hvbc-10q_20181231.htm

(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” or an “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 complying with any new 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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of February 10, 2019, there were 2,255,125 outstanding shares of the issuer’s common stock.

Unaudited Consolidated Statements of Financial Condition as of December 31, 2018 and June 30, 2018 (Dollars in thousands, except share and per share data)

	At December 31,			At June 30,
	2018			2018
Assets
Cash and due from banks	$	1,371		$	1,345
Interest-earning deposits with banks		15,621			13,400
Cash and cash equivalents		16,992			14,745
Investment securities available-for-sale, at fair value		30,439			30,847
Investment securities held-to-maturity		14,286			13,905
Equity securities		500			—
Loans held for sale, at fair value		15,339			13,558
Loans receivable, net of allowance for loan losses of $956 at December 31, 2018 and $871 at June 30, 2018		231,988			212,696
Bank-owned life insurance		6,096			6,016
Restricted investment in bank stock		737			1,190
Premises and equipment, net		2,029			1,873
Accrued interest receivable		1,034			940
Prepaid income taxes		223			254
Deferred income taxes, net		454			526
Prepaid expenses		265			267
Mortgage banking derivatives		391			817
Other assets		110			128
Total Assets	$	320,883		$	297,762

Liabilities and Shareholders' Equity

Liabilities
Deposits	$	273,461		$	235,403
Advances from the Federal Home Loan Bank		10,000			22,000
Securities sold under agreements to repurchase		2,463			5,739
Advances from borrowers for taxes and insurance		1,961			2,276
Deferred gain on sale - leaseback of building		285			294
Other liabilities		1,302			1,329
Total Liabilities		289,472			267,041

Shareholders’ Equity
Preferred Stock, $0.01 par value, 2,000,000 shares authorized; no shares issued and outstanding as of December 31, 2018 and June 30, 2018		—			—
Common Stock, $0.01 par value, 20,000,000 shares authorized; 2,255,125 and 2,259,125 shares issued and outstanding as of December 31, 2018 and June 30, 2018		23			23
Additional paid-in capital		20,487			20,368
Retained earnings		13,686			13,277
Accumulated other comprehensive loss		(548	)		(648	)
Unearned Employee Stock Option Plan		(2,237	)		(2,299	)
Total Shareholders' Equity		31,411			30,721
Total Liabilities and Shareholders' Equity	$	320,883		$	297,762

Unaudited Consolidated Statements of Income for the Three and Six Months Ended December 31, 2018 and 2017; (Dollars in thousands, except per share data)

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2018			2017			2018			2017
Interest Income
Interest and fees on loans	$	2,356		$	1,517		$	4,655		$	2,867
Interest and dividends on investments:
Taxable		97			91			198			209
Nontaxable		73			65			148			130
Interest on mortgage-backed securities and collateralized mortgage obligations		103			94			206			179
Interest on interest-earning deposits		115			97			188			202
Total Interest Income		2,744			1,864			5,395			3,587
Interest Expense
Interest on deposits		686			231			1,200			447
Interest on advances from the Federal Home Loan Bank		53			45			152			75
Interest on securities sold under agreements to repurchase		1			1			2			2
Total Interest Expense		740			277			1,354			524
Net interest income		2,004			1,587			4,041			3,063
Provision for Loan Losses		24			80			83			79
Net interest income after provision for loan losses		1,980			1,507			3,958			2,984
Non-Interest Income
Fees for customer services		35			185			107			230
Increase in cash surrender value of bank-owned life insurance		40			41			80			75
Gain on sale of loans, net		591			909			1,492			2,145
Gain on sale of available-for-sale securities		—			—			—			34
Loss from derivative instruments		(49	)		(74	)		(366	)		(464	)
Change in fair value of loans held-for-sale		57			(140	)		118			(95	)
Other		2			2			3			3
Total Non-Interest Income		676			923			1,434			1,928
Non-Interest Expense
Salaries and employee benefits		1,381			1,267			2,641			2,401
Occupancy		281			260			535			525
Federal deposit insurance premiums		72			26			142			56
Data processing related operations		172			125			343			277
Loss on sale of other real estate owned		—			3			—			3
Real estate owned expense		—			6			—			27
Professional fees		197			113			398			285
Other expenses		410			357			832			741
Total Non-Interest Expense		2,513			2,157			4,891			4,315
Income before income taxes		143			273			501			597
Income Tax Expense		4			94			92			182
Net Income	$	139		$	179		$	409		$	415
Net Income per share:
Basic	$	0.07		$	0.08		$	0.20		$	0.19
Diluted	$	0.07		$	0.08		$	0.20		$	0.19

Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Ended December 31, 2018 and 2017 (Dollars in thousands)

Unaudited Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended December 31, 2018 and 2017 (Dollars in thousands, except per share data)

	Common Stock					Additional Paid-in		Retained		Accumulated Other Comprehensive			Unearned ESOP
	Shares			Amount		Capital		Earnings		Loss			Shares			Total
Balance, October 1, 2018		2,259,125		$	23	$	20,435	$	13,547	$	(734	)	$	(2,268	)	$	31,003
ESOP shares committed to be released		—			—		2		—		—			31			33
Stock option expense		—			—		10		—		—			—			10
Restricted stock expense		—			—		40		—		—			—			40
Forfeiture of restricted stock award		(4,000	)		—		—		—		—			—			—
Net income		—			—		—		139		—			—			139
Other comprehensive income		—			—		—		—		186			—			186
Balance, December 31, 2018		2,255,125		$	23	$	20,487	$	13,686	$	(548	)	$	(2,237	)	$	31,411

	Common Stock				Additional Paid-in		Retained		Accumulated Other Comprehensive			Unearned ESOP
	Shares		Amount		Capital		Earnings		Loss			Shares			Total
Balance, October 1, 2017		2,182,125	$	22	$	20,369	$	13,783	$	(148	)	$	(2,362	)	$	31,664
ESOP shares committed to be released		—		—		—		—		—			23			23
Net income		—		—		—		179		—			—			179
Other comprehensive loss		—		—		—		—		(153	)		—			(153	)
Balance, December 31, 2017		2,182,125	$	22	$	20,369	$	13,962	$	(301	)	$	(2,339	)	$	31,713

	Common Stock					Additional Paid-in		Retained		Accumulated Other Comprehensive			Unearned ESOP
	Shares			Amount		Capital		Earnings		Loss			Shares			Total
Balance, July 1, 2018		2,259,125		$	23	$	20,368	$	13,277	$	(648	)	$	(2,299	)	$	30,721
ESOP shares committed to be released		—			—		5		—		—			62			67
Stock option expense		—			—		28		—		—			—			28
Restricted stock expense		—			—		86		—		—			—			86
Forfeiture of restricted stock award		(4,000	)		—		—		—		—			—			—
Net income		—			—		—		409		—			—			409
Other comprehensive income		—			—		—		—		100			—			100
Balance, December 31, 2018		2,255,125		$	23	$	20,487	$	13,686	$	(548	)	$	(2,237	)	$	31,411

	Common Stock				Additional Paid-in		Retained		Accumulated Other Comprehensive			Unearned ESOP
	Shares		Amount		Capital		Earnings		Loss			Shares			Total
Balance, July 1, 2017		2,182,125	$	22	$	20,369	$	13,547	$	(111	)	$	(2,386	)	$	31,441
ESOP shares committed to be released		—		—		—		—		—			47			47
Net income		—		—		—		415		—			—			415
Other comprehensive loss		—		—		—		—		(190	)		—			(190	)
Balance, December 31, 2017		2,182,125	$	22	$	20,369	$	13,962	$	(301	)	$	(2,339	)	$	31,713

Six Months Ended December 31,	2018			2017
Cash Flows from Operating Activities
Net income	$	409		$	415
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		162			106
Impairment of real estate owned, net		—			14
Amortization of net deferred loan costs		94			67
Amortization of net securities premiums		56			73
Loss in sale of real estate owned		—			3
Gain on sale of available-for-sale securities		—			(34	)
Loss from derivative instruments		366			464
Provision for loan losses		83			79
Deferred income taxes		30			(91	)
Accretion of deferred gain on sale-leaseback transaction		(9	)		(8	)
Earnings on bank owned life insurance		(80	)		(75	)
Stock base compensation expense		114			—
ESOP compensation expense		67			47
Loans held for sale:
Originations, net of prepayments		(75,781	)		(80,066	)
Proceeds from sales		75,610			82,634
Gain on sales		(1,492	)		(2,145	)
Change in fair value of loans held for sale		(118	)		95
(Increase) decrease in:
Accrued interest receivable		(94	)		(153	)
Prepaid federal income taxes		31			133
Prepaid and other assets		20			88
Other liabilities		33			(90	)
Net cash (used in) provided by operating activities		(499	)		1,556
Cash Flows from Investing Activities
Net Increase in loans receivable		(19,469	)		(48,178	)
Activity in available-for-sale securities:
Proceeds from sales		—			11,158
Maturities and repayments		2,027			1,186
Purchases		(1,533	)		(2,665	)
Activity in held-to-maturity securities:
Maturities and repayments		619			11
Purchases		(1,000	)		(635	)
Purchase of equity securities		(500	)		—
Purchases of restricted investment in bank stock		(1,294	)		—
Redemption of restricted investment in bank stock		1,747			(106	)
Purchases of bank-owned life insurance		—			(1,856	)
Proceeds from sale of real estate owned		—			124
Purchases of premises and equipment		(318	)		(107	)
Net cash used in investing activities		(19,721	)		(41,068	)
Cash Flows from Financing Activities
Net increase in deposits		38,058			22,627
Net (decrease) increase in advances from borrowers for taxes and insurance		(315	)		26
Net (decrease) increase in securities sold under agreements to repurchase		(3,276	)		84
Net (decrease) increase in short-term borrowing from Federal Home Loan Bank		(10,000	)		(2,000	)
Proceeds from long-term borrowings from Federal Home Loan Bank		—			10,000
Repayment of long-term borrowings from Federal Home Loan Bank		(2,000	)		(5,000	)
Net cash provided by financing activities		22,467			25,737
Increase (Decrease) in Cash and Cash Equivalents		2,247			(13,775	)
Cash and Cash Equivalents, beginning of year		14,745			28,577
Cash and Cash Equivalents, end of year	$	16,992		$	14,802
Supplementary Disclosure of Cash Flow Information
Cash paid during the year of interest	$	1,280		$	598
Cash paid during the year for income taxes	$	—		$	65
Supplementary Schedule of Noncash Investing Activities
Transfer of loans to real estate owned	$	—		$	127

HV Bancorp, Inc., a Pennsylvania Corporation (the “Company”) is the holding company of Huntingdon Valley Bank (the “Bank”) and was formed in connection with the conversion of the Bank from the mutual to the stock form of organization. On January 11, 2017, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. A total of 2,182,125 shares of common stock were sold to depositors at $10.00 per share through which the Company received gross offering proceeds of approximately $21.8 million. Offering costs from the sale of the common stock totaled $1.4 million, resulting in net proceeds of $20.4 million. Shares of the Company began trading on the Nasdaq Capital Market on January 12, 2017. The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Bank”).

The Bank is a stock savings bank organized under the laws of the Commonwealth of Pennsylvania and is subject to comprehensive regulation and examination by the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“PADOB”). The Bank was organized in 1871, and currently provides residential and commercial loans to its general service area (Montgomery, Bucks and Philadelphia Counties of Pennsylvania) as well as offering a wide variety of savings, checking and certificate of deposit accounts to its retail and business customers.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim information and with the instructions to the Quarterly Report on Form 10-Q, as applicable to a smaller reporting company. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

The financial statements are unaudited; but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof. The balances as of June 30, 2018 have been derived from the audited consolidated financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto contained in the Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission on September 27, 2018. Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity. The results of operations for the three and six months ended December 31, 2018 are not necessarily indicative of the results that may be expected for the year ending June 30, 2019 or any other period.

The Company has evaluated subsequent events through the date of issuance of the financial statements included herein.

The unaudited interim consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, the Bank. In January 2017, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. All significant intercompany transactions and balances have been eliminated in consolidation.

In preparing financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Statement of Financial Condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, other-than-temporary impairments of securities (“OTTI”), interest rate lock commitments (“IRLCs”), mandatory sales commitments, the valuation of mortgage loans held-for-sale and the valuation of deferred tax assets.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, represents changes to clarify, correct errors in, or make minor improvements to the Codification. The amendments in this ASU affect the amendments in ASU 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of this ASU, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. This Update is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.

Further, the ASU made certain targeted amendments to the existing impairment model for available-for-sale (“AFS”) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.

The ASU is effective for public business entities for fiscal years after December 15, 2019, including interim periods within those fiscal years. The amendments are effective for all other entities (including emerging growth companies as further described above for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. In anticipation of the ASU, the Company has entered into a contract with a third party, compiled data for the modeling and is working on developing an estimate using historically and qualitative data based on the requirements of ASU 2016-13.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and

losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Subsequent to the issuance of ASU 2014-09, the FASB issued targeted updates to clarify specific implementation issues including ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the new guidance did not have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company completed its overall assessment of revenue streams and review of related contracts potentially affected by the ASU, including deposit related fees, interchange fees, merchant income, and annuity and insurance commissions. Based on this assessment, the Company concluded that ASU 2014-09 did not materially change the method in which the Company currently recognizes revenue for these revenue streams. The Company also completed its evaluation of certain costs related to these revenue streams to determine whether such costs should be presented as expenses or contra-revenue (i.e., gross vs. net). Based on its evaluation, the Company determined that the classification of certain debit and credit card related costs should change (i.e., costs previously recorded as expense is now recorded as contra-revenue, and vice versa). These classification changes resulted in immaterial changes to both revenue and expense. The Company also determined that certain costs related to ATMs should be recorded as an expense rather than a reduction of revenue. This change did not have a material effect to noninterest income or expense. The Company adopted ASU 2014-09 and its related amendments on its required effective date of July 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Consistent with the modified retrospective approach, the Company did not adjust prior period amounts for the debit and credit card costs and the ATM costs reclassifications noted above. See Note 11 Revenue Recognition for more information.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair

values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The adoption of ASU No. 2016-01 on July 1, 2018 did not have a material impact on the Company’s Consolidated Financial Statements. In accordance with (5) above, the Company measured the fair value of its loan portfolio as of December 31, 2018 using an exit price notion (see Note 6 Fair Value of Assets and Liabilities).

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing diversity in practice. Among these include recognizing cash payments for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities. The Company early adopted this standard on July 1, 2018 with no material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10), to clarify certain aspects of the guidance issued in ASU 2016-01. (1) An entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820, Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all future purchases of identical or similar investments of the same issuer using a fair value method in accordance with Topic 820. (2) Adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place. (3) Remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities. (4) When the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15, Derivatives and Hedging—Embedded Derivatives, or 825-10, Financial Instruments—Overall. (5) Financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates. (6) The prospective transition approach for equity securities without a readily determinable fair value in the amendments in Update 2016-01 is meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance in Topic 944, Financial Services— Insurance, should apply a prospective transition method when applying the amendments related to equity securities without readily determinable fair values. An insurance entity should apply the selected prospective transition method consistently to the entity’s entire population of equity securities for which the measurement alternative is elected. The Company early adopted this standard on July 1, 2018 with no material impact on our consolidated financial statements.

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses			Fair Value
U.S. Governmental securities	$	933	$	—	$	(22	)	$	911
Corporate notes		6,301		—		(123	)		6,178
Collateralized mortgage obligations - agency residential		13,881		1		(415	)		13,467
Mortgage-backed securities - agency residential		3,707		—		(142	)		3,565
Municipal securities		1,402		—		(14	)		1,388
Bank CDs		4,992		—		(62	)		4,930
	$	31,216	$	1	$	(778	)	$	30,439

	June 30, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses			Fair Value
U.S. Governmental securities	$	1,007	$	—	$	(40	)	$	967
Corporate notes		5,805		5		(102	)		5,708
Collateralized mortgage obligations - agency residential		14,297		—		(503	)		13,794
Mortgage-backed securities - agency residential		3,964		—		(186	)		3,778
Municipal securities		1,701		—		(21	)		1,680
Bank CDs		4,992		—		(72	)		4,920
	$	31,766	$	5	$	(924	)	$	30,847

The scheduled maturities of securities available-for-sale and held-to-maturity at December 31, 2018 were as follows:

Securities with a fair value of $9.0 million and $7.8 million at December 31, 2018 and June 30, 2018, respectively, were pledged to secure public deposits and for other purposes as required by law.

There were no sales of available-for-sale securities for the three and six months ended December 31, 2018.

Proceeds from the sale of available-for-sale securities for the six months ended December 31, 2017 were $11.2 million. There were no sales of available-for-sale securities for the three months ended December 31, 2017. Gross realized gains on such sales were approximately $39,000 and gross realized losses on such sales were $5,000 for the six months ended December 31, 2017.

The following tables summarize the unrealized loss positions of securities available-for-sale and held-to-maturity as of December 31, 2018 and June 30, 2018:

	December 31, 2018
	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Loss			Value		Loss			Value		Loss
Available-for-sale:
U.S. Governmental securities	$	398	$	(5	)	$	513	$	(17	)	$	911	$	(22	)
Corporate notes		1,853		(46	)		4,325		(77	)		6,178		(123	)
Collateralized mortgage obligations		2,459		(48	)		10,482		(367	)		12,941		(415	)
Mortgage-backed securities		—		—			3,563		(142	)		3,563		(142	)
Municipal securities		—		—			1,388		(14	)		1,388		(14	)
Bank CDs		985		(14	)		3,445		(48	)		4,430		(62	)
	$	5,695	$	(113	)	$	23,716	$	(665	)	$	29,411	$	(778	)
Held-to-maturity:
Corporate notes	$	511	$	(4	)	$	—	$	—		$	511	$	(4	)
Municipal securities		3,416		(31	)		4,970		(83	)		8,386		(114	)
	$	3,927	$	(35	)	$	4,970	$	(83	)	$	8,897	$	(118	)

	June 30, 2018
	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Loss			Value		Loss			Value		Loss
Available-for-sale:
U.S. Governmental securities	$	414	$	(11	)	$	553	$	(29	)	$	967	$	(40	)
Corporate notes		2,308		(45	)		2,895		(57	)		5,203		(102	)
Collateralized mortgage obligations		8,798		(216	)		4,996		(287	)		13,794		(503	)
Mortgage-backed securities		—		—			3,774		(186	)		3,774		(186	)
Municipal securities		299		(1	)		1,082		(20	)		1,381		(21	)
Bank CDs		2,457		(35	)		2,212		(37	)		4,669		(72	)
	$	14,276	$	(308	)	$	15,512	$	(616	)	$	29,788	$	(924	)
Held-to-maturity:
Corporate notes	$	516	$	(3	)	$	—	$	—		$	516	$	(3	)
Municipal securities		5,542		(100	)		3,375		(89	)		8,917		(189	)
	$	6,058	$	(103	)	$	3,375	$	(89	)	$	9,433	$	(192	)

At December 31, 2018 and June 30, 2018, the investment portfolio included three U.S. Government securities, respectively, with total fair values of $911,000 and $1.0 million, respectively. Each of these securities were in an unrealized loss position as of December 31, 2018 and June 30, 2018, respectively. These securities are zero risk weighted for capital purposes and are guaranteed for repayment of principal and interest. As of December 31, 2018 and June 30, 2018, management found no evidence of other-than-temporary (“OTTI”) on any of the U.S. Governmental securities in an unrealized loss position held in the investment securities portfolio. The Company has the ability to hold to maturity and more likely than not, will not be required to sell the securities before a recovery of the cost has occurred.

At December 31, 2018 and June 30, 2018, the investment portfolio included eighteen and fifteen corporate notes with total fair values of $9.7 million and $8.2 million at the end of each of period, respectively. Of these securities, fourteen and twelve were in an unrealized loss position as of December 31, 2018 and June 30, 2018. At the time of purchase and as of December 31, 2018 and June 30, 2018, these bonds in an unrealized loss position continue to maintain investment grade ratings. As of December 31, 2018 and June 30, 2018, management found no evidence of OTTI on any of the corporate notes held in the investment securities portfolio. The Company has the ability to hold to maturity and more likely than not, will not be required to sell the securities before a recovery of the cost has occurred.

At December 31, 2018 and June 30, 2018, the investment portfolio included forty and forty-one collateralized mortgage obligations (“CMOs”) with total fair values of $13.5 million and $13.8 million, respectively. Of these securities, thirty-nine and forty-one were in an unrealized loss position as of December 31, 2018 and June 30, 2018, respectively. The CMO portfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of December 31, 2018 and June 30, 2018, management found no evidence of OTTI on any of the CMOs held in the investment securities portfolio. The Company has the ability to hold to maturity and more likely than not, will not be required to sell the securities before a recovery of the cost has occurred.

At December 31, 2018 and June 30, 2018, the investment portfolio included fourteen and fifteen mortgage backed securities (“MBS”) with a total fair value of $3.6 million and $3.8 million, respectively. Of these securities, twelve were in an unrealized loss position as of December 31, 2018 and June 30, 2018, respectively. The MBS portfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of December 31, 2018 and June 30, 2018, management found no evidence of OTTI on any of the MBS held in the investment securities portfolio. The Company has the ability to hold to maturity and more likely than not, will not be required to sell the securities before a recovery of the cost has occurred.

At December 31, 2018 and June 30, 2018, the investment portfolio included twenty-five and twenty-eight municipal securities with a total fair value of $12.1 million and $12.9 million, respectively. Of these securities, nineteen and twenty-one were in an unrealized loss position as of December 31, 2018 and June 30, 2018, respectively. The Company’s municipal portfolio issuers are located in Pennsylvania and at the time of purchase, and as of December 31, 2018 and June 30, 2018, continue to maintain investment grade ratings. As of December 31, 2018 and June 30, 2018, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio. The Company has the ability to hold to maturity and more likely than not, will not be required to sell the securities before a recovery of the cost has occurred.

At December 31, 2018 and June 30, 2018, the investment portfolio included twenty Bank Certificate of Deposits (“CDs”) with a total fair value of $4.9 million, respectively. Of these securities, eighteen and nineteen were in an unrealized loss position as of December 31, 2018 and June 30, 2018, respectively. The Bank CDs are fully insured by the FDIC. As of December 31, 2018 and June 30, 2018, management found no evidence of OTTI on any of the Bank CDs held in the investment securities portfolio. The Company has the ability to hold to maturity and more likely than not, will not be required to sell the securities before a recovery of the cost has occurred.

During September 2018, the Company purchased an equity security for $500,000. As of December 31, 2018, the Company determined that the equity investment did not have a readily determinable fair value measure and is carrying the equity investment at cost, less impairment, adjusted for changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The following table presents the carrying amount of the Company’s equity investment at December 31, 2018:

At December 31, 2018, the Company performed a qualitative assessment considering impairment indictors to evaluate whether the investment was impaired and determined the investment was not impaired.

	December 31,			June 30,
(Dollars in thousands)	2018			2018
Residential:
One-to-four family	$	203,823		$	182,234
Home equity and HELOCs		4,226			4,921
Commercial:
Commercial real estate		10,277			10,804
Commercial business		3,625			4,059
Construction		2,307			2,907
Consumer:
Medical education		6,913			7,047
Other		52			31

		231,223			212,003

Less:
Unearned discounts, origination and commitment fees and costs		1,721			1,564
Allowance for loan losses		(956	)		(871	)

	$	231,988		$	212,696

In November 2017, the Bank entered into a loan purchase agreement with a broker to purchase a portfolio of private education loans made to American citizens attending American Medical Association (“AMA”) approved medical schools in Caribbean Nations. The broker serves as a lender, holder, program designer and developer, administrator, and secondary market for the loan portfolios they generate. At December 31, 2018, the balance of the private education loans was $6.9 million. The private student loans were made following a proven credit criteria and were underwritten in accordance with the Bank’s policies. At December 31, 2018, there were ten loans with a balance of approximately $353,000 that are past due 90 days or more. The Company allocated increased allowance for loan loss provisions to the medical education loans for the six months ended December 31, 2018 primarily as a result of the increased past due loan balances.

Overdraft deposits are reclassified as other consumer and are included in the total loans on the statements of financial condition. Overdrafts were $52,000 and $31,000 at December 31, 2018 and June 30, 2018, respectively.

The following tables summarize the activity in the allowance for loan losses by loan class for the three months ended December 31, 2018 and 2017.

Allowance for Loan Losses	For the three months ended December 31, 2018
(Dollars in thousands)	Beginning Balance		Charge- offs			Recoveries		(Credit) Provisions			Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairments
Residential:
One-to-four family	$	695		$	—	$	1	$	26		$	722	$	—	$	722
Home equity and HELOCs		41			—		—		5			46		—		46
Commercial:
Commercial real estate		61			—		—		(2	)		59		—		59
Commercial business		61			—		—		(2	)		59		13		46
Construction		16			—		—		(3	)		13		—		13
Consumer:
Medical education		57			—		—		(1	)		56		—		56
Other		—			—		—		1			1		—		1

	$	931		$	—	$	1	$	24		$	956	$	13	$	943

Allowance for Loan Losses	For the three months ended December 31, 2017
(Dollars in thousands)	Beginning Balance		Charge- offs			Recoveries		(Credit) Provisions			Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairments
Residential:
One-to-four family	$	420	$	(12	)	$	—	$	64		$	472	$	—	$	472
Home equity and HELOCs		39		—			—		(1	)		38		—		38
Commercial:
Commercial real estate		85		—			—		1			86		—		86
Commercial business		68		—			—		(10	)		58		16		42
Construction		3		—			—		7			10		—		10
Consumer:
Medical education		—		—			—		19			19		—		19
Other		—		—			—		—			—		—		—

	$	615	$	(12	)	$	—	$	80		$	683	$	16	$	667

The following tables summarize the activity in the allowance for loan losses by loan class for the six months ended December 31, 2018 and 2017.

Allowance for Loan Losses	For the six months ended December 31, 2018
(Dollars in thousands)	Beginning Balance		Charge- offs		Recoveries		(Credit) Provisions			Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairments

Residential:
One-to-four family	$	651	$	—	$	2	$	69		$	722	$	—	$	722
Home equity and HELOCs		39		—		—		7			46		—		46
Commercial:
Commercial real estate		65		—		—		(6	)		59		—		59
Commercial business		65		—		—		(6	)		59		13		46
Construction		15		—		—		(2	)		13		—		13
Consumer:
Medical education		35		—		—		21			56		—		56
Other		1		—		—		—			1		—		1

	$	871	$	—	$	2	$	83		$	956	$	13	$	943

Allowance for Loan Losses	For the six months ended December 31, 2017
(Dollars in thousands)	Beginning Balance		Charge- offs			Recoveries		(Credit) Provisions			Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairments

Residential:
One-to-four family	$	399	$	(12	)	$	44	$	41		$	472	$	—	$	472
Home equity and HELOCs		38		—			—		—			38		—		38
Commercial:
Commercial real estate		89		(22	)		—		19			86		—		86
Commercial business		58		—			—		—			58		16		42
Construction		9		—			—		1			10		—		10
Consumer:
Medical education		—		—			—		19			19		—		19
Other		—		—			1		(1	)		—		—		—

	$	593	$	(34	)	$	45	$	79		$	683	$	16	$	667

The Company maintains a general allowance for loan losses based on evaluating known and inherent risks in the loan portfolio, including management’s continuing analysis of the factors underlying the quality of the loan portfolio. These factors include changes in the size and composition of the loan portfolio, actual loan loss experience, and current and anticipated economic conditions. The reserve is an estimate based upon factors and trends identified by management at the time the financial statements are prepared. The Company allocated increased allowance for loan loss provisions to the residential one-to-four family for the six months ended December 31, 2018 compared to the same period in 2017, due primarily to the significant increase in the loan balance. In November 2017, the Bank entered into a loan purchase agreement for a portfolio of private medical education loans. The Company allocated increased allowance for loan loss provisions to the medical education loans for the six months ended December 31, 2018 primarily as a result of the increase in quantitative factors impacted by increased past due loan balances.

The following tables summarize information in regards to the recorded investment in loans receivable by loan class as of December 31, 2018 and June 30, 2018:

December 31, 2018
Loans Receivable
(Dollars in thousands)	Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairment
Residential
One-to-four family	$	203,823	$	1,439	$	202,384
Home equity and HELOCs		4,226		67		4,159
Commercial
Commercial real estate		10,277		390		9,887
Commercial business		3,625		142		3,483
Construction		2,307		—		2,307
Consumer:
Medical education		6,913		353		6,560
Other		52		—		52

	$	231,223	$	2,391	$	228,832

June 30, 2018
Loans Receivable
(Dollars in thousands)	Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairment
Residential
One-to-four family	$	182,234	$	1,429	$	180,805
Home equity and HELOCs		4,921		105		4,816
Commercial
Commercial real estate		10,804		398		10,406
Commercial business		4,059		153		3,906
Construction		2,907		—		2,907
Consumer:
Medical education		7,047		—		7,047
Other		31		—		31
	$	212,003	$	2,085	$	209,918

The following table summarizes information in regard to impaired loans by loan portfolio class as of December 31, 2018 and June 30, 2018:

	December 31, 2018						June 30, 2018
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded
Residential:
One-to-four family	$	1,439	$	1,618	$	—	$	1,429	$	1,592	$	—
Home equity and HELOCs		67		83		—		105		106		—
Commercial:
Commercial real estate		390		390		—		398		398		—
Consumer:
Medical education		353		353		—		—		—		—
		2,249		2,444		—		1,932		2,096		—
With an allowance recorded
Commercial:
Commercial business		142		143		13		153		154		14
		142		143		13		153		154		14
	$	2,391	$	2,587	$	13	$	2,085	$	2,250	$	14

The following table presents additional information regarding the impaired loans for the three months ended December 31, 2018 and December 31, 2017:

	Three Months Ended December 31,
	2018				2017
(Dollars in thousands)	Average Record Investment		Interest Income Recognized		Average Record Investment		Interest Income Recognized
With no related allowance recorded
Residential:
One-to-four family	$	1,655	$	—	$	1,151	$	1
Home equity and HELOCs		86		—		105		—
Commercial:
Commercial real estate		392		7		408		8
Consumer:
Medical education		177		—		—		—
		2,310		7		1,664		9
With an allowance recorded
Commercial business		144		2		165		3
		144		2		165		3
	$	2,454	$	9	$	1,829	$	12

If these loans were performing under the original contractual rate, interest income on such loans would have increased approximately $32,000 and $18,000 for the three months ended December 31, 2018 and 2017, respectively.

The following table presents additional information regarding the impaired loans for the six months ended December 31, 2018 and December 31, 2017:

	Six Months Ended December 31,
	2018				2017
(Dollars in thousands)	Average Record Investment		Interest Income Recognized		Average Record Investment		Interest Income Recognized
With no related allowance recorded
One-to-four family	$	1,580	$	—	$	1,147	$	3
Home equity and HELOCs		93		—		106		—
Commercial:
Commercial real estate		394		18		410		14
Consumer:
Medical education		118		—		—		—
		2,185		18		1,663		17
With an allowance recorded
Commercial business		147		4		168		5
		147		4		168		5
	$	2,332	$	22	$	1,831	$	22

If these loans were performing under the original contractual rate, interest income on such loans would have increased approximately $53,000 and $40,000 for the six months ended December 31, 2018 and 2017, respectively.

The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2018 and June 30, 2018:

Credit quality risk ratings include regulatory classifications of Special Mention, Substandard, Doubtful and Loss. Loans classified as Special Mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of prospects for repayment. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

The following tables summarize the aggregate Pass and criticized categories of Special Mention, Substandard and Doubtful within the Company’s internal risk rating system as of December 31, 2018 and June 30, 2018:

	December 31, 2018
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential:
One-to-four family	$	201,834	$	—	$	1,989	$	—	$	203,823
Home equity and HELOCs		4,159		—		67		—		4,226
Commercial:
Commercial real estate		9,675		212		390		—		10,277
Commercial business		3,369		—		256		—		3,625
Construction		2,307		—		—		—		2,307
Consumer:
Medical education		6,560		—		353		—		6,913
Other		52		—		—		—		52
	$	227,956	$	212	$	3,055	$	—	$	231,223

	June 30, 2018
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential:
One-to-four family	$	180,248	$	—	$	1,986	$	—	$	182,234
Home equity and HELOCs		4,816		—		105		—		4,921
Commercial:
Commercial real estate		10,190		216		398		—		10,804
Commercial business		3,773		—		286		—		4,059
Construction		2,907		—		—		—		2,907
Consumer:
Medical education		7,047		—		—		—		7,047
Other		31		—		—		—		31
	$	209,012	$	216	$	2,775	$	—	$	212,003

The following tables present the segments of the loan portfolio summarized by aging categories as of December 31, 2018 and June 30, 2018:

	December 31, 2018
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
Residential:
One-to-four family	$	179	$	754	$	952	$	1,885	$	201,938	$	203,823	$	—
Home equity and HELOCs		276		—		—		276		3,950		4,226		—
Commercial:
Commercial real estate		—		—		—		—		10,277		10,277		—
Commercial business		—		—		—		—		3,625		3,625		—
Construction		—		—		—		—		2,307		2,307		—
Consumer:
Medical education		692		113		353		1,158		5,755		6,913		—
Other		—		—		—		—		52		52		—

	$	1,147	$	867	$	1,305	$	3,319	$	227,904	$	231,223	$	—

	June 30, 2018
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
Residential:
One-to-four family	$	595	$	412	$	800	$	1,807	$	180,427	$	182,234	$	—
Home equity and HELOCs		—		—		105		105		4,816		4,921		—
Commercial:
Commercial real estate		—		—		—		—		10,804		10,804		—
Commercial business		—		—		—		—		4,059		4,059		—
Construction		—		—		—		—		2,907		2,907		—
Consumer:
Medical education		152		62		24		238		6,809		7,047		24
Other		—		—		—		—		31		31		—

	$	747	$	474	$	929	$	2,150	$	209,853	$	212,003	$	24

The Company may grant a concession or modification for economic or legal reasons related to a borrower's financial condition that it would not otherwise consider resulting in a modified loan that is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers' operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company's allowance for loan losses. TDRs are restored to accrual status when the obligation is brought current, has performed in accordance with the modified contractual terms for a reasonable period of time, generally six months, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The Company may identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower's financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions and negative trends may result in a payment default in the near future.

As of December 31, 2018 and June 30, 2018, the Company had two loans identified as TDRs totaling $289,000 and $304,000, respectively. At December 31, 2018 and June 30, 2018, the two TDRs were performing in compliance with their restructured terms and on accrual status. There were no modifications to loans classified as TDRs during the six months ended December 31, 2018. No additional loan commitments were outstanding to these borrowers at December 31, 2018 and June 30, 2018. At both December 31, 2018 and June 30, 2018, there was a specific reserve of $13,000 and $14,000 related to one TDR.

The following table details the Company’s TDRs that are on accrual status and non-accrual status at December 31, 2018:

The following table details the Company’s TDRs that are on accrual status and non-accrual status at June 30, 2018:

The carrying amount of residential mortgage loans in the process of foreclosure was $686,000 and $565,000 at December 31, 2018 and June 30, 2018, respectively.

The Company did not have any derivative instruments designated as hedging instruments or subject to master netting and collateral agreements as of December 31, 2018 and June 30, 2018 and for the three and six months ended December 31, 2018 and 2017. The following tables summarize the amounts recorded in the Company’s consolidated statements of financial condition for derivatives not designated as hedging instruments as of December 31, 2018 and June 30, 2018 (in thousands):

The following table summarizes the amounts recorded in the Company’s consolidated statements of income for derivative instruments not designated as hedging instruments for the three and six months ended December 31, 2018 and December 31, 2017 (in thousands):

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is determined at a reasonable point within the range that is most representative of fair value under current market conditions. Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends, and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

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

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

The following tables provide the fair value for assets required to be measured and reported at fair value on a recurring basis as of December 31, 2018 and June 30, 2018:

	December 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Investment securities available-for-sale:
U.S. Governmental securities	$	—	$	911	$	—	$	911
Corporate notes		—		5,684		494		6,178
Collateralized mortgage obligations - agency residential		—		13,467		—		13,467
Mortgage-backed securities - agency residential		—		3,565		—		3,565
Municipal securities		—		1,388		—		1,388
Bank CDs		—		4,930		—		4,930
Loans held for sale		—		15,339		—		15,339
Forward loan sales commitments		—		173		—		173
TBA securities		—		—		—		—
Interest rate lock commitments		—		—		218		218
	$	—	$	45,457	$	712	$	46,169

	June 30, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Investment securities available-for-sale:
U.S. Governmental securities	$	—	$	967	$	—	$	967
Corporate notes		—		5,214		494		5,708
Collateralized mortgage obligations - agency residential		—		13,794		—		13,794
Mortgage-backed securities - agency residential		—		3,778		—		3,778
Municipal securities		—		1,680		—		1,680
Bank CDs		—		4,920		—		4,920
Loans held for sale		—		13,558		—		13,558
Forward loan sales commitments		—		175		—		175
TBA securities		—		—		—		—
Interest rate lock commitments		—		—		642		642
	$	—	$	44,086	$	1,136	$	45,222

The following tables provide the fair value for liabilities required to be measured and reported at fair value on a recurring basis as of December 31, 2018 and June 30, 2018.

Liabilities measured at fair value on a recurring basis at June 30, 2018 are summarized below.

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended December 31, 2018 and 2017:

There were no assets measured at fair value on a nonrecurring basis at December 31, 2018 and June 30, 2018.

The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Consolidated Statements of Financial Condition as of December 31, 2018 and June 30, 2018:

					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
December 31, 2018	Carrying		Estimated		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	16,992	$	16,992	$	16,992	$	—	$	—
Investment securities held-to-maturity		14,286		14,208		—		11,708		2,500
Equity securities		500		500		—		—		500
Loans receivable, net (1)		231,988		224,900		—		—		224,900
Bank-owned life insurance		6,096		6,096		6,096		—		—
Restricted investment in bank stock		737		737		737		—		—
Accrued interest receivable		1,034		1,034		1,034		—		—
Liabilities:
Deposits	$	273,461	$	250,981	$	178,135	$	72,846	$	—
Advances from the FHLB		10,000		9,848		—		9,848		—
Securities sold under agreements to repurchase		2,463		2,460		2,460		—		—
Accrued interest payable		148		148		148		—		—
Off-balance sheet:
Commitment to extend credit	$	—	$	—	$	—	$	—	$	—

(1) In accordance with the prospective adoption of ASU No. 2016-01, the fair value of the loans as of December 31, 2018 was measured using an exit price notion. The fair value of loans as of June 30, 2018 was measured using an entry price notion.

					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
June 30, 2018	Carrying		Estimated		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	14,475	$	14,475	$	14,475	$	—	$	—
Investment securities held-to-maturity		13,905		13,747		—		11,747		2,000
Loans receivable, net		212,696		205,026		—		—		205,026
Bank-owned life insurance		6,016		6,016		6,016		—		—
Restricted investment in bank stock		1,190		1,190		1,190		—		—
Accrued interest receivable		940		940		940		—		—
Liabilities:
Deposits	$	235,403	$	232,905	$	191,953	$	40,952	$	—
Advances from the FHLB		22,000		21,807		10,000		11,807		—
Securities sold under agreements to repurchase		5,739		5,734		5,734		—		—
Accrued interest payable		74		74		74		—		—
Off-balance sheet:
Commitment to extend credit	$	—	$	—	$	—	$	—	$	—

The above information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. There were no changes in methodologies or transfers between levels at December 31, 2018, other than the adaption of ASU 2016-01. During the year ended June 30, 2018, a Bank CD was transferred out of Level 3 as the Company determined there were the significant observable inputs to classify the Bank CD as sufficiently observable. Therefore, at June 30, 2018, the Bank CD was transferred into a Level 2 valuation.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2018:

These short-term assets are valued at their face value, which approximate fair value.

Where quoted prices are available in an active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain Mortgage Backed Securities (MBS), Collateralized Mortgage Obligations (CMO), Corporate notes, and Municipal and U.S government securities. In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Investment securities classified within Level 3 include certain equity securities that do not have readily available market prices, certain corporate notes, certain Bank CDS and other less liquid investment securities. If observable market-based inputs are not available, we use unobservable inputs to determine appropriate valuation adjustments by reviewing valuation reports provided by a third-party (Level 3).

All mortgage loans held for sale are carried at fair value which is determined on a recurring basis by utilizing quoted prices from dealers in such loans.

The Company's mortgage loans held for sale are generally classified within Level 2 of the valuation hierarchy.

The following table reflects the difference between the carrying amount of mortgage loans held for sale, measured at fair value and the aggregate unpaid principal amount that the Company is contractually entitled to receive at maturity as of December 31, 2018 and June 30, 2018 (in thousands):

The Company did not have any mortgage loans held for sale recorded at fair value that were 90 or more days past due and on non-accrual at December 31, 2018 or June 30, 2018.

The fair value of the Company’s IRLC instruments are based upon the underlying mortgage loan adjusted for the probability of such commitments being exercised and estimated costs to complete and originate the loan. The Company’s IRLCs are classified within Level 3 of the valuation hierarchy as a result of unobservable market data inputs.

Fair values for forward loan sales commitments are based on forward prices with dealers in such securities. Due to the observable inputs used by the Company, the Company’s forward loan sales commitments are classified within Level 2 of the valuation hierarchy.

TBAs are valued based on forward dealer marks from the Company’s approved counterparties. The Company utilizes a third party market pricing service which compiles current prices for instruments from market sources, and those prices represent the current executable price. Due to the observable inputs used by the Company, the Company’s TBAs are classified within Level 2 of the valuation hierarchy.

Fair values are estimated for portfolios of loans with similar financial characteristics. For loans that reprice frequently, the carrying value approximates fair value. The fair value of other type of loans is estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities.

The Company has measured impairment on impaired loans generally based on the fair value of the loan's collateral. The fair value of collateral is based on appraisals performed by qualified licensed appraisers hired by the Company. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included as a Level III measurement. At December 31, 2018 and June 30, 2018, the fair value of the collateral exceeded the carrying amount of the loan; therefore, there are no impaired loans currently being carried at its fair value.

The carrying amount of the investment in bank-owned life insurance approximates its cash surrender value under the insurance policies.

The stock is carried at cost; which approximates fair value and considers the limited marketability of such securities.

The carrying amount of accrued interest receivable and payable approximates their respective fair values.

The carrying amount of demand deposits, savings accounts and money market deposits approximate their fair value. The discount rate is estimated using the rates currently offered for deposits with comparable remaining maturities. The fair value of certificates of deposit is estimated discounting the contractual cash flows. The discount rate is estimated using the rates currently offered for deposits with comparable remaining maturities.

The fair value of advances is estimated based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for borrowings with comparable terms, credit, and remaining maturities.

Securities sold under agreements to repurchase are carried at the amounts at which the securities will be subsequently repurchased as specified in the agreements and the carrying amount is a reasonable estimate of the fair value. The Company values the collateral on a daily basis and obtains additional collateral, if necessary, to protect the Company in the event of default by the counterparties.

The majority of the Company's commitments to extend credit carry current market interest rates if converted to loans. Because commitments to extend credit are generally unassignable by either the Company or the borrower, they only have value to the Company and the borrower. The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties and is not considered material for disclosure.

The following tables present the changes in the balances of each component of accumulated other comprehensive income (“AOCI”) for the three and six months ended December 31, 2018 and December 31, 2017. All amounts are presented net of tax.

The following table present reclassifications out of AOCI by component for the six month ended December 31, 2017. For the three months ended December 31, 2018 and 2017 and for the six months ended December 31, 2018, there were no net unrealized gain on available-for-sale securities.

Earnings per share ("EPS") consist of two separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. The diluted EPS calculation reflects the EPS if all outstanding instruments convertible to common stock were exercised. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect. At December 31, 2018, there were 188,000 stock options outstanding and 73,000 restricted stock shares outstanding which none of the stock options and restricted stock shares were vested and exercisable at December 31, 2018. The 188,000 stock options outstanding and 73,000 restricted stock shares outstanding were not included in the computation of diluted net income per share for the three and six months ended December 31, 2018 as their effect would have been anti-dilutive. For the three and six months ended December 31, 2017, there were no stock options or other convertible instruments

outstanding for the year. Therefore, there is no effect of dilution on the Company’s earnings per share for the three and six months ended December 31, 2017.

The calculation of basic and diluted EPS for the three and six months ended December 31, 2018 and 2017 is as follows:

	For the Three Months Ended December 31					For the Six Months Ended December 31
	2018			2017		2018			2017
Net income	$	139,000		$	179,000	$	409,000		$	415,000
Weighted average number of shares issued		2,257,908			2,182,125		2,258,516			2,182,125
Less weighted average number of unearned ESOP shares		(157,864	)		—		(158,959	)		—
Less weighted average number of unvested restricted stock awards		(71,283	)		—		(73,245	)		—
Basic weighted average shares outstanding		2,028,761			2,182,125		2,026,312			2,182,125
Add dilutive effect of stock options		—			—		—			—
Add dilutive effect of restricted stock awards		—			—		—			—
Diluted weighted average shares outstanding		2,028,761			2,182,125		2,026,312			2,182,125

Net income per share:
Basic	$	0.07		$	0.08	$	0.20		$	0.19
Diluted	$	0.07		$	0.08	$	0.20		$	0.19

The Company’s shareholders approved the HV Bancorp, Inc. 2018 Equity Incentive Plan (the “2018 Equity Incentive Plan”) at a Special Meeting of shareholders on June 13, 2018. An aggregate of 305,497 shares of authorized but unissued common stock of the Company was reserved for future grants of incentive and non-qualified stock options, restricted stock awards and restricted stock units under the 2018 Equity Incentive Plan. Of the 305,497 authorized shares, the maximum number of shares of the Company’s common stock that may be issued under the 2018 Equity Incentive Plan pursuant to the exercise of stock options is 218,212 shares, and the maximum number of shares of the Company’s common stock that may be issued as restricted stock awards or restricted stock units is 87,285 shares.

On June 13, 2018, the Compensation Committee of the Board of Directors authorized the following grants under the 2018 Equity Incentive Plan:

As of December 31, 2018, 4,000 employee restricted shares and 10,000 employee incentive stock options were forfeited.

The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the Company’s 2018 Equity Incentive plan. Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award. As of December 31, 2018, there were 44,497 shares available for future awards under this plan, which includes 30,212 shares available for incentive and non-qualified stock options and 14,285 shares available for restricted stock awards. The restricted shares and stock options vest over a seven year period.

Stock option expense was $28,000 for the six months ended December 31, 2018. The Company did not record any stock option expense for the six months ended December 31, 2017. At December 31, 2018, total unrecognized compensation cost related to stock options was $314,000.

A summary of the Company’s stock option activity and related information for the six months ended December 31, 2018 was as follows:

The weighted average remaining contractual life was 9.4 years at December 31, 2018 and the grant-date fair value of stock options of $1.81 was estimated using the Black-Scholes Option-Pricing Model.

Restricted stock expense for the six months ended December 31, 2018 was $86,000. The Company did not record any restricted stock expense for the six months ended December 31, 2017. At December 31, 2018, the expected future compensation expense relating to non-vested restricted stock outstanding was $1.0 million.

A summary of the Company’s restricted stock activity and related information for the six months ended December 31, 2018 was as follows:

In November 2017, the Company engaged a third party to provide services for certain customers with large deposit balances, by offering both a competitive rate of return and FDIC insurance. Related party balances in this program totaled $26.4 million at December 31, 2018 for which the Company received fees for customer services totaling approximately $2,000 and $84,000 and $39,000 and $84,000 in the three and six months ended December 31, 2018 and December 31, 2017, respectively.

In January 2018, the Company entered into a business consulting agreement with one of our directors to provide deposit sales training, grow deposit market share and identify deposit opportunities. This agreement will terminate on December 31, 2019. The Company has paid $15,000 and $30,000 in consulting fees to the director for the three months and six months ended December 31, 2018.

On July 1, 2018, the Company adopted ASU No. 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606. As stated in Note 1 Summary of Significant Accounting Policies, the implementation of the new standard did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after July 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as income from bank owned life insurance, sales of investment securities, mortgage banking activities, and certain items within other income are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such deposit related fees, interchange fees, and fees income received in exchange for customer’s deposits sourced with a deposit placement network. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606.

The following table presents noninterest income for the three and six months ended December 31, 2018 and 2017:

The following is a discussion of key revenues of fees for customer services that are within the scope of the new revenue guidance:

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

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Certain factors that could cause actual results to differ materially from expected results include, changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of the Company, and changes in the securities markets. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.

The Bank provides financial services to individuals and businesses from our main office in Huntingdon Valley, Pennsylvania, and from our three additional full-service banking offices located in Plumsteadville, Warrington and Huntingdon Valley, Pennsylvania. We also operate a limited service branch in Philadelphia, Pennsylvania. We have a loan production office located in Warminster, Pennsylvania and a loan origination office in Montgomeryville, Pennsylvania. Our primary market area includes Montgomery, Bucks and Philadelphia Counties in Pennsylvania. Our principal business consists of attracting retail deposits from the general public in our market area and investing those deposits, together with funds generated from operations and borrowings, primarily in one- to four-family residential mortgage loans, commercial real estate loans (including multi-family loans), home equity loans and lines of credit and, to a lesser extent, consumer and construction loans. We retain our loans in portfolio depending on market conditions, but we primarily sell our fixed-rate one- to four-family residential mortgage loans in the secondary market. We also invest in various investment securities. Our revenue is derived principally from interest on loans and investments and loan sales. Our primary sources of funds are deposits, Federal Home Loan Bank advances and principal and interest payments on loans and securities.

Our results of operations depend primarily on our net interest income, which is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income consists primarily of gains recognized from the sale of residential mortgage loans in the secondary market, fees for customer services, gain or loss from derivative instruments and change in fair value of loans held for sale. Non-interest expense primarily consists of expenses related to salaries and employee benefits, occupancy, data processing related operations, professional fees, and other expenses.

Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the current period or in future periods.

Our critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of December 31, 2018 have remained unchanged from the disclosures presented in our Annual Report on Form 10-K, for the year ended June 30, 2018.

The Jumpstart Our Business Startups Act (“JOBS Act”) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company”, we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of December 31, 2018 and June 30, 2018, there is not a significant difference in the presentation of our consolidated financial statements as compared to other public companies as a result of this transition guidance. The complete list of Critical Accounting Policies are described in the Annual Report on Form 10-K, for the year ended June 30, 2018.

Comparison of Statements of Financial Condition at December 31, 2018 and at June 30, 2018

Total assets increased $23.1 million, or 7.8%, to $320.9 million at December 31, 2018 from $297.8 million at June 30, 2018. The increase was primarily the result of increases of $19.3 million in loans receivable, $2.3 million in cash and cash equivalents and $1.7 million in loans held for sale.

Cash and cash equivalents increased $2.3 million, or 15.6%, to $17.0 million at December 31, 2018 from $14.7 million at June 30, 2018, primarily as result of net proceeds of $27.0 million from the certificates of deposit issued through brokers during the six months ended December 31, 2018 which was used in part to fund the loan growth of the portfolio as part of our continued strategic emphasis on growing our adjustable-rate jumbo one- to four-family residential real estate loan portfolio. We originated approximately $14.1 million in adjustable-rate jumbo one- to four-family residential real estate loans for the six months ended December 31, 2018. Additionally, the Company repaid $10.0 million of short-term borrowing and $2.0 million of long-term borrowing from the Federal Home Loan Bank during the six months ended December 31, 2018.

Investment securities remained relatively flat at $44.7 million at December 31, 2018 and $44.8 million at June 30, 2018. The investment securities remained flat primarily due to maturities and principal repayments of $2.6 million offset by purchases of $2.5 million during the six months ended December 31, 2018. At December 31, 2018, our held-to-maturity portion of the securities portfolio, at amortized cost, was $14.3 million, and our available-for-sale portion of the securities portfolio, at fair value, was $30.4 million

compared to our held-to-maturity portion of the securities portfolio of $13.9 million and our available-for-sale portion of the securities portfolio of $30.9 million at June 30, 2018.

During September 2018, the Company purchased an equity security for $500,000 (see Note 3 Equity securities for further discussion.)

Net loans increased $19.3 million, or 9.1%, to $232.0 million at December 31, 2018 from $212.7 million at June 30, 2018. One- to four-family residential real estate loans increased $21.6 million, or 11.9%, to $203.8 million at December 31, 2018 from $182.2 million at June 30, 2018 as a result of our continued strategic emphasis on growing our adjustable-rate jumbo one- to four-family residential real estate loan portfolio. Commercial real estate loans decreased by $527,000 from $10.8 million at June 30, 2018 to $10.3 million at December 31, 2018. Commercial business loans decreased by $434,000 from $4.1 million at June 30, 2018 to $3.6 million at December 31, 2018. Construction loans decreased $600,000 to $2.3 million at December 31, 2018 from $2.9 million at June 30, 2018. Home equity and HELOC loans decreased by $695,000 from $4.9 million at June 30, 2018 to $4.2 million at December 31, 2018 primarily as a result of payoff of loans.

In November 2017, the Bank entered into a loan purchase agreement with a broker to purchase a portfolio of private education loans made to American citizens attending American Medical Association (“AMA”) approved medical schools in Caribbean Nations. The broker serves as a lender, holder, program designer and developer, administrator, and secondary market for the loan portfolios they generate. At December 31, 2018, the balance of the private education loans was $6.9 million. The private student loans were made following a proven credit criteria and were underwritten in accordance with the Bank’s policies. At December 31, 2018, there were ten loans with a balance of approximately $353,000 that are past due 90 days or more. The Company allocated increased allowance for loan loss provisions to the medical education loans for the three months ended December 31, 2018 primarily as a result of the increased past due loan balances.

Loans held for sale increased $1.7 million, or 12.5%, to $15.3 million at December 31, 2018 from $13.6 million at June 30, 2018 as the pipeline of one- to four-family residential real estate loans increased during the sixth months ended December 31, 2018.

Deposits increased $38.1 million, or 16.2%, to $273.5 million at December 31, 2018 from $235.4 million at June 30, 2018. Our core deposits (consisting of demand deposits, money market, pass book and statement and checking accounts) increased $8.3 million, or 4.3%, to $200.3 million at December 31, 2018 from $192.0 million at June 30, 2018. This increase during the six months ended December 31, 2018 was primarily a result of an increase in organic core deposit growth. Certificates of deposit increased $29.7 million, or 68.3%, to $73.2 million at December 31, 2018 from $43.5 million at June 30, 2018. The increase in certificate of deposits was primarily the result of $42.0 million in certificates of deposit issued through brokers offset by payments of $15.0 million during the six months ended December 31, 2018 which had a total balance of $29.0 million at December 31, 2018. The net proceeds of $27.0 million from the certificates of deposit issued through brokers during the six months ended December 31, 2018 was used in part to fund the loan growth of the portfolio and to repay advances from the Federal Home Loan Bank.

Advances from the Federal Home Loan Bank decreased by $12.0 million, or 54.5%, from $22.0 million at June 30, 2018 to $10.0 million at December 31, 2018 as a result of net decreases in short-term borrowings of $10.0 million and repayments of $2.0 million in long-term borrowing.

Securities sold under agreements to repurchase decreased approximately $3.2 million, or 56.1%, to $2.5 million at December 31, 2018 from $5.7 million at June 30, 2018 as a result of an increase in the underlying deposit balances, which are primarily held by title companies.

Total shareholders’ equity increased $690,000 to $31.4 million at December 31, 2018 compared to $30.7 million at June 30, 2018 primarily as a result of net income of $409,000 for the six months ended December 31, 2018, share based compensation expense of $114,000 and other comprehensive gains of $100,000 due to the fair value adjustments, net of deferred tax, on the investment securities available-for-sale portfolio as a result of rising interest rates during the six months ended December 31, 2018. In addition, ESOP shares committed to be released of $67,000 contributed to the increase of total shareholders’ equity.

Comparison of Statements of Income for the Three Months Ended December 31, 2018 and 2017

Net income decreased $40,000 to $139,000 for the three months ended December 31, 2018 from $179,000 for the three months ended December 31, 2017. The decrease in net income for the three months ended December 31, 2018 was primarily due to an increase in non-interest expense of $356,000 and a decrease in non-interest income of $247,000 offset by increase of $417,000 in net interest income and decreases of $90,000 in income taxes and $56,000 in provision for loan losses compared to the same period in 2017.

Total interest income increased $880,000, or 47.2%, to $2.7 million for the three months ended December 31, 2018 from $1.9 million for the three months ended December 31, 2017. The increase was primarily the result of an increase in interest and fees on loans of $839,000, an increase in interest on investment securities of $19,000 and an increase on interest on interest-earning deposits with banks of $18,000. Total average interest-earning assets increased $85.7 million to $306.9 million for the three months ended December 31, 2018 from $221.2 million for the same period in 2017 primarily as a result of an increase in the average balance of loans of $86.6 million partially offset by a $662,000 decrease in the average balance of investment securities and a decrease in the average balance of interest-earning deposits with banks of $206,000. The average yield on our interest-earning assets increased 21 basis points to 3.58% for the three months ended December 31, 2018 as compared to 3.37% for the three months ended December 31, 2017 primarily as a result of a higher average yield on investment securities and interest-earning deposits with banks.

Interest and fees on loans increased $839,000 to $2.4 million for the three months ended December 31, 2018 from $1.5 million for the same period in 2017. This increase was primarily due to an increase in average loans outstanding of $86.6 million, which increased to $241.9 million for the three months ended December 31, 2018 from $155.3 million for the three months ended December 31, 2017 as a result of an increase in the average balance of one-to four-family residential loans. The average yield on loans remained relatively flat at 3.90% for the three months ended December 31, 2018 and 3.91% for the three months ended December 31, 2017.

Interest income on interest-earning deposits increased by $18,000 to $115,000 for the three months ended December 31, 2018, from $97,000 for the three months ended December 31, 2017. The increase

was primarily due to an increase in the average yield on interest-earning deposits with banks, which increased 38 basis points, to 2.31% for the three months ended December 31, 2018 from 1.93% for the three months ended December 31, 2017. The average balance of interest-earning deposits decreased $206,000 to $19.9 million for the three months ended December 31, 2018 from $20.1 million for the three months ended December 31, 2017.

Interest on investment securities increased by $19,000 to $261,000 for the three months ended December 31, 2018 from $242,000 for the three months ended December 31, 2017, respectively. Interest on investment securities increased as a result of an increase in interest income on U.S. Government Agency securities, corporate bonds and municipal securities of $10,000 or 6.8% to $158,000 for the three months ended December 31, 2018, from $148,000 for the three months ended December 31, 2017 and an increase in interest income on mortgage backed securities and collateralized mortgage obligation securities which increased by $9,000 or 9.6%, to $103,000 for the three months ended December 31, 2018, from $94,000 for the three months ended December 31, 2017. The average yield on total securities increased 21 basis points to 2.36% for the three months ended December 31, 2018 from 2.15% for the same period in 2017, as increased market rates resulted in higher yielding investments. The average balance of investment securities decreased by $662,000 to $44.3 million for the three months ended December 31, 2018, from $45.0 million for the three months ended December 31, 2017.

Total interest expense increased $463,000 to $740,000 for the three months ended December 31, 2018 from $277,000 for the three months ended December 31, 2017, primarily due to a $455,000 increase in interest expense on deposits and a $8,000 increase in interest expense on advances from the Federal Home Loan Bank.

Interest expense on deposits increased $455,000 to $686,000 for the three months ended December 31, 2018 from $231,000 for the three months ended December 31, 2017 primarily as a result of an increase in average interest bearing deposits of $78.8 million to $249.6 million during the three months ended December 31, 2018 as compared to $170.8 million for the three months ended December 31, 2017. The increase in the average balance of interest bearing deposits was primarily as a result of a $33.2 million increase in the average balance of our core deposit accounts and a $45.6 million increase in the average balance of our certificates of deposit. The increase in the average balance of our core deposits was primarily a result of core deposits obtained through a deposit placement network on a reciprocal basis, such that amounts are under the standard FDIC insurance maximum of $250,000 making the deposits eligible for FDIC insurance. The average cost of deposits was 110 basis points for the three months ended December 31, 2018 compared to 54 basis points for the three months ended December 31, 2017. The average rate paid on money market deposits increased 18 basis points to 0.69% for the three months ended December 31, 2018 from 0.51% for the three months ended December 31, 2017. During the fiscal year 2018, the Company updated our product offerings and phased out offering NOW accounts to our customers and currently is offering demand deposits. The increase in the balance of our certificates of deposits of $45.6 million from $28.9 million for the three months ended December 31, 2017 to $74.5 million for the three months ended December 31, 2018 was primarily the result of the Company issuing certificates of deposit through brokers. In addition, retail growth increased the average balance of certificate of deposits by $14.8 million for the three months ended December 31, 2018. The average cost of certificates of deposit increased by 77 basis points to 1.92% for the three months ended December 31, 2018 as compared to 1.15% for the three months ended December 31, 2017. The increase in the average cost of certificates of deposit for the three months ended December 31, 2018 was the result of increases in short term market interest rates as compared to the three months ended December 31, 2017.

Interest expense on advances from the Federal Home Loan Bank increased $8,000 to $53,000 for the three months ended December 31, 2018 from $45,000 for the three months ended December 31, 2017 as a result of an increase in the average rate on the Federal Home Loan Bank advances which increased to 1.89% for the three months ended December 31, 2018 from 1.51% for the three months ended December 31, 2017 due to increases in advance rates. Offsetting this increase was a decrease in the

average balance of the Federal Home Loan Bank advances. The average balance of the Federal Home Loan Bank advances decreased $739,000 to $11.2 million for the three months ended December 31, 2018 from $11.9 million for the three months ended December 31, 2017 primarily due to the repayment of advances.

Net interest income increased approximately $417,000 or 26.3%, to $2.0 million for the three months ended December 31, 2018 from $1.6 million for the three months ended December 31, 2017 as a result of our net interest-earning assets increasing $7.9 million to $44.0 million for the three months ended December 31, 2018 from $36.1 million for the three months ended December 31, 2017. Our interest rate spread decreased by 32 basis points to 2.45% for the three months ended December 31, 2018 from 2.77% for the three months ended December 31, 2017. Our net interest margin decreased by 26 basis points from 2.87% for the three months ended December 31, 2017 to 2.61% for the three months ended December 31, 2018.

The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

	For the Three Months Ended December 31,
	2018								2017
	Average Balance			Interest Income/ Expense		Yield/ Cost (5)			Average Balance			Interest Income/ Expense		Yield/ Cost (5)
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	241,900		$	2,356		3.90	%	$	155,333		$	1,517		3.91	%
Interest-earning deposits with banks		19,891			115		2.31	%		20,097			97		1.93	%
Investment securities		44,330			261		2.36	%		44,992			242		2.15	%
Restricted investment in bank stock		797			12		6.02	%		764			8		4.19	%
Total interest-earning assets		306,918			2,744		3.58	%		221,186			1,864		3.37	%
Non-interest-earning assets		10,465								11,282
Total assets	$	317,383							$	232,468

Interest-bearing liabilities:
Demand deposits	$	99,396		208			0.84	%	$	—			0		0.00	%
NOW accounts (6)		—			—		0.00	%		41,482			21		0.20	%
Money market deposit accounts		33,084		57			0.69	%		32,958			42		0.51	%
Passbook and statement savings accounts		29,919		17			0.23	%		32,169			21		0.26	%
Checking accounts (7)		12,695		47			1.48	%		35,362			64		0.72	%
Certificates of deposit		74,524		357			1.92	%		28,878			83		1.15	%
Total deposits		249,618		686			1.10	%		170,849			231		0.54	%
Federal Home Loan Bank advances		11,207		53			1.89	%		11,946			45		1.51	%
Securities sold under agreements to repurchase		2,070		1			0.19	%		2,307			1		0.17	%
Total interest-bearing liabilities		262,895		740			1.13	%		185,102			277		0.60	%
Non-interest-bearing liabilities:
Checking		20,825								13,556
Other		2,877								2,361
Total liabilities		286,597								201,019
Shareholders' Equity		30,786								31,449
Total liabilities and Shareholders' equity	$	317,383							$	232,468

Net interest income				$	2,004							$	1,587
Interest rate spread (2)							2.45	%							2.77	%
Net interest-earning assets (3)	$	44,023							$	36,084
Net interest margin (4)							2.61	%							2.87	%
Average interest-earning assets to average interest-bearing liabilities		116.75	%							119.49	%

For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	For the Three Months Ended December 31, 2018 vs 2017
	Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	854		$	(15	)	$	839
Interest-earning deposits with banks		(2	)		20			18
Investment securities		(6	)		25			19
Restricted investment in bank stock		—			4			4
Total interest-earning assets		846			34			880
Interest-bearing liabilities:
Demand deposits		208			—			208
NOW accounts (1)		(4	)		(17	)		(21	)
Money market deposit accounts		—			15			15
Passbook and statement savings accounts		(1	)		(3	)		(4	)
Checking accounts		(73	)		56			(17	)
Certificates of deposit		102			172			274
Total deposits		232			223			455
Federal Home Loan Bank advances		(5	)		13			8
Securities sold under agreements to repurchase		—			—			—
Total interest-bearing liabilities		227			236			463
Change in net interest income	$	619		$	(202	)	$	417

We establish a provision for loan losses, which is charged to operations, in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimated at the balance sheet date. In determining the level of the allowance for loan losses, we consider past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available or economic conditions change.

This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as circumstances change as more information becomes available. The allowance for loan losses is assessed on a quarterly basis and provisions are made for loan losses as required in order to maintain the allowance.

Provision for loan losses decreased by $56,000 to $24,000 for the three months ended December 31, 2018 from $80,000 for the three months ended December 31, 2017 primarily as a result of reduction in loan originations which totaled approximately $24.8 million for the three months ended December 31, 2017 compared to loan originations of $10.0 million for the three months ended December 31, 2018. Non-performing loans increased $301,000, or 19.3% from $1.6 million at June 30, 2018 to $1.9 million as of December 31, 2018, as a result of an increase in medical education loans of $353,000 offset by a decrease of $38,000 in home equity & HELOC loans compared to June 30, 2018. During the three months ended December 31, 2018, there were no total charge-offs and recoveries of $1,000 were received. During the three months ended December 31, 2017, total charge-offs of $12,000 were recorded.

Non-interest income decreased $247,000, or 26.8%, to $676,000 for the three months ended December 31, 2018 from $923,000 for the three months ended December 31, 2017. The decrease in non-interest income was primarily due to a decrease in the gain on sales of loans of $318,000 to $591,000 for the three months ended December 31, 2018 from $909,000 for the three months ended December 31, 2017. This was primarily due to lower sales of loans and reduced margin on loans sold when compared to the same period in 2017. In addition, fees for customer services decreased $150,000 to $35,000 for the three months ended December 31, 2018 from $185,000 for the three months ended December 31, 2017 primarily as a result of decreased income received in exchange for customers’ deposits sourced with a deposit placement network. This decrease in non-interest income was partially offset by a decrease of $197,000 in change in fair value of loans held for sale to $57,000 for the three months ended December 31, 2018 compared to ($140,000) for the three months ended December 31, 2017 and a $25,000 decrease in loss from derivative instruments which decreased to a loss of ($49,000) for the three months ended December 31, 2018 from a loss of ($74,000) for the three months ended December 31, 2017 due to decreased volume of locked loans associated with hedging.

Non-interest expense increased $356,000 or 16.5% to $2.5 million for the three months ended December 31, 2018 from $2.2 million for the three months ended December 31, 2017 primarily as a result of increases in professional and other expenses of $137,000, salaries and employee benefits of $114,000, and federal deposit insurance premiums of $46,000. The professional fees and other expenses increased $137,000, or 29.1%, to $607,000 for the three months ended December 31, 2018 from $470,000 for the three months ended December 31, 2017 due to increases in consulting fees for strategic planning, attorney fees and fees related to deposits obtained through a deposit placement network on a reciprocal basis. Salaries and employee benefits expense increased by $114,000 to $1.4 million for the three months ended December 31, 2018 from $1.3 million for the three months ended December 31, 2017 primarily as a result of annual merit increases, increases in additional health insurance premium expense and share based compensation expense. Included in salaries and employee benefits expense for the three month ended December 31, 2018 is share based compensation expense of approximately $39,000 compared to no expense in the same prior period. In addition, included in other expenses is share based compensation expense of approximately $11,000 related to our board of directors for the three months ended December 31, 2018 compared to no expense for the same prior period. Federal deposit insurance premiums increased approximately $46,000 to $72,000 for the three months ended December 31, 2018 from $26,000 for the three months ended December 31, 2017 as a result of the increase in the average balance deposit balance of $78.8 million for the three months ended December 31, 2018 compared to three months ended December 31, 2017.

Income tax expense was decreased $90,000 to $4,000 for the three months ended December 31, 2018 from $94,000 for the three months ended December 31, 2017. A federal income tax benefit of ($4,000) was included in total taxes for the three months ended December 31, 2018 as compared to federal income tax expense of $71,000 with an effective federal tax rate of 28.4% for the three months ended December 31, 2017. The decrease in federal income tax expense for the three months ended December 31, 2018 compared to the same period a year ago reflected a decrease in income before taxes as well as credit for ESOP dividend payment.

Pennsylvania state tax expense decreased $16,000 to $8,000 for the three months ended December 31, 2018 from $23,000 for the three months ended December 31, 2017 with effective rates of 5.6% and 8.4%, respectively.

Comparison of Statements of Income for the Six Months Ended December 31, 2018 and 2017

Net income decreased $6,000, or 1.4%, to $409,000 for the six months ended December 31, 2018 from $415,000 for the six months ended December 31, 2017. The decrease in net income for the six months ended December 31, 2018 was primarily due to increases in non-interest expense of $576,000 and provision for loan losses of $4,000, a decrease in non-interest income of $494,000 partially offset an increases in net interest income of $978,000, and income tax expense of $90,000 as compared to the same period in 2017.

Total interest income increased $1.8 million, or 50.4%, to $5.4 million for the six months ended December 31, 2018 from $3.6 million for the six months ended December 31, 2017. The increase was primarily the result of a $1.8 million increase in interest and fees on loans, a $19,000 increase in interest on investment securities, partially offset by a $14,000 decrease in interest-earning deposits with banks. The average balance of our interest-earning assets increased by $85.0 million to $299.2 million for the six months ended December 31, 2018 as compared to the six months ended December 31, 2017 primarily due to growth in residential loan originations as our total loans increased from an average balance of $146.8 million for the six months ended December 31, 2017 to $238.2 million for the six months ended December 31, 2018. The average yield on our interest-earning assets increased 26 basis points to 3.61% for the six months ended December 31, 2018 as compared to 3.35% for the six months ended December 31, 2017 primarily as a result of a higher average yield on investment securities and on interest-earning deposits with banks.

Interest and fees on loans increased $1.8 million, or 62.4%, to $4.7 million for the six months ended December 31, 2018 from $2.9 million for the six months ended December 31, 2017. This increase resulted primarily from a $91.4 million increase in the average balance of loans to $238.2 million for the six months ended December 31, 2018 from $146.8 million for the six months ended December 31, 2017, due to our continued focus on increasing our portfolio of adjustable-rate jumbo one- to four-family residential mortgages. The average yield on loans remained flat at 3.91% for the six months ended December 31, 2018 and for the six months ended December 31, 2017.

Interest and dividends on investments, mortgage-backed securities and collateralized mortgage obligations increased $19,000, or 3.8%, to $522,000 for the six months ended December 31, 2018 from $503,000 for the six months ended December 31, 2017. The increase was primarily the result of an increase in interest income on mortgage backed securities and collateral mortgage obligation securities increased by $27,000, or 15.1% to $206,000 for the six months ended December 31, 2018, from $179,000 for the six months ended December 31, 2017. Offsetting this increase, was a decrease in interest income on U.S. Government Agency securities, corporate bonds and municipal securities of $8,000, or 2.5% to $316,000 from $324,000 for the six months ended December 31, 2017. The average

yield on investment securities increased 22 basis points to 2.36% for the six months ended December 31, 2018 from 2.14% for the six months ended December 31, 2017, as market rates increased reflecting higher yielding investments. The average balance of investment securities decreased by $2.8 million to $44.3 million for the six months ended December 31, 2018, from $47.1 million for the six months ended December 31, 2017.

Interest on interest-earning deposits decreased $14,000 to $188,000 for the six months ended December 31, 2018 from $202,000 for the six months ended December 31, 2017 due to a decrease in the average balance of interest-earning deposits of $4.0 million to $15.7 million for the six months ended December 31, 2018 from $19.7 million for the six months ended December 31, 2017. The decrease was primarily as the result of the deployment of liquidity into loans. The average yield on interest-earning deposits increased 33 basis points to 2.39% for the six months ended December 31, 2018 from 2.06% for the six months ended December 31, 2017 as a result of increases in short-term market interest rates.

Total interest expense increased $830,000 to $1.4 million for the six months ended December 31, 2018 from $524,000 for the six months ended December 31, 2017 due primarily to a $753,000 increase in interest on deposits and a $77,000 increase in interest on advances from the Federal Home Loan Bank.

Interest on deposits increased $753,000 to $1.2 million for the six months ended December 31, 2018 from $447,000 for the six months ended December 31, 2017 as a result of an increase in average interest bearing deposits of $72.1 million to $237.0 million during the six months ended December 31, 2018 as compared to $164.9 million during the six months ended December 31, 2017. The increase in the average balance of interest bearing deposits was primarily as a result of a $34.9 million increase in the average balance of our core deposit accounts and a $37.2 million increase in the average balance of our certificates of deposit. The average cost of deposits increased by 47 basis points to 1.01% for the six months ended December 31, 2018 from 0.54% for the six months ended December 31, 2017. The increase in the average balance of core deposits was primarily the result of an increase in organic core deposit growth. The average rates paid on the money market deposits increased by 30 basis points to 0.63% for the six months ended December 31, 2017 from 0.33% for the six months ended December 31, 2017. During the fiscal year 2018, the Company updated our product offerings and phased out offering NOW accounts to our customers and currently is offering demand deposits. The increase in the balance of our certificates of deposits of $37.2 million from $28.6 million for the six months ended December 31, 2017 to $65.8 million for the six months ended December 31, 2018 was primarily the result of the Company issuing certificates of deposit through brokers which had a had an average balance of $23.2 million for the six months ended December 31, 2018. In addition, retail growth increased the average balance of certificate of deposits by $14.0 million for the six months ended December 31, 2018 resulting from increases in certain product rates. The average cost of certificates of deposit increased by 75 basis points to 1.86% for the six months ended December 31, 2018 as compared to 1.11% for the six months ended December 31, 2017. The increase in the average cost of certificates of deposit for the six months ended December 31, 2018 was the result of increases in short term market interest rates as compared to the six months ended December 31, 2017.

Interest on advances from the Federal Home Loan Bank increased $77,000 to $152,000 for the six months ended December 31, 2018 from $75,000 for the six months ended December 31, 2017 as a result of an increase in the average balance of Federal Home Loan Bank advances and increase in the average cost of Federal Home Loan Bank advances. The average balance of Federal Home Loan Bank advances increased by $4.8 million to $15.5 million during the six months ended December 31, 2018 as compared to $10.7 million for the six months ended December 31, 2017 to fund loan requirements. In addition, the average cost of Federal Home Loan Bank advances increased by 56 basis points to 1.96% for the six months ended December 31, 2018 from 1.40% for the six months ended December 31, 2017, due primarily to increases in advance rates.

Net interest income increased $978,000, or 31.9%, to $4.0 million for the six months ended December 31, 2018 from $3.1 million for the six months ended December 31, 2017 as we increased our interest income at a greater rate than our interest expense. Our net interest-earning assets increased to $44.7 million for the six months ended December 31, 2018 from $36.4 million for the six months ended December 31, 2017. Our interest rate spread decreased by 21 basis points to 2.55% for the six months ended December 31, 2018 from 2.76% for the six months ended December 31, 2017. Our net interest margin decreased by 16 basis points to 2.70% for the six months ended December 31, 2018 from 2.86% for the six months ended December 31, 2017.

	For the Six Months Ended December 31,
	2018								2017
	Average Balance			Interest Income/ Expense		Yield/ Cost (5)			Average Balance			Interest Income/ Expense		Yield/ Cost (5)
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	238,215		$	4,655		3.91	%	$	146,818		$	2,867		3.91	%
Interest-earning deposits with banks		15,737			188		2.39	%		19,653			202		2.06	%
Investment securities		44,277			522		2.36	%		47,063			503		2.14	%
Restricted investment in bank stock		990			30		6.06	%		710			15		4.23	%
Total interest-earning assets		299,219			5,395		3.61	%		214,244			3,587		3.35	%
Non-interest-earning assets		10,289								9,889
Total assets	$	309,508							$	224,133

Interest-bearing liabilities:
Demand deposits	$	99,074		382			0.77	%	$	—			—		0.00	%
NOW accounts (6)		—			—		—			38,678			38		0.20	%
Money market deposit accounts		31,680		100			0.63	%		32,535			54		0.33	%
Passbook and statement savings accounts		29,602		35			0.24	%		32,620			44		0.27	%
Checking accounts (7)		10,856		70			1.29	%		32,491			152		0.94	%
Certificates of deposit		65,757		613			1.86	%		28,560			159		1.11	%
Total deposits		236,969		1,200			1.01	%		164,884			447		0.54	%
Federal Home Loan Bank advances		15,481		152			1.96	%		10,708			75		1.40	%
Securities sold under agreements to repurchase		2,108		2			0.19	%		2,208			2		0.18	%
Total interest-bearing liabilities		254,558		1,354			1.06	%		177,800			524		0.59	%
Non-interest-bearing liabilities:
Checking		21,463								12,855
Other		2,672								1,987
Total liabilities		278,693								192,642
Shareholders' Equity		30,815								31,491
Total liabilities and Shareholders' equity	$	309,508							$	224,133

Net interest income				$	4,041							$	3,063
Interest rate spread (2)							2.55	%							2.76	%
Net interest-earning assets (3)	$	44,661							$	36,444
Net interest margin (4)							2.70	%							2.86	%
Average interest-earning assets to average interest-bearing liabilities		117.54	%							120.50	%

The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. 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. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	For the Six Months Ended December 31, 2018 vs 2017
	Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	2,017		$	(229	)	$	1,788
Interest-earning deposits with banks		(26	)		12			(14	)
Investment securities		(40	)	59				19
Restricted investment in bank stock		8			7			15
Total interest-earning assets		1,959			(151	)		1,808
Interest-bearing liabilities:
Demand deposits		—			382			382
NOW accounts (1)		(13	)		(25	)		(38	)
Money market deposit accounts		(2	)		48			46
Passbook and statement savings accounts		(3	)		(6	)		(9	)
Checking accounts		(146	)		64			(82	)
Certificates of deposit		223			231			454
Total deposits		59			694			753
Federal Home Loan Bank advances		20			57			77
Securities sold under agreements to repurchase		—			—			—
Total interest-bearing liabilities		79			751			830
Change in net interest income	$	1,880		$	(902	)	$	978

Provision for loan losses increased by $4,000 to $83,000 for the six months ended December 31, 2018, from $79,000 for the six months ended December 31, 2017. Non-performing loans increased from $1.6 million at June 30, 2018 to $1.9 million as of December 31, 2018, an increase of $301,000, or 19.3%. During the six months ended December 31, 2018, total net recoveries of $2,000 were recorded. During the six months ended December 31, 2017, total net recoveries of $11,000 were recorded.

Non-interest income decreased $494,000, or 25.6%, to $1.4 million for the six months ended December 31, 2018 from $1.9 million for the six months ended December 31, 2017. The decrease in non-interest income was primarily due to a decrease in gain on sales of loans, which decreased $653,000, or 30.4% to $1.5 million for the six months ended December 31, 2018 from $2.1 million for the six months ended December 31, 2017. This was due to lower sales of loans and reduced margin on loans sold when compared to the same period of 2017. Loss from hedging instruments decreased $98,000 to ($366,000) for the six months ended December 31, 2018 from ($464,000) for the six months ended December 31, 2017 due to decreased volume of locked loans associated with hedging. In addition, fees for customer services decreased by $123,000 to $107,000 for the six months ended December 31, 2018 from $230,000 for the six months ended December 31, 2017 as a result of a decrease in income received in exchange for customer’s deposits sourced in a deposit placement network. Offsetting these decreases was a $213,000 increase in the change in fair value of loans held for sale from ($95,000) for the six months ended December 31, 2017 to $118,000 for the six months ended December 31, 2018. There was no gain on sale of available-for-sale securities for the six months ended December 31, 2018 compared to $34,000 for the six months ended December 31, 2018.

Non-interest expense increased $576,000, or 13.3%, to $4.9 million for the six months ended December 31, 2018 from $4.3 million for the six months ended December 31, 2017. The increase primarily reflected increases in salaries and employee benefits of $240,000, professional fees and other expenses of $204,000 and federal deposit insurance premiums of $86,000. Salary and employee benefits expense increased by $240,000 to $2.6 million for the six months ended December 31, 2018 from $2.4 million for the six months ended December 31, 2017 primarily because of annual merit increases, increases in additional health insurance premium expense and share based compensation expense. Included in salary and employee benefits expense was share based compensation expense of approximately $92,000 for the six months ended December 31, 2018 compared to no expense in same prior period. The professional fees and other expenses increased $204,000, or 19.9%, to $1.2 million for the six months ended December 31, 2018 from $1.0 million for the six months ended December 31, 2017 due to increases in consulting fees for strategic planning and fees related to deposits obtained through a deposit placement network on a reciprocal basis. In addition, included in other expenses is share based compensation expense of approximately $22,000 for the six months ended December 31, 2018 for the board of directors. Federal deposit insurance premiums increased approximately $86,000 to $142,000 for the six months ended December 31, 2018 from $56,000 for the six months ended December 31, 2017 as a result of the increase in the average deposit balance of $72.1 million to $237.0 million for the six months ended December 31, 2018 compared to $165.0 million for the six months ended December 31, 2017.

Income tax expense was $92,000 for the six months ended December 31, 2018 as compared to an income tax expense of $182,000 for the six months ended December 31, 2017. Federal income taxes included in total taxes for the six months ended December 31, 2018 and 2017 were $61,000 and $144,000, with effective federal tax rates of 13.0% and 25.8%, respectively. The decrease in the effective tax rate for the six months ended December 31, 2018 compared to the same period a year ago was primarily a decrease in income before taxes and as well as credit for ESOP dividend payment.

Pennsylvania state tax expense decreased $7,000 to $31,000 for the six months ended December 31, 2018 from $38,000 for the six months ended December 31, 2017 with effective rates of 6.2% and 6.4%, respectively.

Non-Performing Assets We define non-performing loans as loans that are either non-accruing or accruing whose payments are 90 days or more past due and non-accruing troubled debt restructurings. Non-performing assets, including non-performing loans and other real estate owned, totaled $1.9 million, or 0.80% of total assets, at December 31, 2018. There were no non-accruing troubled debt restructurings at December 31, 2018 and June 30, 2018. The following table sets forth the amounts and categories of our non-performing assets at the dates indicated. There were no accruing loans past due 90 days or more at December 31, 2018 and one loan accruing past due 90 days or more at June 30, 2018.

	At December 31,			At June 30,
	2018			2018
	(Dollars in thousands)
Non-accrual loans:
Residential:
One- to four-family	$	1,439		$	1,429
Home equity & HELOCs		67			105
Commercial real estate		—			—
Commercial business		—			—
Construction		—			—
Consumer:
Medical education		353			—
Total non-accrual loans		1,859			1,534

Loans accruing past 90 days:
Consumer and other:
Medical education		—			24

Total non-performing loans		1,859			1,558

Real estate owned		—			—
Other non-performing assets		—			—
Total non-performing assets	$	1,859		$	1,558

Ratios:
Total non-performing loans to total loans receivable		0.80	%		0.73	%
Total non-performing loans to total assets		0.58	%		0.52	%
Total non-performing assets to total assets		0.58	%		0.52	%

The following table sets forth activity in our allowance for loan losses for the periods indicated.

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2018			2017			2018			2017
	(Dollars in thousands)						(Dollars in thousands)
Balance at beginning of year	$	931		$	615		$	871		$	593

Charge-offs:
Residential:
One- to four-family		—			(12	)		—			(12	)
Home equity & HELOCs		—			—			—			—
Commercial real estate		—			—			—			(22	)
Commercial business		—			—			—			—
Construction		—			—			—			—
Consumer:		—			—			—			—
Medical education		—			—			—			—
Other		—			—			—			—
Total charge-offs		—			(12	)		—			(34	)

Recoveries:
Residential:
One- to four-family		1			—			2			44
Home equity & HELOCs		—			—			—			—
Commercial real estate		—			—			—			—
Commercial business		—			—			—			—
Construction		—			—			—			—
Consumer:
Medical education		—			—			—			—
Other		—			—			—			1
Total recoveries		1			—			2			45

Net recoveries (Charge-offs)		1			(12	)		2			11
Provision for loan losses		24			80			83			79
Balance at end of period	$	956		$	683		$	956		$	683

Ratios:
Net recoveries to average loans outstanding		—			—			—			—
Allowance for loan losses to non-performing loans at end of period		51.43	%		54.90	%		51.43	%		54.90	%
Allowance for loan losses to total loans at end of period		0.41	%		0.43	%		0.41	%		0.43	%

Liquidity Management. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from sales of loans and securities, and matured loans and securities. We also have the ability to borrow from the Federal Home Loan Bank of Pittsburgh. Huntingdon Valley Bank had Federal Home Loan Bank of Pittsburgh advances of $10.0 million outstanding with unused borrowing capacity of $133.2 million as of December 31, 2018. Additionally, at December 31, 2018, we had the ability to borrow $3.0 million from the Atlantic Community Bankers Bank and we maintained a line of credit equal to 95% of the fair value of collateral held by the Federal Reserve Bank, which was $2.0 million at December 31, 2018. We have not borrowed against the credit lines with the Atlantic Community Bankers Bank and the Federal Reserve Bank during the three months ended December 31, 2018 and 2017.

The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short and long-term liquidity needs as of December 31, 2018.

We monitor and 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.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold and interest-earning deposits in other banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2018, cash and cash equivalents totaled $17.0 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $30.4 million at December 31, 2018.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash (used in) provided by operating activities was ($499,000) and $1.6 million for the six months ended December 31, 2018 and December 31, 2017, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans and proceeds from maturing securities, was $19.7 million and $41.1 million for the three months ended December 31, 2018 and December 31, 2017, respectively. During the three months ended December 31, 2018, there were no sales of available-for-sale securities compared to $11.2 million sold in securities available-for-sale for the six months ended December 31, 2017. Net cash provided by financing activities was $22.5 million and $25.7 million for the six months ended December 31, 2018 and 2017, respectively, which consisted primarily of increases in deposits of $38.1 million and $22.6 offset by net repayments of $12.0 million for borrowing from the Federal Home Loan Bank and proceeds of $10.0 million and repayments of ($7.0) million from the Federal Home Loan Bank for the three months ended December 31, 2018 and 2017, respectively.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of December 31, 2018, totaled $60.8 million of total deposits which included brokered certificates of deposit of $29.0 million. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital Management. Huntingdon Valley Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2018, Huntingdon Valley Bank exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines.

Information presented for December 31, 2018 and June 30, 2018, reflects the Basel III capital requirements that became effective January 1, 2015 for the Bank. Under these capital requirements and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk- weightings and other factors.

Federal bank regulators require the Bank maintain minimum ratios of core capital to adjusted average assets of 4.0%, common equity Tier 1 capital to risk-weighted assets of 4.5%, Tier 1 capital to risk-weighted assets of 6.0% and total risk-based capital to risk-weighted assets of 8.0%. At December 31, 2018, the Bank met all the capital adequacy requirements to which it was subject. At December 31, 2018, the Bank was “well capitalized” under the regulatory framework for prompt corrective action. To be “well capitalized,” the Bank must maintain minimum leverage, common equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. Management believes that no conditions or events have occurred since December 31, 2018 that would materially adversely change the Bank’s capital classifications.

The Bank’s actual capital amounts and ratios are presented in the table (dollars in thousands):

To Be Well Capitalized

Under the Prompt

Capital Adequacy

Corrective Action

Actual

Purposes

Provision

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2018

Total risk-based capital (to

risk-weighted assets)

25,749

15.2

$>13,564

> 8.0%

$>16,955

>10.0%

Tier 1 capital (to risk-weighted

assets)

24,793

14.6

>10,173

> 6.0%

>13,564

> 8.0%

Tier 1 capital (to average assets)

24,793

8.0

>12,406

> 4.0%

>15,508

> 5.0%

Tier 1 common equity (to risk

-weighted assets)

24,793

14.6

>7,630

> 4.5%

>11,021

> 6.5%

As of June 30, 2018

Total risk-based capital (to

risk-weighted assets)

25,050

15.6

$>12,874

> 8.0%

$>16,092

>10.0%

Tier 1 capital (to risk-weighted

assets)

24,179

15.0

>9,655

> 6.0%

>12,874

> 8.0%

Tier 1 capital (to average assets)

24,179

8.8

>11,031

> 4.0%

>13,789

> 5.0%

Tier 1 common equity (to risk

-weighted assets)

24,179

15.0

>7,241

> 4.5%

>10,460

> 6.5%

As a licensed mortgagee, the Bank is subject to the rules and regulations of the Department of Housing and Urban Development (“HUD”), Federal Housing Authority (“FHA”) and state regulatory authorities with respect to originating, processing and selling loans. Those rules and regulations, among other things, require the maintenance of minimum net worth levels (which vary based on the portfolio of FHA loans originated by the Bank). Failure to meet the net worth requirements could adversely impact the ability of the Bank to originate loans and access secondary markets. As of December 31, 2018 and June 30, 2018, the Bank maintained the minimum required net worth levels.

The Bank must hold a capital conservation buffer, subject to a phase-in from January 1, 2016 through December 31, 2019, above its minimum risk-based capital requirements. As of December 31, 2018, the Bank is required to maintain a capital conservation buffer of 1.875%. At December 31, 2018, the Bank met the capital conservation buffer requirements. Failure to maintain the full amount of the buffer will result in restrictions on the Bank’s ability to make capital distributions and to pay discretionary bonuses to executive officers. The phase-in requires the Bank to increase its capital conservation buffer from 0.625% as of June 30, 2016 to 2.50% as of June 30, 2019 and thereafter.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%. A financial institution can elect to be subject to this new definition.

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2018, we had outstanding commitments to originate loans of $10.4 million, unused lines of credit totaling $12.0 million and $5.0 million in stand-by letters of credit outstanding. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates of deposit that are scheduled to mature in less than one year from December 31, 2018 totaled $60.8 million of total deposits which included brokered certificates of deposit of $29.0 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment, agreements with respect to borrowed funds and deposit liabilities.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of December 31, 2018. Based on their evaluation of the Company's disclosure controls and procedures, the Company's Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) occurred during the second fiscal quarter of 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

At December 31, 2018, the Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company. In addition, no material proceedings are pending or known to be threatened or contemplated against the Company or its subsidiary by governmental authorities.

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.

INDEX

PART I – FINANCIAL INFORMATION				1

		Item 1 – Consolidated Financial Statements – Unaudited		1

			Notes to Unaudited Consolidated Financial Statements	6

		Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		38

		Item 3 – Quantitative and Qualitative Disclosures about Market Risk		56

		Item 4 – Controls and Procedures		56

	PART II OTHER INFORMATION			58

		Item 1 – Legal Proceedings		58

		Item 1A – Risk Factors		58

		Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		58

		Item 3 – Defaults upon Senior Securities		58

		Item 4 – Mine Safety Disclosures		58

		Item 5 – Other Information		58

		Item 6 – Exhibits		58

SIGNATURES				59

	December 31, 2018
	Available-for-Sale				Held-to-Maturity
	Amortized				Amortized
(Dollars in thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	4,195	$	4,169	$	1,260	$	1,255
Due from one to five years		7,501		7,371		2,282		2,263
Due from after five to ten years		1,001		959		7,631		7,600
Due after ten years		18,519		17,940		3,113		3,090
	$	31,216	$	30,439	$	14,286	$	14,208

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

	2018
(dollars in thousands)	Year-to-date		Life-to-date
Amortized cost	$	500	$	500
Impairment		—		—
Observable price changes		—		—
Carrying value	$	500	$	500

	As of December 31, 2018
	Number		Accrual		Non-Accrual
(Dollars in thousands)	Of Loans		Status		Status		Total TDRs
Commercial real estate		1	$	147	$	—	$	147
Commercial business		1		142		—		142
Total		2	$	289	$	—	$	289

December 31, 2018
Asset Derivatives
	Balance Sheet			Notional
	Presentation	Fair Value		Amount
Interest rate lock commitments	Mortgage banking derivatives	$	218	$	7,659
Forward loan sales commitments	Mortgage banking derivatives		173		4,526
To Be Announced securities ("TBAs")	Mortgage banking derivatives		—		—


Liability Derivatives
	Balance Sheet			Notional
	Presentation	Fair Value		Amount
Interest rate lock commitments	Other liabilities	$	18	$	3,305
Forward loan sales commitments	Other liabilities		8		1,249
TBA securities	Other liabilities		52		9,500

		Gain/(Loss)
	Consolidated Statements of Income	Three Months Ended
	Presentation	December 31, 2018			December 31, 2017
Interest rate lock commitments	Loss from derivative instruments	$	(42	)	$	(173	)
Forward loan sales commitments	Gain from derivative instruments		52			131
TBA securities	Loss from derivative instruments		(59	)		(32	)
	Total loss from derivative instruments	$	(49	)	$	(74	)

		Gain/(Loss)
	Consolidated Statements of Income	Six Months Ended
	Presentation	December 31, 2018			December 31, 2017
Interest rate lock commitments	Loss from derivative instruments	$	(386	)	$	(542	)
Forward loan sales commitments	(Loss) gain from derivative instruments		(6	)		123
TBA securities	Gain (loss) from derivative instruments		26			(45	)
	Total loss from derivative instruments	$	(366	)	$	(464	)

Loans held for sale
	Carrying Amount		Aggregated Unpaid Principal Balance		Excess Carrying Amount Over Aggregate Unpaid Principal Balance
December 31, 2018	$	15,339	$	14,943	$	396
June 30, 2018	$	13,558	$	13,279	$	279

Net unrealized holding losses on available-for-sales securities (1):
	For the three months ended						For the six months ended
(Dollars in thousands)	December 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Balance at beginning period	$	(734	)	$	(148	)	$	(648	)	$	(111	)
Unrealized holding gains (losses) on available-for-sale securities before reclassification		186			(153	)		100			(165	)
Amount reclassified for investment securities gains included in net income		—			—			—			(25	)
Net current-period other comprehensive income (loss)		186			(153	)		100			(190	)
Balance at ending period	$	(548	)	$	(301	)	$	(548	)	$	(301	)

For the six months ended December 31, 2017:

(Dollars in thousands)	Amount reclassified from accumulated other comprehensive income (2)		Affected line item in the consolidated statements of income
Net unrealized gain on available-for-sale securities (1)	$	34	Gain on sale of available-for-sale securities, net
		(9)	Income tax expense
	$	25

	Officers		Employees		Outside Directors		Total
Incentive stock options		125,000		43,000		—		168,000
Non-qualified stock options		—		—		30,000		30,000
Restricted stock awards		50,000		12,000		15,000		77,000
Total		175,000		55,000		45,000		275,000

	2018
	Options			Weighted- Average Exercise Price		Average Intrinsic Value
Outstanding, July 1		198,000		$	14.80	$	3,960
Granted		—			—
Exercised		—			—		—
Forfeited		(10,000	)		14.80		—
Outstanding, December 31		188,000		$	14.80	$	33,840
Exercisable, December 31		—		$	—	$	—

	2018
	Number of Shares			Weighted- Average Grant Date Fair Value
Non-vested, July 1		77,000		$	14.80

Granted		—			—
Forfeited		(4,000	)		14.80
Non-vested at December 31		73,000		$	14.80

(Dollars in thousands)	Three Months Ended December 31,				Six Months Ended December 31,
Non-Interest Income	2018		2017		2018		2017
In-scope of Topic 606:
Fee income	$	2	$	144	$	41	$	144
Insufficient fund fees		17		18		33		38
Other service charges		14		21		29		45
ATM interchange fee income		2		2		4		3
Noninterest Income (in-scope of Topic 606)		35		185		107		230
Noninterest Income (out-of-scope of Topic 606)		641		738		1,327		1,698
Total Noninterest Income		676		923		1,434		1,928


31.1		Rule 13a-14(a) Certification of the Chief Executive Officer *

31.2		Rule 13a-14(a) Certification of the Chief Financial Officer *

32.0		Section 1350 Certification *

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

		HV BANCORP, INC.

Date: February 14, 2019	By:	/s/ Travis J. Thompson
		Travis J. Thompson
		President and Chief Executive Officer
		(Duly Authorized Officer)

Date: February 14, 2019	By:	/s/ Joseph C. O’Neill, Jr.
		Joseph C. O’Neill, Jr.
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)