of credit		-		-		88		88		-		-		80		80
Foreclosed real estate		-		-		572		572		-		-		653		653
Total assets at fair value	$	-	$	-	$	1,248	$	1,248	$	-	$	-	$	1,459	$	1,459

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
June 30, 2018
Measured on a recurring basis:
Available for sale securities:
U.S. Government and agency obligations	$	-	$	63,430	$	-	$	63,430
Corporate and other debt securities		-		8,235		-		8,235
Mortgage-backed securities – residential		-		33,807		-		33,807
Total assets at fair value	$	-	$	105,472	$	-	$	105,472

Measured on a non-recurring basis:
Impaired loans:
Residential mortgages	$	-	$	-	$	688	$	688
Construction		-		-		1,984		1,984
Commercial loans		-		-		845		845
Home equity lines of credit		-		-		7		7
Foreclosed real estate		-		-		460		460
Total assets at fair value	$	-	$	-	$	3,984	$	3,984

There were no transfers between levels within the fair value hierarchy during the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017.~~2018.

Impaired loans in the preceding table had a carrying amount of ~~$676,000,~~$945,000, and a remaining valuation allowance of ~~$131,000~~$141,000 at ~~December~~March 31, ~~2018,~~2019, as compared to $3.9 million and $451,000, respectively, as of June 30, 2018. Impaired loans measured at fair value incurred no net charge-offs and resulted in ~~an additional credit~~a provision for loan losses of ~~$7,000~~$9,000 during the ~~six~~nine months ended ~~December~~March 31, ~~2018.~~2019. Impaired loans measured at fair value as of ~~December~~March 31, ~~2017~~2018 incurred ~~$997,000~~$1.1 million of net charge-offs and resulted in an additional provision for loan losses of ~~$405,000~~$201,000 during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018.

The following tables present quantitative information about Level 3 fair value measurements for selected financial instruments measured at fair value on a non-recurring basis at ~~December~~March 31, ~~2018~~2019 and June 30, 2018 (dollars in thousands):

Valuation

Unobservable

Range or

Valuation

Unobservable

Range or

Fair Value

Technique(s)

Input(s)

Rate Used

Fair Value

Technique(s)

Input(s)

Rate Used

December 31, 2018:

March 31, 2019:

Impaired loans - residential mortgages

526

Discounted cash flow

Discount rate

5.4% to 6.3%

698

Discounted cash flow

Discount rate

5.4% to 6.3%

Sales contract

Discount to sales contract

-24.3% to -10.3%

Sales comparison

Adjustments for

differences in

sales comparables

-24.3% to -10.2%

Impaired loans - commercial loans

Discounted cash flow

Discount rate

7.0% to 7.5%

Discounted cash flow

Discount rate

7.0%

Impaired loans - home equity lines of credit

Discounted cash flow

Discount rate

6.3%

Discounted cash flow

Discount rate

6.3%

Sales contract

Discount to sales contract

-24.3% to -10.3%

Sales comparison

Adjustments for

differences in

sales comparables

-24.3% to -10.2%

Foreclosed real estate

572

Sales comparison

Adjustments for

differences in

sales comparables

-25.0% to 45.0%

653

Sales comparison

Adjustments for

differences in

sales comparables

-8.0% to 45.0%

��

June 30, 2018:

Impaired loans - residential mortgages

688

Sales comparison

Adjustments for

differences in sales

comparables

-5.1% to 20.9%

688

Sales comparison

Adjustments for

differences in sales

comparables

-5.1% to 20.9%

Discounted cash flow

Discount rate

5.4% to 6.3%

Discounted cash flow

Discount rate

5.4% to 6.3%

Impaired loans - construction

1,984

Sales contract

Discount to sales contract

9.8%

1,984

Sales contract

Discount to sales contract

9.8%

Impaired loans - commercial loans

845

Discounted cash flow

Discount rate

5.3% to 7.5%

845

Discounted cash flow

Discount rate

5.3% to 7.5%

Sales contract

Discount to sales contract

9.8%

Sales contract

Discount to sales contract

9.8%

Impaired loans - home equity lines of credit

Sales comparison

Adjustments for

differences in sales

comparables

-5.1% to 20.9%

Sales comparison

Adjustments for

differences in sales

comparables

-5.1% to 20.9%

Discounted cash flow

Discount rate

6.3%

Discounted cash flow

Discount rate

6.3%

Foreclosed real estate

460

Sales comparison

Adjustments for

differences in

sales comparables

-8.1% to -0.4%

460

Sales comparison

Adjustments for

differences in

sales comparables

-8.1% to -0.4%

The following is a summary of the carrying amounts and estimated fair values of the Company’s financial assets and liabilities, ~~(in thousands) (none~~none of which are held for trading ~~purposes)~~purposes (in thousands):

	Carrying		Fair Value Measurements								Carrying		Fair Value Measurements
	Amount		Level 1		Level 2		Level 3		Total		Amount		Level 1		Level 2		Level 3		Total
December 31, 2018:
March 31, 2019:
Financial assets:
Cash and cash equivalents	$	143,119	$	143,119	$	-	$	-	$	143,119	$	87,105	$	87,105	$	-	$	-	$	87,105
Investment securities held to maturity		359,777		-		351,701		-		351,701		354,000		-		351,184		-		351,184
Investment securities available for sale		92,686		-		92,686		-		92,686		86,014		-		86,014		-		86,014
Loans receivable, net		904,377		-		-		884,574		884,574		935,680		-		-		923,683		923,683
Accrued interest receivable		4,457		-		1,366		3,091		4,457		5,037		-		1,694		3,343		5,037
Federal Home Loan Bank stock		2,385	N/A		N/A		N/A		N/A			2,384	N/A		N/A		N/A		N/A
Derivative assets - interest rate contracts		343		-		343		-		343		526		-		526		-		526
Financial liabilities:
Demand, NOW, money market deposits and savings accounts		803,970		803,970		-		-		803,970		774,999		774,999		-		-		774,999
Time deposits		421,354		-		424,037		-		424,037		427,194		-		431,302		-		431,302
Mortgage escrow funds		9,085		9,085		-		-		9,085		7,675		7,675		-		-		7,675
FHLB advances		26,279		-		26,299		-		26,299		26,248		-		26,537		-		26,537
Derivative liabilities - interest rate contracts		343		-		343		-		343		526		-		526		-		526
June 30, 2018:
Financial assets:
Cash and cash equivalents	$	62,145	$	62,145	$	-	$	-	$	62,145	$	62,145	$	62,145	$	-	$	-	$	62,145
Investment securities held to maturity		353,183		-		343,188		-		343,188		353,183		-		343,188		-		343,188
Investment securities available for sale		105,472		-		105,472		-		105,472		105,472		-		105,472		-		105,472
Loans receivable, net		902,336		-		-		882,319		882,319		902,336		-		-		882,319		882,319
Accrued interest receivable		4,358		-		1,402		2,956		4,358		4,358		-		1,402		2,956		4,358
Federal Home Loan Bank stock		2,050	N/A		N/A		N/A		N/A			2,050	N/A		N/A		N/A		N/A
Financial liabilities:
Demand, NOW, money market deposits and savings accounts		765,084		765,084		-		-		765,084		765,084		765,084		-		-		765,084
Time deposits		392,373		-		394,205		-		394,205		392,373		-		394,205		-		394,205
Mortgage escrow funds		8,803		8,803		-		-		8,803		8,803		8,803		-		-		8,803
FHLB advances		18,841		-		20,574		-		20,574		18,841		-		20,574		-		20,574

In connection with the adoption of ASU 2016-01 on July 1, 2018, we refined our methodology to estimate the fair value of our loan portfolio using an exit price notion resulting in prior periods no longer being comparable. The exit price notion requires determination of the price at which willing market participants would transact at the measurement date under current market conditions depending on facts and circumstances, such as origination rates, credit risk, transaction costs, liquidity, national and regional market trends and other adjustments, utilizing publicly available rates and indices. The application of an exit price notion requires the use of significant judgment. The prior period estimate of loans receivable, net was determined using an entrance price methodology based only on the discounted value of contracted cash flows based on prevailing interest rates.

The following is a summary of the ~~Company’s and~~ Bank’s actual capital amounts and ratios as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, compared to the required ratios for minimum capital adequacy and for classification as well capitalized (dollars in thousands): . As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act passed by Congress in 2018, the Company is no longer subject to consolidated capital requirements, as the Company’s total consolidated assets do not exceed $3 billion, and thus the consolidated capital ratios are no longer required to be disclosed in the financial statements.

											To Be Well Capitalized															To Be Well Capitalized
											Under Prompt															Under Prompt
						For Capital Adequacy					Corrective Action										For Capital Adequacy					Corrective Action
	Bank Actual					Purposes					Provisions					Bank Actual					Purposes					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2018:
March 31, 2019:
PCSB Bank
Leverage (Tier 1)	$	205,731		13.8	%	$	59,702		4.0	%	$	74,628		5.0	%
Risk-based:
Common Tier 1		205,731		20.7			44,406		4.5			64,141		6.5
Tier 1		205,731		20.7			59,208		6.0			78,943		8.0
Total		210,674		21.2			78,973		8.0			98,679		10.0
PCSB Financial Corporation
Leverage (Tier 1)	N/A		N/A			N/A		N/A			N/A		N/A			$	207,968		13.7	%	$	60,687		4.0	%	$	75,859		5.0	%
Risk-based:
Common Tier 1	N/A		N/A			N/A		N/A			N/A		N/A				207,968		20.5			45,712		4.5			66,028		6.5
Tier 1	N/A		N/A			N/A		N/A			N/A		N/A				207,968		20.5			60,949		6.0			81,265		8.0
Total	N/A		N/A			N/A		N/A			N/A		N/A				212,913		21.0			81,265		8.0			101,581		10.0

June 30, 2018:
PCSB Bank
Leverage (Tier 1)	$	200,488		13.6	%	$	58,924		4.0	%	$	73,655		5.0	%	$	200,488		13.6	%	$	58,924		4.0	%	$	73,655		5.0	%
Risk-based:
Common Tier 1		200,488		21.1			42,745		4.5			61,743		6.5			200,488		21.1			42,745		4.5			61,743		6.5
Tier 1		200,488		21.1			56,994		6.0			75,991		8.0			200,488		21.1			56,994		6.0			75,991		8.0
Total		205,392		21.6			75,991		8.0			94,989		10.0			205,392		21.6			75,991		8.0			94,989		10.0
PCSB Financial Corporation
Leverage (Tier 1)	$	287,991		19.5	%	$	58,948		4.0	%	N/A		N/A
Risk-based:
Common Tier 1		287,991		30.3			42,783		4.5		N/A		N/A
Tier 1		287,991		30.3			57,044		6.0		N/A		N/A
Total		292,895		30.8			76,058		8.0		N/A		N/A

In addition to the ratios above, the Basel III Capital Rules have established that community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonus payments to executive officers. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and was phased in over a four-year period ~~(increasing by that amount on each subsequent~~through January 1, ~~until it reached 2.5% on~~2019. As of January 1, ~~2019).~~2019, the conservation buffer was fully phased in.

Management believes that as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, the Bank met all capital adequacy requirements to which it was subject, including the capital conservation buffer of ~~1.875%~~2.5% and ~~1.250%~~1.875% as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively. Further, the most recent FDIC notification categorized the Bank as a well-capitalized institution under the prompt corrective action regulations. There have been no conditions or events since that notification that management believes have changed the Bank’s capital classification. As a result of recent regulatory reform, the Company is no longer subject to consolidated capital requirements, as the Company’s total consolidated assets do not exceed $3 billion, and thus the consolidated capital ratios are no longer required to be disclosed in the financial statements.

Basic EPS is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted EPS is calculated in a similar manner, except that the denominator includes the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method. Dilutive financial instruments include stock options and unvested restricted stock.

The following table provides factors used in the earnings per share computation for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017.~~2018.

	Three Months Ended December 31,						Six Months Ended December 31,						Three Months Ended March 31,				Nine Months Ended March 31,
	2018			2017			2018			2017			2019		2018		2019		2018
	(dollars in thousands, except share and per share data)												(amounts in thousands, except share and per share data)
Net income applicable to common stock	$	2,324		$	2		$	4,653		$	1,758		$	1,986	$	2,177	$	6,639	$	3,935

Average number of common shares outstanding		18,124,242			18,165,110			18,144,676			18,165,110			17,451,763		18,165,110		17,917,077		18,165,110
Less: Average unallocated ESOP shares		(1,271,524	)		(1,373,805	)		(1,283,734	)		(1,391,227	)		1,247,370		1,344,384		1,271,790		1,375,979
Average number of common shares outstanding used to calculate basic earnings per common share		16,852,718			16,791,305			16,860,942			16,773,883
Average number of common share soutstanding used to calculate basic earnings per common share														16,204,393		16,820,726		16,645,287		16,789,131

Effect of equity-based awards		15,746			-			7,873			-			57,362		-		14,459		-
Average number of common shares outstanding used to calculate diluted earnings per common share		16,868,464			16,791,305			16,868,815			16,773,883			16,261,755		16,820,726		16,659,746		16,789,131

Earnings per common share:
Basic	$	0.14		$	-		$	0.28		$	0.10		$	0.12	$	0.13	$	0.40	$	0.23
Diluted	$	0.14		$	-		$	0.28		$	0.10		$	0.12	$	0.13	$	0.40	$	0.23

Stock options for 1,339,293 shares of common stock were not considered in computing diluted earnings per common share for both the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 because they were antidilutive. There were no potentially dilutive common stock equivalents during the three or ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018.

Derivatives not designated as hedges may be used to manage the Company’s exposure to interest rate movements or to provide service to customers. The Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Company executes with a third party in order to minimize the net risk exposure resulting from such transactions. These interest rate swap agreements do not qualify for hedge accounting treatment, and therefore changes in fair value are reported in current period earnings.

The Company had no interest rate swaps atas of June 30, 2018. The following table presents summary information about the interest rate swaps as of ~~December~~March 31, ~~2018:~~2019:

	December 31,			March 31,
(dollars in thousands)	2018			2019
Notional amounts	$	16,648		$	16,525
Weighted average pay rates		4.40	%		4.39	%
Weighted average receive rates		4.40	%		4.39	%
Weighted average maturity	9.83 years			9.58 years
Fair value of combined interest rate swaps	$	-		$	-

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on July 1, 2018. Under ASC 2014-09, an entity is required to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, as well as qualitative and quantitative disclosure related to contracts with certain customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.

In accordance with ASU 2014-09, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company applies the following five steps to properly recognize revenue:

The Company’s ~~in-scope~~ revenue streams that are ~~subject to~~within the scope of the accounting standard are: (1) fees and service charges on deposit accounts (including interchange fees), which, are included on the Consolidated Statements of Operations as “Fees and service charges” and (2) gains on the sale of foreclosed real estate. For the three and ~~six~~nine months ended ~~December~~March 31, 2019 fees and services charges totaled $436,000 and $1.3 million, of which and $390,000 and $1.2 million, respectively, were revenue streams within the scope of the accounting standard. For the three and nine months ended March 31, 2018 fees and services charges totaled ~~$457,000~~$352,000 and ~~$875,000,~~$1.1 million, of which $335,000 and $424,000 and $816,000, respectively, were in-scope revenue streams. For the three and six months ended December 31, 2017 fees and services charges totaled $412,000 and $793,000, of which $309,000 and $600,000,$935,000, respectively, were in-scope revenue streams.

Fees and Service Charges on Deposit Accounts. The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfied the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. For the three and ~~six~~nine months ended ~~December~~March 31, 2019 fees and service charges on deposit accounts were $295,000 and $892,000, and for the three and nine months ended March 31, 2018 fees and service charges on deposit accounts were ~~$310,000~~$242,000 and ~~$597,000, and for the three and six months ended December 31, 2017 fees and service charges on deposit accounts were $211,000 and $407,000,~~$649,000, respectively.

Interchange Income. The Company earns interchange fees from debit cardholder transactions conducted through various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. For the three and ~~six~~nine months ended ~~December~~March 31, 2019 interchange income was $95,000 and $314,000, and for the three and nine months ended March 31, 2018 interchange income was ~~$114,000~~$93,000 and ~~$219,000, and for the three and six months ended December 31, 2017 interchange income was $98,000 and $193,000,~~$286,000, respectively.

Gain/Losses on Sales of Foreclosed Real Estate. The Company records a gain or loss from the sale of foreclosed real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of foreclosed real estate to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed real estate asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. ~~The Company recorded~~ ~~$24,000~~For the three and ~~$14,000~~nine months ended March 31, 2019, gains on sale of foreclosed real estate were $0 and $24,000, compared to $13,000 and $27,000, for the three and ~~six~~nine months ended ~~December~~March 31, 2018, ~~or 2017,~~ respectively.

On October 24, 2018, the Company’s shareholders approved the PCSB Financial Corporation 2018 Equity Incentive Plan (the “Plan”), which permits the grant of stock options and restricted stock and/or restricted stock units. The total number of shares that may be granted under the Plan is 2,543,115, of which 1,816,511 shares may be granted as stock options and 726,604 shares may be granted as restricted stock and restricted stock units. Concurrent with the approval of the Plan, on October 24, 2018, 431,039 stock options and 183,884 restricted stock awards (“RSAs”) were granted to non-employee directors. Additionally, on November 14, 2018 the Board of Directors approved employee grants of 908,254 stock options and 363,301 RSAs. All grants of stock options and RSAs have a 5-year vesting period. Total compensation cost that has been charged against income for the Plan was ~~$482,000~~$829,000 and $1.3 million for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018.~~2019.

RSAs provide for the issuance of shares to both employees and non-employee directors. These awards generally vest over a 5-year period, with 20% vesting each year on the anniversary of the award, however may not vest more rapidly than over a three-year period. All awards were made at the fair value of common stock on the grant date. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at grant date. The fair value of the stock was determined to be the closing price of the stock on the NASDAQ exchange. Total shares available for grant under the Plan are 726,604, of which 547,185 shares were issued as of ~~December~~March 31, ~~2018.~~2019.

The following table presents a summary of RSA activity during the period ended ~~December~~March 31, ~~2018.~~2019.

	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Unvested allocated shares outstanding at July 1, 2018		-	$	-		-	$	-
Shares granted		547,185		19.02		547,185		19.02
Shares vested		-		-		-		-
Shares forfeited		-		-		-		-
Unvested allocated shares at December 31, 2018		547,185	$	19.02

Unvested allocated shares at March 31, 2019						547,185	$	-

As of ~~December~~March 31, ~~2018,~~2019, there was ~~$9.8~~$9.6 million of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of ~~4.9~~4.6 years.

Stock options awarded to employees under the Plan are considered incentive stock options (ISOs), up to applicable limits. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. Those issued to non-employee directors, as well as those exceeding ISO limitations, are considered non-qualified stock options (NQSOs). Options generally vest over a 5-year period, with 20% vesting each year on the anniversary of the award, however may not vest more rapidly than over a three-year period, and have a contractual term of 10 years. The Company has a policy of using shares held as a treasury stock to satisfy share option exercises. Currently, the Company has a sufficient number of treasury shares to satisfy the current level of exercisable share options.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatilities of a peer group of publicly-traded financial institutions. The expected term of options granted is based on the simplified “mid-point” approach which utilizes the weighted average vesting period and contractual term. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of options granted during the current year was determined using the following weighted-average assumptions as of grant date.

As of ~~December~~March 31, ~~2018,~~2019, there was ~~$6.0~~$5.7 million of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of ~~4.9~~4.6 years.

The following table presents a summary of activity related to stock options granted under the ~~Stock Plans,~~Plan, and changes during the period then ended:

	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Years		Aggregate Intrinsic Value		Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Years		Aggregate Intrinsic Value
	(dollars in thousands, except share and per share data)								(dollars in thousands, except share and per share data)
Options outstanding at July 1, 2018		-	$	-			$	-		-	$	-			$	-
Options granted		1,339,293		19.04						1,339,293		19.04
Options expired		-		-						-		-
Options exercised		-		-						-		-
Options outstanding at December 31, 2018		1,339,293	$	19.04		9.9	$	701
Options outstanding at March 31, 2019										1,339,293	$	19.04		9.6	$	715

Fully vested and expected to vest		1,339,293	$	19.04		9.9	$	701		1,339,293	$	19.04		9.6	$	715
Exercisable at December 31, 2018		-	$	-			$	-
Exercisable at March 31, 2019										-	$	-			$	-

~~Subsequent to December 31, 2018,~~ the Company repurchased 686,186 shares of common stock, at an average cost of $20.36 per share, resulting in a total of 908,256 shares repurchased, at an average cost of $20.15, which completes the Company’s current stock repurchase plan.

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

Management’s discussion and analysis of financial condition at ~~December~~March 31, ~~2018~~2019 and June 30, 2018, and results of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 and ~~2017~~2018 is intended to assist in understanding the consolidated financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q and with the audited consolidated financial statements included in the annual report on Form 10-K for the fiscal year ended June 30, 2018.

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

Additional factors that may affect our results are discussed in the annual report on Form 10-K for the fiscal year ended June 30, 2018, under the heading “Risk Factors.”

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. The company assumes no obligation to update any forward looking statements except as may be required by applicable law or regulation.

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 involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows:

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

Comparison of Financial Condition at ~~December~~March 31, ~~2018~~2019 and June 30, 2018

Total Assets. Total assets increased ~~$77.1~~$43.6 million, or ~~5.2%~~2.9%, to ~~$1.56~~$1.52 billion at ~~December~~March 31, ~~2018~~2019 from $1.48 billion at June 30, 2018. The increase is primarily the result of increases of ~~$81.0~~$33.3 million in net loans receivable, $25.0 million in cash and cash equivalents and ~~$2.0~~$3.9 million in ~~net loans receivable,~~other assets, partially offset by a decrease of ~~$6.2~~$18.6 million in total investment securities.

Cash and Cash Equivalents. Cash and cash equivalents increased ~~$81.0~~$25.0 million, or ~~130.3%~~40.2%, to ~~$143.1~~$87.1 million at ~~December~~March 31, ~~2018~~2019 from $62.1 million at June 30, 2018. The increase was primarily attributable to a ~~$67.9~~$44.7 million increase in deposits, a ~~$7.5 million increase in FHLB advances and a $12.8~~$19.5 million decrease in available for sale securities and a $7.4 million increase in FHLB advances, partially offset by a ~~$6.6~~$33.3 million increase in net loans receivable and $817,000 increase in held to maturity ~~securities and a $2.0 million increase in loans receivable.~~securities.

Securities ~~Held-to-Maturity.~~Held to Maturity. Total securities held to maturity increased ~~$6.6 million,~~$817,000, or ~~1.9%~~0.2%, to ~~$359.8~~$354.0 million at ~~December~~March 31, ~~2018~~2019 from $353.2 million at June 30, 2018. This increase was primarily caused by ~~$42.2~~$49.2 million of purchases, ~~which includes $30.0 million of corporate bonds,~~ partially offset by ~~$22.1~~$48.0 million in calls, maturities and amortization of mortgage-backed ~~securities, and $13.5 million of maturities of U.S. government and agency obligations.~~securities.

Securities Available for Sale. Total securities available for sale decreased ~~$12.8~~$19.5 million, or ~~12.1%~~18.4%, to ~~$92.7~~$86.0 million at ~~December~~March 31, ~~2018~~2019 from $105.5 million at June 30, 2018. This decline was primarily due to ~~$8.0~~$14.4 million of ~~net~~calls and maturities of U.S. government and agency obligations, ~~$5.0~~$3.9 million of amortization of mortgage backed securities, ~~net~~and $2.1 million of sales, partially offset by a ~~$298,000~~$1.1 million decrease in net unrealized losses.

Net Loans Receivable. Net loans receivable increased ~~$2.0~~$33.3 million, or ~~0.2%~~3.7%, to ~~$904.3~~$935.6 million at ~~December~~March 31, ~~2018~~2019 from $902.3 million at June 30, 2018. The increase was the result of ~~$75.3~~$127.7 million ofin originations and loan purchases, partially offset by ~~$73.3~~$94.4 million of net amortization, prepayments, and ~~prepayments~~other activity on the remaining ~~portfolio, including $25.0 million of loan prepayments on four commercial mortgage loans and one residential mortgage loan.~~portfolio.

Deposits. Total deposits increased ~~$67.9~~$44.7 million, or ~~5.9%~~3.9% to ~~$1.23~~$1.20 billion at ~~December~~March 31, ~~2018~~2019 from $1.16 billion at June 30, 2018. This increase primarily reflects increases of ~~$71.3~~$87.3 million in money market accounts, ~~$30.2~~$34.8 million in time deposits, $6.0 million in demand deposits ~~$29.0 million in time deposits~~ and ~~$5.4~~$2.5 million in NOW accounts, partially offset by a decrease of ~~$68.0~~$85.9 million in savings ~~accounts. The increase in total deposits included~~accounts, and a ~~$7.5~~$2.5 million net ~~increase~~decrease in brokered time deposits and a transient balance of $28.4 million in one non-interest bearing customer account, the majority of which has been withdrawn from the Bank as of the filing date of this Form 10-Q. Excluding this transient balance, deposit growth year to date is $39.5 million or 3.4%.deposits.

Federal Home Loan Bank Advances. Federal Home Loan Bank advances increased ~~$7.5~~$7.4 million, or ~~39.5%~~39.3%, to ~~$26.3~~$26.2 million at ~~December~~March 31, ~~2018~~2019 from $18.8 million at June 30, 2018. The increase is primarily due to $12.5 million of additional long-term advances, partially offset by $5.1 million in maturities and paydowns.

Total Shareholders’ Equity. Total shareholders’ equity ~~increased $1.2~~decreased $9.2 million, or ~~0.4%~~3.2%, to ~~$288.8~~$278.3 million at ~~December~~March 31, ~~2018~~2019 from ~~$287.6~~$287.5 million at June 30, 2018. This ~~increase~~decrease was primarily due to the repurchase of $18.3 million in common stock and $1.5 million of cash dividends paid, partially offset by net income of ~~$4.7~~$6.6 million, $2.0 million of stock-based compensation expense, $1.2 million of comprehensive income, primarily due to the decrease in net unrealized losses on investment securities and a ~~$970,000~~$719,000 reduction in unearned ESOP shares for plan shares earned during the ~~period, partially offset by the repurchase of $4.3 million in common stock and $1.0 million of cash dividends paid in the current year.~~period. As of ~~December~~March 31, ~~2018,~~2019, the Company ~~had~~completed its previously reported program to repurchase up to 908,256 shares of its outstanding common stock. The Company repurchased ~~222,070~~908,256 shares at an average ~~cost~~price of ~~$19.52~~$20.15 per ~~share, which represents 24% of the 908,256 shares authorized for repurchase under the existing plan.~~share. At ~~December~~March 31, ~~2018,~~2019, the Company’s book value per share and tangible book value per share were ~~$15.62~~$15.63 and $15.27, respectively, compared to $15.83 and $15.47, respectively, at June 30, 2018. At ~~December~~March 31, ~~2018,~~2019, the Bank was considered “well capitalized” under applicable regulatory guidelines.

Comparison of Operating Results for the Three Months Ended ~~December~~March 31, ~~2018~~2019 and ~~2017~~2018

General. Net income was ~~$2.3~~$2.0 million for the three months ended ~~December~~March 31, ~~2018~~2019 compared to ~~$2,000~~$2.2 million for the three months ended ~~December~~March 31, ~~2017.~~2018. The ~~increase~~decrease was primarily due to an $865,000 increase in noninterest expense, and a ~~$1.8 million decrease~~$34,000 increase in income tax expense, partially offset by a ~~$558,000~~$594,000 increase in net interest income, a ~~$228,000~~$67,000 increase in ~~non-interest~~noninterest income and a ~~$194,000~~$47,000 decrease in the provision for loan ~~losses, partially offset by a $455,000 increase in non-interest expense.~~losses.

Net Interest Income.Net interest income increased ~~$558,000,~~$594,000, or ~~5.5%~~5.9%, to $10.7 million for the three months ended ~~December~~March 31, ~~2018~~2019, compared to ~~$10.2~~the same period in 2018. The increase in net interest income compared to the prior period is primarily the result of a $99.6 million, or 7.3%, increase in average interest-earning assets, partially offset by a 5 basis point decrease in the net interest margin. The increase in average interest-earning assets is primarily due to a $70.1 million increase in average loans receivable. The net interest margin was 2.94% for the three months ended ~~December~~March 31, ~~2017. The increase primarily reflects~~2019, a ~~$79.5 million increase~~decrease of five basis points compared to 2.99% in ~~total average interest-earning assets. The net interest margin was 3.00% for~~ the ~~three months ended December 31, 2018 unchanged from the three months ended December 31, 2017, as~~prior year quarter. Despite continued asset growth and a higher yielding asset mix, ~~offset~~ the ~~increased~~margin has been impacted by rising funding costs due to higher short-term interest rates along with competitive pricing. The cost of interest-bearing deposits was 1.04% for the three months ended March 31, 2019 compared to 0.58% for the three months ended March 31, 2018, an increase of 46 basis points. The Company has experienced a shift in deposit mix as customers in lower costing saving products moved funds ~~driven by~~to higher rate money market ~~interest rates.~~ ~~The increase in average net interest-earning assets primarily reflects the loan portfolio growth.~~accounts and time deposits.

Interest and Dividend Income. Interest and dividend income increased ~~$1.5~~$2.0 million, or ~~13.6%~~17.2%, to ~~$13.2~~$13.6 million for the three months ended ~~December~~March 31, ~~2018~~2019 compared to ~~a $11.7~~$11.6 million for the three months ended ~~December~~March 31, ~~2017.~~2018. The increase primarily reflects a ~~$79.5~~$99.6 million increase in total average interest-earning assets and a 2531 basis point increase in the yield on total interest-earning assets. The increase in yield is due to the shift from generally lower yielding investment securities to generally higher yielding loans, as well as the increase in yields for all asset types primarily due to changes in market interest rates.

Interest income on loans receivable increased ~~$1.2~~$1.3 million, or ~~12.5%~~14.4%, primarily due to ~~an $81.8~~a $70.1 million increase in the average balance of loans receivable to ~~$909.4~~$913.6 million for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~$827.6~~$843.5 million for the same period last year, and a 1024 basis point increase in the average yield on loans to ~~4.53%~~4.56% for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~4.43%~~4.32% for the same period last year.

Interest income on securities increased ~~$159,000,~~$251,000, or ~~7.0%~~10.6%, primarily due to a ~~29 basis~~34 basis point increase in the average yield on securities to ~~2.21%~~2.35% for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~1.92%~~2.01% for the same period last year, partially offset by a ~~$33.7~~$26.3 million decrease in the average balance of securities. The increase in the yield on securities was primarily due to an increase in market interest rates.

Interest income on other interest-earning assets, primarily consisting of cash balances at correspondent banks including the Federal Reserve, increased ~~$274,000,~~$437,000, or ~~126.3%~~246.9%, due primarily to a ~~$31.5~~$55.8 million increase in the average balance of ~~the~~other interest-earning assets to ~~$85.9~~$98.7 million for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~$54.4~~$42.9 million for the same period last year, and ~~a 69~~an 84 basis point increase in the average yield on other interest-earning assets to ~~2.27%~~2.52% for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~1.58%~~1.68% for the same period last year. The increase in the yield on other interest-earning assets was primarily due ~~primarily~~ to an increase in market interest rates.

Interest Expense. Interest expense increased ~~$1.0~~$1.4 million, or ~~69.7%~~93.3%, to ~~$2.5~~$2.9 million for the three months ended ~~December~~March 31, ~~2018~~2019 compared to $1.5 million for the three months ended ~~December~~March 31, ~~2017.~~2018. The increase primarily reflects a 3546 basis point increase in the average cost of interest-bearing liabilities to ~~0.94%~~1.08% for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~0.59%~~0.62% for the same period last year, and a ~~$66.8~~$96.2 million increase in the average balance on ~~interest bearing~~interest-bearing liabilities.

Interest expense on interest-bearing deposits increased ~~$1.1~~$1.4 million, or ~~81.7%~~98.6%, primarily due to a 37 46 basis point increase in the average cost of interest- bearing deposits to ~~0.91%~~1.04% for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~0.54%~~0.58% for the same period last year, and ~~an $80.0~~a $97.4 million increase in the average balance to ~~$1.04~~$1.06 billion for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~$957.8~~$967.0 million for the three months ended ~~December~~March 31, ~~2017.~~2018. The increase in the average rate paid on interest-bearing deposits was primarily caused by ~~an 80 basis point increase~~rising funding costs due to higher short-term interest rates along with competitive pricing. The Company has experienced a shift in the deposit mix as customers in lower costing saving products moved funds to higher rate money market accounts and time deposits. The average interest rate paid on money market accounts and a 56time deposits both increased 70 basis ~~point increase in the average rate paid on time deposits~~points, as the Bank offered ~~increased~~higher rates on these deposits due to the increase in market interest ~~rates~~.rates.

Interest expense on Federal Home Loan Bank advances ~~decreased~~increased $43,000, or ~~26.2%~~34.4%, primarily due to a ~~$13.2 million decrease~~77 basis point increase in the average ~~balance~~cost to ~~$22.1 million~~2.61% for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~$35.3 million~~1.84% for the same period last year, partially offset by a ~~30 basis point increase~~$1.2 million decrease in the average ~~cost~~balance to ~~2.15%~~$26.2 million for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~1.85%~~$27.4 million for the same period last year. The increase in the average cost is primarily due to higher rates on new borrowings and the maturity of lower cost borrowings.

Provision for Loan Losses. The provision for loan losses decreased by ~~$194,000~~$47,000 to ~~$6,000~~$7,000 for the three months ended ~~December~~March 31, ~~2018,~~2019, compared to ~~$200,000~~$54,000 for the three months ended ~~December~~March 31, ~~2017.~~2018. Charge-offs, net of recoveries, were ~~$22,000~~$5,000 for the three months ended ~~December 30,~~March 31, 2018 compared to ~~$997,000~~recoveries, net of charge-offs, of $99,000 for the three months ended ~~December~~March 31, ~~2017. In the prior year period, the Company recorded a $997,000 charge-off of a specific reserve recorded on a construction loan.~~2018. Loans classified as substandard decreased ~~$8.1~~$10.6 million, or ~~44.3%~~53.9%, to ~~$10.2~~$9.0 million as of ~~December~~March 31, ~~2018,~~2019, from ~~$18.3~~$19.6 million at ~~December~~March 31, ~~2017.~~2018. Non-performing loans as a percent of total loans receivable was ~~0.39%~~0.30% as of ~~December~~March 31, ~~2018,~~2019, a decrease from ~~0.97%~~0.80% as of ~~December~~March 31, ~~2017.~~2018.

~~Non-Interest~~Noninterest Income. ~~Non-interest~~ Noninterest income increased ~~$228,000,~~$67,000, or ~~32.9%~~13.1%, to ~~$920,000~~$579,000 for the three months ended ~~December~~March 31, ~~2018~~2019 compared to a ~~$692,000~~$512,000 for the three months ended ~~December~~March 31, ~~2017.~~2018. The increase was caused primarily by ~~a $155,000 gain on the sale of bank premises, a $55,000 gain on the sale of securities,~~an $84,000 increase in fees and ~~$76,000 of swap income recorded in the current period,~~service charges (deposit fees and loan processing fees), partially offset by ~~$99,000 of loan-related income recorded~~a $17,000 decrease in ~~the prior year quarter.~~all other noninterest income.

~~Non-Interest~~Noninterest Expense. ~~Non-interest~~Noninterest expense increased ~~$455,000,~~$865,000, or ~~5.6%~~11.0%, to ~~$8.6~~$8.7 million for the three months ended ~~December~~March 31, ~~2018~~2019 compared to ~~$8.1~~$7.8 million for the three months ended ~~December~~March 31, ~~2017.~~2018. The increase was primarily caused ~~primarily~~ by a ~~$574,000~~$957,000 increase in salaries and employee benefits, partially offset by a ~~$110,000~~$92,000 decrease in ~~losses on a receivable.~~all other noninterest expenses. The increase in salaries and employee benefits was primarily due to ~~$482,000~~$829,000 of stock-based compensation expense recorded in the current quarter, as well as a ~~$199,000~~$110,000 increase in salaries as a result of additional ~~staffing, partially offset by lower retirement and medical benefits costs.~~staffing.

Income Tax Expense. Income tax expense ~~decreased $1.8 million,~~increased $34,000, or ~~70.4%~~5.8%, to ~~$754,000~~$625,000 for the three months ended ~~December~~March 31, ~~2018~~2019 from ~~$2.6 million~~$591,000 for the three months ended ~~December~~March 31, ~~2017.~~2018. The ~~decrease~~increase was caused primarily by a ~~$1.8 million~~$182,000 one-time deferred tax remeasurement ~~charge~~credit recorded in the prior year period in conjunction with the passing of the Tax Cuts and Job ~~Act, which reduced corporate income tax rates from 34% to 21%.~~Act. The effective income tax rate was ~~24.5%~~23.9% for the three months ended ~~December~~March 31, ~~2018 compared to 31.3%~~2019. The effective tax rate, adjusted for remeasurement credit, was 27.9% for the three months ended ~~December~~March 31, ~~2017. Excluding the effect of the one-time charge in the prior year,~~2018. Beginning on July 1, 2018, the Company ~~fully realized~~began to realize the full benefits of the reduction in the ~~Federal~~ corporate income tax rate from 34% to 21%, which became effective in January 2018.

Comparison of Operating Results for the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2018~~2019 and ~~2017~~2018

General. Net income increased ~~$2.9~~$2.7 million, or ~~164.7%~~68.7%, to ~~$4.7~~$6.6 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 compared to ~~$1.8~~$3.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The increase was primarily due to a $1.9 million decrease in income tax expense, a ~~$1.1~~$1.7 million increase in net interest income, a ~~$271,000~~$318,000 decrease in the provision for loan losses, and a ~~$155,000~~$222,000 increase in ~~non-interest~~noninterest income, partially offset by a ~~$569,000~~$1.4 million increase in ~~non-interest~~noninterest expense.

Net Interest Income.Net interest income increased ~~$1.1~~$1.7 million, or 5.8%, to $31.9 million for the nine months ended March 31, 2019, compared to the same period in 2018. The increase in net interest income compared to the prior year is primarily the result of a $78.2 million, or 5.7%, ~~to $21.2 million for the six months ended December 31, 2018 compared to $20.1 million for the six months ended December 31, 2017.~~increase in average interest-earning assets. The ~~increase primarily reflects a $67.5 million~~ increase in average interest-earning assets ~~and a 2 basis point~~is primarily due to an $80.6 million increase in ~~the~~average loans receivable. The net interest margin ~~to 2.97%~~was 2.96% for the ~~six~~nine months ended ~~December~~March 31, 2019 unchanged from the nine months ended March 31, 2018. Despite continued asset growth and a higher yielding asset mix, the margin has been negatively impacted by rising funding costs due to higher short-term interest rates along with competitive pricing. The cost of interest-bearing deposits was 0.91% for the nine months ended March 31, 2019 compared to 0.55% for the nine months ended March 31, 2018, ~~compared to 2.95% for the six months ended December 31, 2017. The increase in average net interest-earning assets primarily reflects the loan portfolio growth, and~~ an increase of 36 basis points. The Company has experienced a shift in ~~other interest-earning assets, partially offset by a decrease~~deposit mix as customers in ~~investment securities.~~lower costing saving products moved funds to higher rate money market accounts and time deposits.

Interest and Dividend Income. Interest and dividend income increased ~~$2.8~~$4.9 million, or ~~12.6%~~14.1%, to ~~$25.8~~$39.5 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 compared to a ~~$23.0~~$34.6 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The increase primarily reflects a ~~$67.5~~$78.2 million increase in total average interest-earning assets and a 2427 basis point increase in the yield on total interest-earning assets. The increase in yield is due to the increase in market interest rates, as well as the shift of assets from generally lower yielding investment securities to generally higher yielding loans.

Interest income on loans receivable increased ~~$2.2~~$3.5 million, or ~~12.4%~~13.1%, primarily due to an ~~$85.8~~$80.6 million increase in the average balance of loans receivable to ~~$906.2~~$908.7 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~$820.4~~$828.1 million for the same period last year, and an 813 basis point increase in the average yield on loans to ~~4.46%~~4.49% for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~4.38%~~4.36% for the same period last year.

Interest income on securities increased ~~$280,000,~~$531,000, or ~~6.2%~~7.7%, primarily due to a ~~27 basis~~29 basis point increase in the average yield on securities to ~~2.15%~~2.21% for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~1.88%~~1.92% for the same period last year, partially offset by a ~~$33.0~~$30.8 million decrease in the average balance of securities. The increase in the yield on securities was primarily due to an increase in market interest rates.

Interest income on other interest-earning assets, primarily consisting of cash balances at correspondent banks including the Federal Reserve, increased ~~$385,000,~~$822,000, or ~~85.4%~~130.9%, due primarily to a 72$28.4 million increase in the average balance of the other interest-earning assets to $83.9 million for the nine months ended March 31, 2019 from $55.5 million for the same period last year, and a 79 basis point increase in the average yield on other interest-earning assets to ~~2.17%~~2.30% for the ~~three~~nine months ended ~~December~~March 31, 2019 from ~~1.45%~~1.51% for the same period last ~~year, and due to $14.7 million increase in the average balance of the interest-earning assets.~~year. The increase in the yield on other interest-earning assets was due primarily to an increase in market interest rates. ~~The increase in average balances is a result of investing securities cash inflows into loan growth.~~

Interest Expense. Interest expense increased ~~$1.7~~$3.2 million, or ~~60.5%~~71.7%, to ~~$4.6~~$7.6 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 compared to ~~$2.9~~$4.4 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The increase primarily reflects a 2935 basis point increase in the average cost of interest-bearing liabilities to ~~0.87%~~0.94% for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~0.58%~~0.59% for the same period last year, and a ~~$58.0~~$70.7 million increase in the average balance on ~~interest bearing~~interest-bearing liabilities.

Interest expense on interest-bearing deposits increased ~~$1.9~~$3.2 million, or ~~72.1%~~81.4%, primarily due to a 32 36 basis point increase in the average cost of deposits to ~~0.85%~~0.91% for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~0.53%~~0.55% for the same period last year, and ~~a $75.9~~an $83.1 million increase in the average balance to ~~$1.04~~$1.05 billion for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~$959.5~~$962.0 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The increase in the average rate paid on interest-bearing deposits was primarily caused ~~primarily~~ by rising funding costs due to higher short-term interest rates along with competitive pricing. The Company has experienced a ~~75 basis point increase~~shift in ~~the~~deposit mix as customers in lower costing saving products moved funds to higher rate money market accounts and time deposits. The average interest rate paid on money market accounts and a 50time deposits increased 73 and 57 basis ~~point increase in the average rate paid on time deposits~~points respectively, as the Bank offered increased rates on these deposits due to the increase in market interest ~~rates~~.rates.

Interest expense on Federal Home Loan Bank advances decreased ~~$108,000,~~$65,000, or ~~34.0%~~14.7%, primarily due to a ~~$17.8 million decrease~~55 basis point increase in the average ~~balance~~cost to ~~$20.5 million~~2.25% for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~$38.3 million~~1.70% for the same period last year, partially offset by a ~~38 basis point increase~~$12.3 million decrease in the average ~~cost~~balance to ~~2.03%~~$22.4 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~1.65%~~$34.7 million for the same period last year. The increase in the average cost is primarily due to higher rates on new borrowings and the maturity of lower cost borrowings.

Provision for Loan Losses. The provision for loan losses decreased by ~~$271,000~~$318,000 to ~~$64,000~~$71,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2018,~~2019, compared to ~~$335,000~~$389,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. Charge-offs, net of recoveries, were ~~$25,000~~$30,000 for the ~~six~~nine months ended ~~December 30, 2018~~March 31, 2019 compared to ~~$1.0~~$915,000 for the nine months ended March 31, 2018. In the prior year period, the Company recorded a $997,000 charge-off of a specific reserve previously recorded on a construction loan.

Noninterest Income. Noninterest income increased $222,000, or 11.6%, to $2.1 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~

~~Non-Interest Income.~~ ~~Non-interest income~~ ~~increased $155,000, or 11.0%~~2019 compared to ~~$1.6~~a $1.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018 compared to a $1.4 million for the six months ended December 31, 2017.~~2018. The increase was caused primarily by a $155,000 gain on the sale of bank premises and $147,000 of swap income in the current year period, partially offset by a $118,000 decrease ~~of $118,000~~ in ~~gain~~gains on the sale of securities.

~~Non-Interest~~Noninterest Expense. ~~Non-interest~~Noninterest expense increased ~~$569,000,~~$1.4 million, or ~~3.6%~~6.0%, to ~~$16.6~~$25.3 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 compared to ~~$16.0~~$23.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The increase was caused primarily by ~~an $854,000~~a $1.8 million increase in salaries and employee benefits, partially offset by decreases of ~~$126,000~~ $400,000in ~~advertising, $110,000 in losses on a receivable and $49,000 in~~all other ~~non-interest~~noninterest expenses. The increase in salaries and employee benefits was primarily due to ~~$482,000~~$1.3 million of stock-based compensation expense recorded in the current year, as well as a ~~$527,000~~$668,000 increase in salaries as a result of additional staffing, partially offset by lower retirement and medical benefits costs.

Income Tax Expense. Income tax expense decreased ~~$1.9~~$1.8 million, or ~~56.4%~~47.1%, to ~~$1.5~~$2.1 million for the ~~six~~nine months ended ~~December~~March 31, ~~2018~~2019 from ~~$3.4~~$3.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The decrease was caused primarily by a ~~$1.8~~$1.6 million one-time deferred tax remeasurement charge recorded in the prior ~~year in conjunction with the passing of the Tax Cuts and Job Act, which reduced corporate income tax rates from 34% to 21%.~~year. The effective income tax rate was 23.9% for the ~~six~~nine months ended ~~December~~March 31, ~~2018 compared to 31.4%~~2019. The effective tax rate, adjusted for remeasurement credit, was 30.2% for the ~~six~~nine months ended ~~December~~March 31, 2017. Excluding the effect of the one-time charge in the prior year, the Company fully realized the benefits of the reduction in the Federal corporate income tax rate from 34% to 21%, which became effective in January 2018.

Average Balance Sheet and Interest Rates. The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Amortization of loan fees is included in interest income on loans.

	Three Months Ended December 31,																Three Months Ended March 31,
	2018								2017								2019								2018
	Average Balance			Interest/ Dividends		Average Rate			Average Balance			Interest/ Dividends		Average Rate			Average Balance			Interest/ Dividends		Average Rate			Average Balance			Interest/ Dividends		Average Rate
	(dollars in thousands)																(dollars in thousands)
Assets:
Loans receivable	$	909,368		$	10,321		4.53	%	$	827,614		$	9,171		4.43	%	$	913,634		$	10,413		4.56	%	$	843,557		$	9,103		4.32	%
Investment securities		439,919			2,428		2.21			473,641			2,269		1.92			445,604			2,619		2.35			471,932			2,368		2.01
Other interest-earning assets		85,874			491		2.27			54,388			217		1.58			98,717			614		2.52			42,860			177		1.68
Total interest-earning assets		1,435,161			13,240		3.69			1,355,643			11,657		3.44			1,457,955			13,646		3.75			1,358,349			11,648		3.44
Non-interest-earning assets		57,567								58,665								58,541								56,874
Total assets	$	1,492,728							$	1,414,308							$	1,516,496							$	1,415,223

Liabilities and equity:
NOW accounts	$	116,381			52		0.18		$	112,147			48		0.17		$	116,781			52		0.18		$	113,178			49		0.18
Money market accounts		101,078			280		1.10			29,014			22		0.30			126,438			368		1.18			42,448			50		0.48
Savings accounts and escrow		416,687			252		0.24			509,888			309		0.24			392,537			239		0.24			496,574			297		0.24
Time deposits		403,652			1,791		1.76			306,756			928		1.20			428,643			2,082		1.97			314,815			984		1.27
Total interest-bearing deposits		1,037,798			2,375		0.91			957,805			1,307		0.54			1,064,399			2,741		1.04			967,015			1,380		0.58
Federal Home Loan Bank advances		22,106			121		2.15			35,293			164		1.85			26,259			168		2.61			27,444			125		1.84
Total interest-bearing liabilities		1,059,904			2,496		0.94			993,098			1,471		0.59			1,090,658			2,909		1.08			994,459			1,505		0.62
Non-interest-bearing deposits		135,470								130,614								133,671								129,905
Other non-interest-bearing liabilities		6,506								7,765								11,242								6,719
Total liabilities		1,201,880								1,131,477								1,235,571								1,131,083
Total equity		290,848								282,831								280,925								284,140
Total liabilities and equity	$	1,492,728							$	1,414,308							$	1,516,496							$	1,415,223

Net interest income				$	10,744							$	10,186							$	10,737							$	10,143
Interest rate spread ⁽¹⁾							2.75								2.85								2.67								2.82
Net interest margin ⁽²⁾							3.00								3.00								2.94								2.99
Average interest-earning assets to interest-bearing liabilities		135.40	%							136.51	%							133.68	%							136.59	%

	Nine Months Ended March 31,
	2019								2018
	Average Balance			Interest/ Dividends		Average Rate			Average Balance			Interest/ Dividends		Average Rate
	(dollars in thousands)
Assets:
Loans receivable	$	908,674		$	30,632		4.49	%	$	828,138		$	27,092		4.36	%
Investment securities		446,398			7,413		2.21			477,199			6,882		1.92
Other interest-earning assets		83,938			1,450		2.30			55,502			628		1.51
Total interest-earning assets		1,439,010			39,495		3.66			1,360,839			34,602		3.39
Non-interest-earning assets		55,334								57,927
Total assets	$	1,494,344							$	1,418,766

Liabilities and equity:
NOW accounts	$	117,522			157		0.18		$	113,365			146		0.17
Money market accounts		95,407			788		1.10			33,854			93		0.37
Savings accounts and escrow		423,922			780		0.25			508,259			930		0.24
Time deposits		408,210			5,447		1.78			306,527			2,785		1.21
Total interest-bearing deposits		1,045,061			7,172		0.91			962,005			3,954		0.55
Federal Home Loan Bank advances		22,395			378		2.25			34,712			443		1.70
Total interest-bearing liabilities		1,067,456			7,550		0.94			996,717			4,397		0.59
Non-interest-bearing deposits		131,507								131,629
Other non-interest-bearing liabilities		8,344								7,590
Total liabilities		1,207,307								1,135,936
Total equity		287,037								282,830
Total liabilities and equity	$	1,494,344							$	1,418,766

Net interest income				$	31,945							$	30,205
Interest rate spread ⁽¹⁾							2.72								2.80
Net interest margin ⁽²⁾							2.96								2.96
Average interest-earning assets to interest-bearing liabilities		134.81	%							136.53	%

Six Months Ended December 31,

2018

2017

Average
Balance

Interest/
Dividends

Average
Rate

Average
Balance

Interest/
Dividends

Average
Rate

(dollars in thousands)

Assets:

Loans receivable

$
906,194

$
20,219

4.46
%

$
820,429

$
17,989

4.38
%
Investment securities

446,795

4,794

2.15

479,833

4,514

1.88

Other interest-earning assets

76,548

836

2.17

61,822

451

1.45

Total interest-earning assets

1,429,537

25,849

3.61

1,362,084

22,954

3.37

Non-interest-earning assets

53,731

58,453

Total assets

$
1,483,268

$
1,420,537

Liabilities and equity:

NOW accounts

$
117,893

105

0.18

$
113,458

97

0.17

Money market accounts

79,891

419

1.04

29,557

43

0.29

Savings accounts and escrow

439,615

540

0.25

514,102

633

0.25

Time deposits

397,994

3,367

1.68

302,382

1,801

1.18

Total interest-bearing deposits

1,035,393

4,431

0.85

959,499

2,574

0.53

Federal Home Loan Bank advances

20,463

210

2.03

38,346

318

1.65

Total interest-bearing liabilities

1,055,856

4,641

0.87

997,845

2,892

0.58

Non-interest-bearing deposits

130,425

132,491

Other non-interest-bearing liabilities

6,894

8,026

Total liabilities

1,193,175

1,138,362

Total equity

290,093

282,175

Total liabilities and equity

$
1,483,268

$
1,420,537

Net interest income

$
21,208

$
20,062

Interest rate spread ⁽¹⁾

2.74

2.79

Net interest margin ⁽²⁾

2.97

2.95

Average interest-earning assets to interest-bearing liabilities

135.39
%

136.50
%

Rate/Volume Analysis. The following tables set forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

	Six Months Ended December 31,									Three Months Ended March 31,
	2018 versus 2017									2019 versus 2018
	Rate			Volume			Net			Rate		Volume			Net
	(in thousands)									(in thousands)
Interest income:
Loans receivable	$	302		$	1,928		$	2,230		$	535	$	775		$	1,310
Investment securities		537			(257	)		280			224		27			251
Other interest-earning assets		256			129			385			121		316			437
Total interest-earning assets		1,095			1,800			2,895			880		1,118			1,998

Interest expense:
NOW accounts		4			4			8			2		1			3
Money market accounts		228			148			376			135		183			318
Savings and escrow accounts		23			(116	)		(93	)		20		(78	)		(58	)
Time deposits		893			673			1,566			664		434			1,098
Federal Home Loan Bank advances		63			(171	)		(108	)		50		(7	)		43
Total interest-bearing liabilities		1,211			538			1,749			871		533			1,404

Net increase in net interest income	$	(116	)	$	1,262		$	1,146		$	9	$	585		$	594

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans and investment securities, have longer maturities than our liabilities, consisting primarily of deposits and FHLB advances. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, we have established a management-level Asset/Liability Management Committee, which takes initial responsibility for developing an asset/liability management process and related procedures, establishing and monitoring reporting systems and developing asset/liability strategies. On at least a quarterly basis, the Asset/Liability Management Committee reviews asset/liability management with the Investment Asset/Liability Committee that has been established by the Board of Directors. This committee also reviews any changes in strategies as well as the performance of any specific asset/liability management actions that have been implemented previously. On a quarterly basis, an outside consulting firm provides us with detailed information and analysis as to asset/liability management, including our interest rate risk profile. Ultimate responsibility for effective asset/liability management rests with our Board of Directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. The net proceeds from the offering have increased our capital and provided management with greater flexibility to manage our interest rate risk, including the following strategies; originating loans with adjustable interest rates; utilizing interest rate swap contracts; promoting core deposit products; and adjusting the interest rates and maturities of funding sources, as necessary. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.

Net Portfolio Value Simulation. We analyze our sensitivity to changes in interest rates through a net portfolio value of equity (“NPV”) model. NPV represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities. The NPV ratio represents the dollar amount of our NPV divided by the present value of our total assets for a given interest rate scenario. NPV attempts to quantify our economic value using a discounted cash flow methodology while the NPV ratio reflects that value as a form of equity ratio. We estimate what our NPV would be at a specific date. We then calculate what the NPV would be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate NPV under the assumptions that interest rates increase 100 and 200 basis points from current market rates and that interest rates decrease 100 and 200 basis points from current market rates. Based on the recent increases in the fed funds rate, as of ~~December~~March 31, ~~2018~~2019 we have removed the 150 basis point decrease scenario in favor of a 200 basis point decrease to evaluate NPV.

The following table presents the estimated changes in our NPV that would result from changes in market interest rates at ~~December~~March 31, ~~2018~~2019 and June 30, 2018. All estimated changes presented in the table are within the policy limits approved by our Board of Directors.

	NPV									NPV as Percent of Portfolio Value of Assets						NPV									NPV as Percent of Portfolio Value of Assets
	(dollars in thousands)															(dollars in thousands)
Basis Point Change in Interest Rates	Dollar Amount		Dollar Change			Percent Change				NPV Ratio			Change (in bps)			Dollar Amount		Dollar Change			Percent Change				NPV Ratio			Change (in bps)
December 31, 2018:
March 31, 2019:
200	$	308,618	$	(36,471	)		(10.6	)	%		21.14	%		(128	)	$	292,697	$	(35,101	)		(10.7	)	%		20.41	%		(125	)
100		329,290		(15,799	)		(4.6	)			21.95			(47	)		312,234		(15,564	)		(4.7	)			21.18			(48	)
-		345,089	-			-					22.42		-				327,798	-			-					21.66		-
(100)		350,412		5,323			1.5				22.26			(16	)		332,546		4,748			1.4				21.48			(18	)
(200)		348,014		2,925			0.8				21.73			(69	)		331,790		3,992			1.2				21.05			(61	)

June 30, 2018:
200	$	282,017	$	(50,676	)		(15.2	)	%		20.75	%		(219	)	$	282,017	$	(50,676	)		(15.2	)	%		20.75	%		(219	)
100		313,606		(19,087	)		(5.7	)			22.25			(69	)		313,606		(19,087	)		(5.7	)			22.25			(69	)
-		332,693	-			-					22.94		-				332,693	-			-					22.94		-
(100)		342,520		9,827			3.0				23.02			8			342,520		9,827			3.0				23.02			8
(150)		348,648		15,955			4.8				23.14			20			348,648		15,955			4.8				23.14			20

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

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

We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short and intermediate-term securities.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At ~~December~~March 31, ~~2018,~~2019, cash and cash equivalents totaled ~~$143.1~~$87.1 million, an increase from $62.1 million as of June 30, 2018. Debt securities classified as available for sale, which provide an additional source of liquidity, totaled ~~$92.7~~$86.0 million at ~~December~~March 31, ~~2018,~~2019, a decrease from ~~$105.5~~$105.5 million as of June 30, 2018.

We had the ability to borrow up to ~~$294.6~~$295.5 million and $314.9 million from the Federal Home Loan Bank of New York, at ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively, of which ~~$26.3~~$26.2 million and $18.8 million was outstanding as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively. We also had an available line of credit with the Federal Reserve Bank of New York’s discount window program of ~~$119.6~~$116.0 million and $122.1 million as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively, none of which was outstanding at either date.

We have no material commitments or demands that are likely to affect our liquidity other than as set forth below. If loan demand was to increase faster than expected, or any unforeseen demand or commitment was to occur, we could access our borrowing capacity with the Federal Home Loan Bank of New York or the Federal Reserve Bank of New York.

We had ~~$108.4~~$126.8 million and $99.7 million of loan commitments outstanding as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively, and ~~$61.2~~$72.2 million and $59.5 million as of ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively, of approved, but unadvanced, funds to borrowers. We also had $1.7 million and $1.4 million in outstanding letters of credit at ~~December~~March 31, ~~2018~~2019 and June 30, 2018, respectively.

Time deposits due within one year of ~~December~~March 31, ~~2018~~2019 totaled ~~$177.4~~$163.4 million, a decrease of ~~$5.9~~$19.9 million from $183.3 million as of June 30, 2018. If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the time deposits at ~~December~~March 31, ~~2018.~~2019. We believe, however, based on past experience that a significant portion of our time deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

The Holding Company is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its stockholders and for other corporate purposes. The Holding Company’s primary source of liquidity is dividend payments it may receive from the Bank. The Bank’s ability to pay dividends to the Holding Company is governed by applicable laws and regulations. At ~~December~~March 31, ~~2018~~2019, the Holding Company (on an unconsolidated, stand-alone basis) had liquid assets of ~~$67.8~~$55.4 million.

Capital Resources. The ~~Company and~~ Bank ~~are~~is subject to various regulatory capital requirements administered by the New York State Department of Financial Services and the Federal Deposit Insurance Corporation. At ~~December~~March 31, ~~2018,~~2019, the Bank exceeded all applicable regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines. See Note 98 to the accompanying unaudited financial statements.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk.

The information required by this item is included in Part I, Item 2 of this report under "Management of Market Risk".

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of ~~December~~March 31, ~~2018.~~2019. Based on that evaluation, the

Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

During the quarter ended ~~December~~March 31, ~~2018,~~2019, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial ~~reporting.~~reporting will not have a material impact on the Company’s consolidated financial position, results of operations or ~~disclosures~~disclosures.

The Company is not involved in any pending legal proceedings as a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. At ~~December~~March 31, ~~2018,~~2019, the Company was not involved in any legal proceedings the outcome of which it believes would be material to its consolidated financial condition or results of operations.

For information regarding the Company’s risk factors, see Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018, filed with the Securities and Exchange Commission. As of ~~December~~March 31, ~~2018,~~2019, the risk factors of the Company have not changed materially from those disclosed in the Annual Report on Form 10-K for the year ended June 30, 2018.

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

The following table presents information regarding stock repurchases by the Company during the quarter ended ~~December~~March 31, ~~2018.~~2019.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Maryland	81-4710738
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2651 Strang Blvd, Suite 100 Yorktown Heights, NY	10598
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	23
	Consolidated Balance Sheets	23
	Consolidated Statements of Operations	34
	Consolidated Statements of Comprehensive Income	45
	Consolidated Statements of Changes in Shareholders’ Equity	56
	Consolidated Statements of Cash Flows	68
	Notes to Unaudited Consolidated Financial Statements	810
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3536
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4647
Item 4.	Controls and Procedures	4647
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	4748
Item 4.	Mine Safety Disclosures	4748
Item 5.	Other Information	4748
Item 6.	Exhibits	48
Signatures		49


Risk-free interest rate		3.03	%
Expected term		6.50
Expected stock price volatility		18.26	%
Dividend yield		0.63	%
Weighted average fair value of options granted	$	4.61

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Small reporting company	☐

		Emerging growth company	☒

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
October 1, 2018 through October 31, 2018		—	$	—		—		908,256
November 1, 2018 through November 30, 2018		29,200		20.02		29,200		879,056
December 1, 2018 through December 31, 2018		192,870		19.45		192,870		686,186
Total		222,070	$	19.52		222,070

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
January 1, 2019 through January 31, 2019		335,000	$	19.99		335,000		351,186
February 1, 2019 through February 28, 2019		351,186		20.71		351,186		-
March 1, 2019 through March 31, 2019		-		-		-		-
Total		686,186	$	20.36		686,186

Exhibit Number		Description

3.1		Articles of Incorporation of PCSB Financial Corporation ⁽¹⁾

3.2		Bylaws of PCSB Financial Corporation ⁽²⁾

~~10.1~~		~~PCSB Financial Corporation 2018 Equity Incentive Plan~~ ⁽³⁾

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials for the quarter ended ~~December~~March 31, ~~2018,~~2019, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements⁽⁴⁾

		PCSB FINANCIAL CORPORATION

Date: ~~February 8,~~May 10, 2019		/s/ Joseph D. Roberto
		Joseph D. Roberto
		Chairman, President and Chief Executive Officer

Date: ~~February 8,~~May 10, 2019		/s/ Scott D. Nogles
		Scott D. Nogles
		Executive Vice President and Chief Financial Officer