UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2019

OR

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

For the transition period from ____________ to _______________

Commission File No. 000-55732

          COMMUNITY SAVINGS BANCORP, INC.          

(Exact name of registrant as specified in its charter)

Maryland	81-3840964
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
425 Main Street
Caldwell, Ohio	43724
(Address of principal	(Zip Code)
executive office)

(740) 732-5678

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, 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 x       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). x Yes     ¨ No

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

Large accelerated filer ¨    Accelerated filer ¨     Non-accelerated filer x     Smaller reporting company x

Emerging growth company x

If an emerging growth company, indicate by checkmark 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  x 

As of May 14, 2019, the latest practicable date, 408,739 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

Securities registered pursuant to Section 12(b) of the Act:

Title of class Trading symbol Name of exchange on which registered

Community Savings Bancorp, Inc.

Index to Quarterly Report on Form 10-Q

PART I – FINANCIAL INFORMATION		3
Item 1	Interim Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018	3
	Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2019 and 2018	4
	Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended March 31, 2019 and 2018	5
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended March 31, 2019 and 2018	6
	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2019 and 2018	8
	Notes to Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4	Controls and Procedures	48
PART II – OTHER INFORMATION		49
Item 1	Legal Proceedings	49
Item 1A	Risk Factors	49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3	Defaults Upon Senior Securities	49
Item 4	Mine Safety Disclosures	49
Item 5	Other Information	49
Item 6	Exhibits	50
SIGNATURES		51

 2

Part I – Financial Information

Item 1. Interim Financial Statements (Unaudited)

Community Savings Bancorp, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

	March 31,			June 30,
	2019			2018
	(Unaudited)
Assets
Cash and due from banks	$	1,607		$	2,222
Interest-earning demand deposits in other financial institutions		2,842			2,082
Cash and cash equivalents		4,449			4,304
Interest-earning time deposits in other financial institutions		3,595			4,595
Investment securities available-for-sale, at fair value		5,282			6,651
Restricted Stock		940			940
Loans		36,186			31,888
Less: allowance for loan losses		(239	)		(253	)
Loans, net		35,947			31,635
Premises and equipment, net		387			422
Foreclosed assets, net		104			9
Accrued interest receivable		110			135
Bank owned life insurance		787			769
Other assets		517			508
Total assets	$	52,118		$	49,968
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand	$	10,188		$	10,406
Savings and money market		23,707			22,067
Time		7,744			7,926
Total deposits		41,639			40,399
Federal Home Loan Bank advances		2,500			1,000
Payments by borrowers for taxes and insurance		173			92
Other liabilities		130			190
Total liabilities		44,442			41,681
Shareholders' Equity
Preferred stock - par value $0.01 per share, 5,000,000 shares authorized, none issued		-			-
Common stock - par value $0.01 per share, 50,000,000 shares authorized, 399,029 shares issued and outstanding as of March 31, 2019 and 441,290 shares issued and outstanding as of June 30, 2018		4			4
Additional paid in capital		2,675			3,264
Unearned employee stock ownership plan (ESOP) shares		(294	)		(311	)
Retained earnings		5,301			5,424
Accumulated other comprehensive loss		(10	)		(94	)
Total shareholders' equity		7,676			8,287
Total liabilities and shareholders' equity	$	52,118		$	49,968

See Notes to Consolidated Financial Statements (unaudited)

 3

Community Savings Bancorp, Inc.

Consolidated Statements of Operations

(In thousands, except share data)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018
	(Unaudited)
Interest Income
Loans, including fees	$	412		$	361		$	1,195		$	1,078
Taxable securities		23			30			71			94
Tax exempt securities		10			10			30			30
Interest-earning deposits		62			46			159			124
Total interest income		507			447			1,455			1,326
Interest Expense
Deposits		34			31			95			95
Federal Home Loan Bank advances		19			10			42			36
Total interest expense		53			41			137			131
Net Interest Income		454			406			1,318			1,195
Provision for Loan Losses		-			-			-			-
Net Interest Income After Provision for Loan Losses		454			406			1,318			1,195
Noninterest Income
Service charges and fees		78			62			245			192
Gain on sale of foreclosed assets, net		-			-			11			-
Increase in cash surrender value-bank owned life insurance		6			6			18			13
Other operating		-			4			10			4
Total noninterest income		84			72			284			209
Noninterest Expense
Salaries, employee benefits and directors fees		224			202			664			640
Occupancy and equipment		29			27			95			75
Data processing		83			96			243			259
Correspondent bank service charges		59			58			175			169
Franchise taxes		16			18			52			44
FDIC insurance premiums		5			5			14			12
Professional services		76			128			225			325
Advertising		5			3			18			13
Office supplies		24			22			69			73
Impairment of foreclosed assets		-			8			-			8
Other		87			56			202			136
Total noninterest expense		608			623			1,757			1,754
Loss Before Federal Income Tax Benefit		(70	)		(145	)		(155	)		(350	)
Federal Income Tax Benefit		(17	)		(37	)		(32	)		(50	)
Net loss	$	(53	)	$	(108	)	$	(123	)	$	(300	)
Loss per share - basic and diluted	$	(0.14	)	$	(0.26	)	$	(0.31	)	$	(0.73	)
Weighted-average shares outstanding - basic and diluted		379,599			410,236			395,135			409,147

See Notes to Consolidated Financial Statements (unaudited)

 4

Community Savings Bancorp, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018
	(Unaudited)
Net loss	$	(53	)	$	(108	)	$	(123	)	$	(300	)
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale	$	64			(72	)		106			(147	)
Tax effect		(13	)		15			(22	)		40
Total other comprehensive income (loss)		51			(57	)		84			(107	)
Comprehensive loss	$	(2	)	$	(165	)	$	(39	)	$	(407	)

See Notes to Consolidated Financial Statements (unaudited)

 5

Community Savings Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except share data)

Three Months Ended March 31, 2019

														Accumulated
					Additional			Unearned						Other
	Preferred		Common		Paid in			ESOP			Retained			Comprehensive
	Stock		Stock		Capital			Shares			Earnings			Income (Loss)			Total
	(Unaudited)
Balance at January 1, 2019	$	-	$	4	$	2,950		$	(311	)	$	5,354		$	(61	)	$	7,936
Net loss		-		-		-			-			(53	)		-			(53	)
ESOP Shares Earned		-		-		5			17			-			-			22
Other comprehensive income		-		-		-			-			-			51			51
Stock buyback (20,261 shares)		-		-		(279	)		-			-			-			(279	)
Balance at March 31, 2019	$	-	$	4	$	2,675		$	(294	)	$	5,301		$	(10	)	$	7,676

Three Months Ended March 31, 2018

													Accumulated
					Additional		Unearned						Other
	Preferred		Common		Paid in		ESOP			Retained			Comprehensive
	Stock		Stock		Capital		Shares			Earnings			Income (Loss)			Total
	(Unaudited)
Balance at January 1, 2018	$	-	$	4	$	3,258	$	(327	)	$	6,241		$	(25	)	$	9,151
Net loss		-		-		-		-			(108	)		-		$	(108	)
ESOP Shares Earned		-		-		4		16			-			-		$	20
Other comprehensive loss		-		-		-		-			-			(57	)	$	(57	)
Reclassification of certain tax effects from accumulated other comprehensive income		-		-		-		-			5			(5	)		-
Balance at March 31, 2018	$	-	$	4	$	3,262	$	(311	)	$	6,138		$	(87	)	$	9,006

See Notes to Consolidated Financial Statements (unaudited)

 6

Community Savings Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except share data)

Nine Months Ended March 31, 2019

														Accumulated
					Additional			Unearned						Other
	Preferred		Common		Paid in			ESOP			Retained			Comprehensive
	Stock		Stock		Capital			Shares			Earnings			Income (Loss)			Total
	(Unaudited)
Balance at July 1, 2018	$	-	$	4	$	3,264		$	(311	)	$	5,424		$	(94	)	$	8,287
Net loss		-		-		-			-			(123	)		-			(123	)
ESOP Shares Earned		-		-		5			17			-			-			22
Other comprehensive income		-		-		-			-			-			84			84
Stock buyback (42,261 shares)		-		-		(593	)		-			-			-			(593	)
Balance at March 31, 2019	$	-	$	4	$	2,675		$	(294	)	$	5,301		$	(10	)	$	7,676

Nine Months Ended March 31, 2018

													Accumulated
					Additional		Unearned						Other
	Preferred		Common		Paid in		ESOP			Retained			Comprehensive
	Stock		Stock		Capital		Shares			Earnings			Loss			Total
	(Unaudited)
Balance at July 1, 2017	$	-	$	4	$	3,258	$	(327	)	$	6,433		$	25		$	9,393
Net loss		-		-		-		-			(300	)		-			(300	)
ESOP Shares Earned		-		-		4		16			-			-			20
Other comprehensive loss		-		-		-		-			-			(107	)		(107	)
Reclassification of certain tax effects from  accumulated other comprehensive income		-		-		-		-			5			(5	)		-
Balance at March 31, 2018	$	-	$	4	$	3,262	$	(311	)	$	6,138		$	(87	)	$	9,006

See Notes to Consolidated Financial Statements (unaudited)

 7

Community Savings Bancorp, Inc.

Consolidated Statements of Cash Flows

(In thousands)

	Nine Months Ended March 31,
	2019			2018
	(Unaudited)
Cash Flows from Operating Activities
Net loss	$	(123	)	$	(300	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		44			50
Deferred income tax expense		(32	)		(50	)
Amortization of premiums and discounts on securities, net		51			85
Gain on reposession of foreclosed assets		(11	)		-
Net changes in:
Accrued interest receivable		25			27
Bank owned life insurance-cash surrender value		(18	)		(13	)
Other assets		(4	)		32
Other liabilities		(59	)		45
Net cash used in operating activities		(127	)		(124	)
Cash Flows from Investing Activities
Net change in interest-earning time deposits in other financial institutions		1,000			485
Proceeds from maturities of available for sale securities		550			555
Principal repayments of available for sale mortgage-backed securities		874			1,117
Net change in loans		(4,393	)		(434	)
Purchase of premises and equipment		(9	)		(31	)
Purchase of bank owned life insurance		-			(750	)
Net cash (used in) provided by investing activities		(1,978	)		942
Cash Flows from Financing Activities
Net change in deposits		1,240			65
Proceeds from Federal Home Loan Bank advances		1,500			-
Repayment of Federal Home Loan Bank advances		-			(3,500	)
Payments by borrowers for taxes and insurance		81			74
ESOP shares earned		22			20
Stock buyback		(593	)		-
Net cash provided by ( used in) financing activities		2,250			(3,341	)
Net Change in Cash and Cash Equivalents		145			(2,523	)
Beginning Cash and Cash Equivalents		4,304			8,699
Ending Cash and Cash Equivalents	$	4,449		$	6,176
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings	$	137		$	131
Supplemental Disclosure of Noncash Investing Activities
Transfers from loans to foreclosed assets	$	-		$	-

See Notes to Consolidated Financial Statements (unaudited)

 8

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 1: Basis of Presentation

Community Savings Bancorp, Inc. (the “Company”), headquartered in Caldwell, Ohio, was formed to serve as the holding company for Community Savings (the “Bank”) as part of the Bank’s mutual-to-stock conversion. The conversion was effective January 10, 2017.  In the conversion and concurrent stock offering, the Company issued 441,290 shares at an offering price of $10.00 per share.

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included to present fairly the financial position as of March 31, 2019 and the results of operations for the three and nine months ended March 31, 2019 and 2018. Amounts have not been audited and the results of operations for the three and nine months ended March 31, 2019, herein are not necessarily indicative of the results of operations to be expected for the entire fiscal year.

The accompanying consolidated balance sheet as of June 30, 2018 has been derived from audited financial statements included in the Company’s Form 10-K. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. Accordingly, these consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended June 30, 2018 included in the Company’s Form 10-K.

Principles of Consolidation

The consolidated financial statements as of and for the periods ended March 31, 2019, include Community Savings Bancorp, Inc. and its wholly-owned subsidiary, Community Savings (the “Bank”), together referred to as the “Company.” Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of foreclosed assets, valuation of deferred tax assets, and fair values of financial instruments.

 9

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 2: Securities

The amortized cost and fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available-for-sale Securities:
March 31, 2019
Mortgage-backed securities of U.S. government sponsored entities - residential	$	3,409	$	19	$	(27	)	$	3,401
Collateralized mortgage obligations of government sponsored entities - residential		180		1		(2	)		179
State and political subdivisions
Taxable		257		-		-			257
Nontaxable		1,449		4		(8	)		1,445
	$	5,295	$	24	$	(37	)	$	5,282
June 30, 2018
Mortgage-backed securities of U.S. government sponsored entities - residential	$	4,280	$	6	$	(94	)	$	4,192
Collateralized mortgage obligations of government sponsored entities - residential		218		1		(5	)		214
State and political subdivisions
Taxable		815		1		(3	)		813
Nontaxable		1,457		1		(26	)		1,432
	$	6,770	$	9	$	(128	)	$	6,651

 10

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The amortized cost and fair value of available-for-sale securities at March 31, 2019, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	Amortized		Fair
	Cost		Value
	(In thousands)
Five to ten years	$	287	$	287
Beyond ten years		1,419		1,415
		1,706		1,702
Mortgage-backed securities of U.S. government sponsored entities - residential		3,409		3,401
Collateralized mortgage obligations of government sponsored entities - residential		180		179
Totals	$	5,295	$	5,282

The Company had no sales of investment securities during the three and nine-month periods ended March 31, 2019 and 2018.

The Company had pledged $1.4 million and $1.7 million of its investment securities at March 31, 2019 and June 30, 2018, respectively, and $885,000 and $635,000 of interest-earning time deposits at March 31, 2019 and June 30, 2018. The Company also had pledged $175,000 and $125,000 of interest-earning demand deposits at March 31, 2019 and June 30, 2018, primarily to secure public deposits.

The Company’s restricted stock consists of $915,000 of stock in the Federal Home Loan Bank of Cincinnati (FHLB) and $25,000 of stock in the Company’s data service provider at both March 31, 2019 and June 30, 2018. Restricted stock is carried at cost and has limited transferability.

 11

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table shows the Company’s gross unrealized losses in investments and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and June 30, 2018:

	Less than 12 Months					12 Months or Longer					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
March 31, 2019
Available-for-sale Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential	$	-	$	-		$	1,890	$	(27	)	$	1,890	$	(27	)
Collateralized mortgage obligations of government sponsored entities - residential		-		-			109		(2	)	$	109		(2	)
State and political subdivisions
Nontaxable		-		-			665		(8	)		665		(8	)
	$	-	$	-		$	2,664	$	(37	)	$	2,664	$	(37	)
June 30, 2018
Available-for-sale Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential	$	1,777	$	(31	)	$	1,568	$	(63	)	$	3,345	$	(94	)
Collateralized mortgage obligations of government sponsored entities - residential		121		(5	)		-		-			121		(5	)
State and political subdivisions
Taxable		-		-			510		(3	)		510		(3	)
Nontaxable		531		(3	)		363		(23	)		894		(26	)
	$	2,429	$	(39	)	$	2,441	$	(89	)	$	4,870	$	(128	)

Other-than-temporary Impairment

At March 31, 2019 and June 30, 2018, the decline in fair value of the Company’s investment securities available-for-sale is attributable to changes in interest rates and not credit quality. At March 31, 2019 there were a total of thirteen securities in a loss position. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before recovery of their amortized cost basis, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2019.

 12

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 3: Loans and Allowance for Loan Losses

Loans at March 31, 2019 and June 30, 2018 include:

	March 31,			June 30,
	2019			2018
	(In thousands)
Real estate
Residential	$	25,055		$	25,127
Home equity lines of credit		1,839			1,979
Commercial and multi-family		1,268			1,927
Consumer and other		8,024			2,855
Total loans		36,186			31,888
Allowance for loan losses		(239	)		(253	)
Net loans	$	35,947		$	31,635

The risk characteristics applicable to each segment of the loan portfolio are described below:

Residential Real Estate and Home Equity Lines of Credit

Residential mortgage loans and home equity lines of credit are secured by one-to four-family residences and are comprised of owner-occupied and non-owner-occupied loans. Construction real estate loans (immaterial for the periods presented) are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. The Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values or residential properties. Risk is mitigated by the fact that loans are of smaller individual amounts and spread over a large number of borrowers.

Multi-family Real Estate

Multi-family real estate loans generally involve a greater degree of credit risk than residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family real estate is typically dependent upon the successful operation of the related real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

 13

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Commercial Real Estate

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk.

Consumer and Other Loans

Consumer and other loans entail greater credit risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as automobiles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles may be significantly reduced based upon the condition of the automobiles and the lack of demand for used automobiles.

 14

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three and nine months ended March 31, 2019 and the loans by impairment method as of March 31, 2019:

	Real Estate
							Commercial
				Home Equity			and Multi-			Consumer
	Residential			Lines of Credit			Family			and Other			Unallocated			Total
	(In thousands)
Three Months Ended March 31, 2019
Allowance for loan losses:
Balance, January 1, 2019	$	160		$	13		$	9		$	53		$	18		$	253
Provision for loan losses		17			(1	)		(3	)		(6	)		(7	)		-
Charge-offs		(14	)		-			-			-			-			(14	)
Recoveries		-			-			-			-			-			-
Balance, March 31, 2019	$	163		$	12		$	6		$	47		$	11		$	239
Nine Months Ended March 31, 2019
Allowance for loan losses:
Balance, July 1, 2018	$	171		$	13		$	10		$	23		$	36		$	253
Provision for loan losses		6			(1	)		(4	)		24			(25	)		-
Charge-offs		(14	)		-			-			-			-			(14	)
Recoveries		-			-			-			-			-			-
Balance, March 31, 2019	$	163		$	12		$	6		$	47		$	11		$	239
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	6		$	-		$	-		$	-		$	-		$	6
Ending balance, collectively evaluated for impairment	$	157		$	12		$	6		$	47		$	11		$	233
Loans:
Ending balance	$	25,055		$	1,839		$	1,268		$	8,024					$	36,186
Ending balance; individually evaluated for impairment	$	610		$	5		$	79		$	-					$	694
Ending balance; collectively evaluated for impairment	$	24,445		$	1,834		$	1,189		$	8,024					$	35,492

 15

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three and nine months ended March 31, 2018:

	Real Estate
						Commercial
			Home Equity			and Multi-		Consumer
	Residential		Lines of Credit			Family		and Other			Unallocated			Total
	(In thousands)
Three Months Ended March 31, 2018
Allowance for loan losses:
Balance, January 1, 2018	$	175	$	16		$	10	$	17		$	35		$	253
Provision for loan losses		-		(2	)		-		1			1			-
Charge-offs		-		-			-		-			-			-
Recoveries		-		-			-		-			-			-
Balance, March 31, 2018	$	175	$	14		$	10	$	18		$	36		$	253
Nine Months Ended March 31, 2018
Allowance for loan losses:
Balance, July 1, 2017	$	162	$	21		$	8	$	20		$	42		$	253
Provision for loan losses		13		(7	)		2		(2	)		(6	)		-
Charge-offs		-		-			-		-			-			-
Recoveries		-		-			-		-			-			-
Balance, March 31, 2018	$	175	$	14		$	10	$	18		$	36		$	253

 16

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents, by portfolio segment, the allowance for loan losses, the recorded investment in loans and impairment method as of June 30, 2018:

	June 30, 2018
	Real Estate
					Commercial
			Home Equity		and Multi-		Consumer
	Residential		Lines of Credit		Family		and Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	7	$	-	$	-	$	-	$	-	$	7
Ending balance, collectively evaluated for impairment	$	164	$	13	$	10	$	23	$	36	$	246
Loans:
Ending balance	$	25,127	$	1,979	$	1,927	$	2,855			$	31,888
Ending balance; individually evaluated for impairment	$	366	$	5	$	87	$	-			$	458
Ending balance; collectively evaluated for impairment	$	24,761	$	1,974	$	1,840	$	2,855			$	31,430

 17

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Internal Risk Categories

The Company has adopted a standard loan grading system for all loans. Loans are selected for a grading review based on certain characteristics, including credit concentrations, subprime criteria, and delinquency of 90 days or more. Definitions are as follows:

Pass: These are higher quality loans that do not fit any of the other categories described below.

Special Mention: The loans identified as special mention have an obvious flaw or a potential weakness that deserves special management attention, but which has not yet impacted collectability. These flaws or weaknesses, if left uncorrected, may result in the deterioration of the prospects of repayment or the deterioration of the Company’s credit position.

Substandard: These are loans with a well-defined weakness, where the Company has a serious concern about the borrower’s ability to make full repayment if the weaknesses are not corrected. The loan may contain a flaw, which could impact the borrower’s ability to repay, or the borrower’s continuance as a “going concern.” When collateral values are not sufficient to secure the loan and other weaknesses are present, the loan may be rated substandard. A loan will also be rated substandard when full repayment is expected, but it must come from the liquidation of collateral.

One-to-four family residential real estate loans and home equity loans that are past due 90 days or more with loan to value ratios greater than 60 percent are classified as substandard.

Doubtful: These are loans with major defined weaknesses, where future charge-off of a part of the credit is highly likely. The primary repayment source is no longer viable and the viability of the secondary source of repayment is in doubt. The amount of loss is uncertain due to circumstances within the credit that are not yet fully developed and the loan is rated “Doubtful” until the loss can be accurately estimated.

Loss: These are near term charge-offs. Loans classified as loss are considered uncollectible and of such little value that it is not desirable to continue carrying them as assets on the Company’s financial statements, even though partial recovery may be possible at some future time.

 18

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of March 31, 2019 and June 30, 2018. There were no loans classified as doubtful or loss for the periods presented.

	Real Estate
					Commercial
			Home Equity		and Multi-		Consumer
	Residential		Lines of Credit		Family		and Other		Total
	(In thousands)
March 31, 2019
Pass	$	24,254	$	1,792	$	1,188	$	8,024	$	35,258
Special mention		-		-		-		-		-
Substandard		801		47		80		-		928
Total	$	25,055	$	1,839	$	1,268	$	8,024	$	36,186
June 30, 2018
Pass	$	24,507	$	1,941	$	1,840	$	2,855	$	31,143
Special mention		-		-		-		-		-
Substandard		620		38		87		-		745
Total	$	25,127	$	1,979	$	1,927	$	2,855	$	31,888

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the past year.

 19

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of March 31, 2019 and June 30, 2018:

					90 Days and
	30-59 Days		60-89 Days		Greater		Total				Total Loans
	Past Due		Past Due		Past Due		Past Due		Current		Receivable
	(In thousands)
March 31, 2019
Real estate
Residential	$	73	$	-	$	68	$	141	$	24,914	$	25,055
Home equity lines of credit		-		-		-		-		1,839		1,839
Commercial and multi-family		-		-		-		-		1,268		1,268
Consumer and other		23		-		-		23		8,001		8,024
Total	$	96	$	-	$	68	$	164	$	36,022	$	36,186
June 30, 2018
Real estate
Residential	$	271	$	3	$	65	$	339	$	24,788	$	25,127
Home equity lines of credit		-		4		-		4		1,975		1,979
Commercial and multi-family		74		-		13		87		1,840		1,927
Consumer and other		12		34		-		46		2,809		2,855
Total	$	357	$	41	$	78	$	476	$	31,412	$	31,888

A loan is considered impaired when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans, but also include loans modified in troubled debt restructurings.

 20

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents impaired loan information as of and for the three and nine months ended March 31, 2019:

							For the Three Months Ended				For the Nine Months Ended
	As of March 31, 2019						March 31, 2019				March 31, 2019
	Recorded Investment		Unpaid Principal Balance		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Loans with no related allowance recorded:
Real estate
Residential	$	545	$	545	$	-	$	547	$	-	$	433	$	-
Home equity lines of credit		5		5		-		5		-		5		-
Commercial and multi-family		79		79		-		80		-		83		-
Consumer and other		-		-		-		-		-		-		-
Loans with an allowance recorded:
Real estate
Residential		65		67		6		67		1		68		3
Home equity lines of credit		-		-		-		-		-		-		-
Commercial and multi-family		-		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-		-
Totals	$	694	$	696	$	6	$	699	$	1	$	589	$	3

 21

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents impaired loan information as of June 30, 2018 and for the three and nine months ended March 31, 2018:

							For the Three Months Ended				For the Nine Months Ended
	As of June 30, 2018						March 31, 2018				March 31, 2018
	Recorded Investment		Unpaid Principal Balance		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Loans with no related allowance recorded:
Real estate
Residential	$	305	$	305	$	-	$	292	$	-	$	293	$	-
Home equity lines of credit		5		5		-		6		-		6		-
Commercial and multi-family		87		87		-		89		-		91		-
Consumer and other		-		-		-		-		-		-		-
Loans with an allowance recorded:
Real estate
Residential		69		71		7		87		1		89		3
Home equity lines of credit		-		-		-		-		-		-		-
Commercial and multi-family		-		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-		-
Totals	$	466	$	468	$	7	$	474	$	1	$	479	$	3

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.  Interest income recognized on a cash basis was not materially different than interest income recognized. 

 22

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents the Company’s nonaccrual loans at March 31, 2019 and June 30, 2018. The table excludes performing troubled debt restructurings.

	March 31,		June 30,
	2019		2018
	(In thousands)
Real estate
Residential	$	545	$	305
Home equity lines of credit		5		5
Commercial and multi-family		79		87
Consumer and other		-		-
Total nonaccrual	$	629	$	397

No loans were modified as troubled debt restructurings during the three and nine months ended March 31, 2019 or 2018. The Company had loans modified, in previous years, in a troubled debt restructuring totaling $65,000 and $69,000 at March 31, 2019 and June 30, 2018, respectively. Troubled debt restructured loans had specific allowances totaling $6,000 and $7,000 at March 31, 2019 and June 30, 2018, respectively. At March 31, 2019, the Company had no commitments to lend additional funds to borrowers with troubled debt restructured loans.

The Company had no troubled debt restructurings modified in the 12 months prior to March 31, 2019 or 2018 that subsequently defaulted during the nine-month periods ended March 31, 2019 or 2018. A troubled debt restructured loan is considered to be in payment default once it is 30 days contractually past due under the loan’s modified terms.

 23

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 4: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier I capital, and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of leverage capital to adjusted average total assets (as defined).

Management believes, as of March 31, 2019 and June 30, 2018, that the Bank meets all capital adequacy requirements to which it is subject.

Basel III requires the Bank to maintain minimum amounts and ratios of common equity Tier 1 capital to risk-weighted assets, as defined in the regulation. Under the Basel III rules, in order to avoid limitations on capital distributions, including dividends, the Bank must hold a capital conservation buffer above the adequately capitalized common equity Tier 1 capital to risk-weighted assets ratio. The capital conservation buffer is 2.50 percent. Under Basel III, the Bank elected to opt-out of including accumulated other comprehensive income in regulatory capital.

As of March 31, 2019 and June 30, 2018, the most recent notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total capital, Tier I capital, common equity Tier I capital and leverage capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

 24

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of March 31, 2019
Total Capital (to Risk-Weighted Assets)
Company	$	8,223		29.4	%	$	2,239		8.0	%		N/A		N/A
Bank	$	7,532		26.9	%	$	2,239		8.0	%	$	2,799		10.0	%
Tier I Capital (to Risk-Weighted Assets)
Company	$	7,984		28.5	%	$	1,679		6.0	%		N/A		N/A
Bank	$	7,293		26.1	%	$	1,679		6.0	%	$	2,239		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Company	$	7,984		28.5	%	$	1,259		4.5	%		N/A		N/A
Bank	$	7,293		26.1	%	$	1,259		4.5	%	$	1,819		6.5	%
Leverage Capital (to Adjusted Average Total Assets)
Company	$	7,984		14.7	%	$	2,171		4.0	%		N/A		N/A
Bank	$	7,293		13.4	%	$	2,171		4.0	%	$	2,714		5.0	%
As of June 30, 2018
Total Capital (to Risk-Weighted Assets)
Company	$	8,634		37.0	%	$	1,868		8.0	%		N/A		N/A
Bank	$	7,849		33.6	%	$	1,868		8.0	%	$	2,335		10.0	%
Tier I Capital (to Risk-Weighted Assets)
Company	$	8,381		35.9	%	$	1,401		6.0	%		N/A		N/A
Bank	$	7,596		32.5	%	$	1,401		6.0	%	$	1,868		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Company	$	8,381		35.9	%	$	1,051		4.5	%		N/A		N/A
Bank	$	7,596		32.5	%	$	1,051		4.5	%	$	1,517		6.5	%
Leverage Capital (to Adjusted Average Total Assets)
Company	$	8,381		16.4	%	$	2,047		4.0	%		N/A		N/A
Bank	$	7,596		14.8	%	$	2,047		4.0	%	$	2,559		5.0	%

 25

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 5: Disclosures about Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

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

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

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

 26

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Recurring Measurements

The following table presents the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2019 and June 30, 2018:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
March 31, 2019
Mortgage-backed securities of U.S. government sponsored entities - residential	$	3,401	$	-	$	3,401	$	-
Collateralized mortgage obligations of government sponsored entities - residential		179		-		179		-
State and political subdivisions
Taxable		257		-		257		-
Nontaxable		1,445		-		1,445		-
	$	5,282	$	-	$	5,282	$	-
June 30, 2018
Mortgage-backed securities of U.S. government sponsored entities - residential	$	4,192	$	-	$	4,192	$	-
Collateralized mortgage obligations of government sponsored entities - residential		214		-		214		-
State and political subdivisions
Taxable		813		-		813		-
Nontaxable		1,432		-		1,432		-
	$	6,651	$	-	$	6,651	$	-

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There were no assets classified within Level 3 of the fair value hierarchy measured on a recurring basis.

 27

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flow. Such securities are classified within Level 2 of the valuation hierarchy.

Nonrecurring Measurements

The following table presents fair value measurements of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which fair value measurements fall at March 31, 2019 and June 30, 2018:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
March 31, 2019
Impaired loans
Real estate
1-4 family residential	$	59	$	-	$	-	$	59
Forclosed assets
Residential real estate	$	104	$	-	$	-	$	104
June 30, 2018
Impaired loans
Real estate
1-4 family residential	$	62	$	-	$	-	$	62
Foreclosed assets
Residential real estate	$	9	$	-	$	-	$	9

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

 28

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Impaired Loans (Collateral Dependent)

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the borrower and borrower’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Foreclosed Assets

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

Appraisals for collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

 29

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements:

	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
	(In thousands)
March 31, 2019
Impaired loans (collateral dependent) - residential real estate	$	59	Sales comparison approach	Adjustments for selling cost and holding period		13	%
Foreclosed assets - residential real estate	$	104	Sales comparison approach	Adjustments for selling cost and discount for time since appraisal		17	%
June 30, 2018
Impaired loans (collateral dependent) - residential real estate	$	62	Sales comparison approach	Adjustments for selling cost and holding period		13	%
Foreclosed assets - residential real estate	$	9	Sales comparison approach	Adjustments for selling cost and discount for time since appraisal		52	%

 30

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Fair Value of Financial Instruments

The following table presents the carrying amount and fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2019 and June 30, 2018.

			Fair Value Measurement Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(In thousands)
March 31, 2019
Financial assets
Cash and cash equivalents	$	4,449	$	4,449	$	-	$	-	$	4,449
Interest-earning time deposits		3,595		3,595		-		-		3,595
Investments securities available-for-sale		5,282		-		5,282		-		5,282
Restricted Stock		940		-		-		940		940
Loans, net		35,947		-		-		36,880		36,880
Accrued interest receivable		110		110		-		-		110
Bank owned life insurance		787		787		-		-		787
Financial liabilities
Deposits		41,639		33,895		7,619		-		41,514
Federal Home Loan Bank advances		2,500		-		2,517		-		2,517
Payments by borrowers for taxes and insurance		173		173		-		-		173
June 30, 2018
Financial assets
Cash and cash equivalents	$	4,304	$	4,304	$	-	$	-	$	4,304
Interest-earning time deposits		4,595		4,595		-		-		4,595
Investments securities available-for-sale		6,651		-		6,651		-		6,651
Restricted Stock		940		-		-		940		940
Loans, net		31,635		-		-		32,195		32,195
Accrued interest receivable		135		-		135		-		135
Bank owned life insurance		769		-		769		-		769
Financial liabilities
Deposits		40,399		32,473		7,682		-		40,155
Federal Home Loan Bank advances		1,000		-		1,008		-		1,008
Payments by borrowers for taxes and insurance		92		-		92		-		92

 31

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents and Interest-earning Time Deposits

The carrying amount of cash, short-term instruments and time deposits approximate fair value and are classified as Level 1.

Investment Securities Available-for-Sale

The carrying amount of investment securities available-for-sale approximate fair value and are classified as Level 2.

Restricted Stock

Due to restrictions placed on their transferability, the FHLB and COCC stock are carried at cost, which approximates fair value based on redemption provisions resulting in a Level 3 classification.

Loans

Fair values of loans are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values, resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value of collateral as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Accrued Interest Receivable

The carrying amounts of accrued interest approximate fair value, resulting in a Level 1 classification.

Bank Owned Life Insurance

The fair value of bank owned life insurance approximates the cash surrender value of the policies, resulting in a level 1 classification.

Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.

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Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Federal Home Loan Bank Advances

The fair values of FHLB advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements, resulting in a Level 2 classification.

Payments by Borrowers for Taxes and Insurance

The fair value of escrow accounts is estimated to approximate the carrying amount resulting in a Level 1 classification.

Off-Balance Sheet Instruments

Fair values of off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

 33

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 6: Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive loss by component, net of tax, for the three and nine months ended March 31, 2019 and 2018 are as follows:

	Three Months Ended March 31,
	2019			2018
	(In thousands)
Balance, January 1	$	(61	)	$	(25	)
Other comprehensive income (loss) before tax effect		51			(57	)
Reclassification of certain tax effects from accumulated other comprehensive income (loss)		-			(5	)
Balance, March 31	$	(10	)	$	(87	)

	Nine Months Ended March 31,
	2019			2018
	(In thousands)
Balance, July 1	$	(94	)	$	25
Net current period other comprehensive income (loss)		84			(107	)
Reclassification of certain tax effects from accumulated other comprehensive income (loss)		-			(5	)
Balance, March 31	$	(10	)	$	(87	)

There were no material items reclassified from accumulated other comprehensive income (loss) to the consolidated statement of operations for the three and nine months ended March 31, 2019 and 2018.

Note 7: Recent Accounting Pronouncements

FASB ASU 2014-09, Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance on revenue recognition from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most contract revenue recognition guidance, including industry-specific guidance. The core principle of the amended guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amended guidance is effective, as to the Company, for annual reporting periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019, and should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. Early adoption is prohibited. ASU 2014-09 may require the Company to change how it recognizes certain components of noninterest income, but the Company does not believe it will have a material impact on the Company’s financial statements or disclosures.

 34

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. For public business entities, the amendments in this update include the elimination of the requirement to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, the requirement to use the exit price notion when measuring fair value of financial instruments for disclosure purposes, the requirement 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, the requirement for 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 accompanying notes to the financial statements, and the amendments 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 amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption of the amendments in this update is not permitted, except that early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance are permitted as of the beginning of the fiscal year of adoption for the following amendment: An entity should 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 if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. An entity should apply the amendments to this update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company does not believe it will have a material impact on the Company’s financial statements or disclosures.

FASB ASU 2016-02, Leases. In February 2016, the FASB issued ASU 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

● A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and

● A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

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Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

The amendments in ASU 2016-02 are effective, as to the Company, for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

FASB ASU 2016-13, Financial Instruments-Credit Losses. In June 2016, the FASB issued ASU 2016-13. The amendments in this ASU replace the incurred loss model for recognition of credit losses with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The amendments are effective, as to the Company, for annual reporting periods beginning after December 15, 2020 and for interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations.

FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. 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 amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s statement of cash flows.

 36

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

FASB ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs. In March 2017, the FASB issued ASU 2017-08. The amendment shortens the amortization period for certain callable debt securities purchased at a premium. Upon adoption of the standard, premiums on these qualifying callable debt securities will be amortized to the earliest call date. Discounts on purchased debt securities will continue to be accreted to maturity. This ASU will become effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. Upon transition, entities should apply the guidance on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption and provide the disclosures required for a change in accounting principle. Management has not determined the expected effect of the adoption of ASU 2017-08 on the Company’s financial statements.

FASB ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value. In August, 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which changes the fair value measurement disclosure requirements of ASC 820. The ASU amends ASC 820 to add, remove, and modify certain fair value measurement disclosure requirements, primarily related to Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. Management is evaluating the new ASU, but does not expect the ASU to have a material effect on the Company's financial position or results of operations.

FASB ASU 2019-01, Leases (Topic 842): Codification Improvements. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which addressed issues lessors sometimes encounter. Specifically addressed in this Update were issues related to 1) determining the fair value of the underlying asset by the lessor that are not manufacturers or dealers (generally financial institutions and captive finance companies), and 2) lessors that are depository and lending institutions should classify principal and payments received under sales-type and direct financing leases within investing activities in the cash flow statement. The ASU also exempts both lessees and lessors from having to provide the interim disclosures required by ASC 250-10-50-3 in the fiscal year in which a company adopts the new leases standard. The amendments addressing the two lessor accounting issues are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the effective date is for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. This Update is not expected to have a significant impact on the Company’s financial statements.

 37

Community Savings Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

FASB ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. This Update is not expected to have a significant impact on the Company’s financial statements.

Note 8: Loss Per Share

Basic loss per share (“LPS”) is calculated by dividing net loss applicable to common stock by the weighted-average number of shares of common stock outstanding during the period. Unallocated common shares held by the Company’s Employee Stock Ownership Plan (the “ESOP”) are shown as a reduction in stockholders’ equity and are excluded from weighted-average common shares outstanding for basic and diluted LPS calculations until they are committed to be released.

Loss per share for the three months ended March 31, 2019 was $(0.14), calculated using 409,019 average shares outstanding less 29,420 unallocated shares held by the ESOP. Loss per share for the nine months ended March 31, 2019 was $(0.31), calculated using 424,555 average shares outstanding, less 29,420 unallocated shares held by the ESOP. The Company had no dilutive or potentially dilutive securities at March 31, 2019. Loss per share for the three and nine months ended March 31, 2018 was $(0.26) and $(0.73) respectively, calculated using 441,290 and 440,201 shares issued, respectively, less 31,054 unallocated shares held by the ESOP. The Company had no dilutive or potentially dilutive securities at March 31, 2018.

Note 9: Employee Stock Ownership Plan (ESOP)

As part of the Company’s stock conversion, shares were purchased by the ESOP with a loan from Community Savings Bancorp, Inc. All employees of the Bank meeting certain tenure requirements are entitled to participate in the ESOP. Compensation expense related to the ESOP was $6,000 and $18,000 for the three and nine months ended March 31, 2019. Compensation expense related to the ESOP was $6,000 and $18,000 for the three and nine months ended March 31, 2018.

The stock price at the formation date was $10.00. The aggregate fair value of the 29,420 unallocated shares was $426,590 based on the $14.50 closing price of our common stock on March 31, 2019.

Note 10: Equity Incentive Plan

On March 12, 2019, Community Savings Bancorp, Inc. issued 9,710 shares of common stock to distribute to officers and directors as a restricted stock award under the Equity Incentive Plan approved by the Board of Directors February 19, 2018.

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Community Savings Bancorp, Inc.

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

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

Forward-Looking Statements

This document contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions. These forward-looking statements include: statements of goals, intentions and expectations, statements regarding prospects and business strategy, statements regarding asset quality and market risk, and estimates of future costs, benefits and results.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following: (1) general economic conditions, (2) competitive pressure among financial services companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand, (6) changes in legislation or regulation, (7) changes in accounting principles, policies and guidelines and (8) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. We have no obligation to update or revise any forward-looking statements to reflect any changed assumptions, any unanticipated events or any changes in the future.

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

Total Assets. Total assets increased $2.1 million, or 4.2%, to $52.1 million at March 31, 2019 from $50.0 million at June 30, 2018. The increase was due primarily to an increase in net loans of $4.3 million, partially offset by a $1.4 million decrease in investment securities available-for-sale and a decrease in interest-earning time deposits in other institutions of $1.0 million.

Cash and Cash Equivalents. Cash and cash equivalents increased $144,000, or 3.4%, to $4.4 million at March 31, 2019 from $4.3 million at June 30, 2018. The increase in cash and cash equivalents was due primarily to a $1.2 million increase in deposits, an increase of $1.5 million in FHLB advances, a $1.4 million decrease in investment securities available for sale, and a $1 million decrease in interest-earning time deposits in other institutions, partially offset by a $4.3 million increase in net loans.

Investment Securities available-for-sale. Investment securities available-for-sale decreased $1.4 million, or 20.1%, to $5.3 million at March 31, 2019 from $6.7 million at June 30, 2018. The decrease in investment securities available-for-sale was primarily due to principal repayments on mortgage-backed securities totaling $874,000 and the maturity of municipal bond in the amount of $550,000.

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Community Savings Bancorp, Inc.

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

Net Loans. Net loans increased $4.3 million, or 13.6%, to $35.9 million at March 31, 2019 from $31.6 million at June 30, 2018. The increase in net loans was due primarily to an increase of $5.1 million, or 179.3%, in consumer and other loans to $8.0 million at March 31, 2019 from $2.9 million at June 30, 2018, partially offset by a decrease of $659,000, or 34.2%, in commercial and multi-family loans and a decrease of $140,000, or 7.1%, in home equity lines of credit. Loans originated during the nine months ended March 31, 2019 totaled $8.9 million, of which $6.7 million were consumer and other loans and $2.1 million were one- to four family residential loans. The substantial increase in consumer loans was due to an increase in auto loans, most of which were generated from applications taken at car dealerships as part of our indirect auto lending program. This program was implemented beginning in June of 2018.

Deposits. Deposits increased $1.2 million, or 3.1%, to $41.6 million at March 31, 2019 from $40.4 million at June 30, 2018. The increase resulted primarily from a $1.6 million, or 7.2%, increase in savings and money market accounts, partially offset by a decrease in demand deposits of $218,000, or 2.1%, and a decrease in time deposits of $181,000, or 2.3%.

Bank Owned Life Insurance. Cash surrender value of Bank Owned Life Insurance increased $18,000, or 2.3%, to $787,000 at March 31, 2019 from $769,000 at June 30, 2018.

FHLB Advances. FHLB advances increased $1.5 million, or 150.0%, to $2.5 million at March 31, 2019 from $1.0 million at June 30, 2018, as we utilized certain FHLB advances to partially fund the increase in consumer and other loans.

Shareholders’ Equity. Shareholders’ equity decreased $611,000, or 7.4%, to $7.7 million at March 31, 2019 from $8.3 million at June 30, 2018. The decrease was due primarily to a net loss of $123,000 during the nine months ended March 31, 2019 and a $593,000 stock buyback, partially offset by an increase in accumulated other comprehensive income of $106,000 during the period.

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2019 and 2018

General. For the three months ended March 31, 2019, we had a net loss of $53,000 compared to a net loss of $108,000 for the three months ended March 31, 2018, an increase in income of $55,000. The increase in income resulted primarily from an increase in net interest income of $48,000, an increase in noninterest income of $12,000, and decrease of $15,000 in non-interest expense, which were partially offset by a decrease of $20,000 in federal income tax benefits.

Average Balance Sheets. The following table sets forth average balance sheets, average yields and costs, and certain other information for the three-month periods ended March 31, 2019 and 2018. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are accreted to interest income.

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Community Savings Bancorp, Inc.

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

	For the Three Months Ended March 31,
	2019								2018
	Average Outstanding Balance			Interest		Yield/Rate			Average Outstanding Balance			Interest		Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	36,020		$	412		4.58	%	$	32,554		$	361		4.44	%
Investment securities		5,406			33		2.48	%		7,196			40		2.22	%
Other interest-earning assets (1)		9,340			62		2.65	%		9,435			46		1.95	%
Total interest-earning assets		50,766			507		3.99	%		49,185			447		3.64	%
Noninterest-earning assets		3,753								1,922
Allowance for loan losses		(245	)							(253	)
Total assets	$	54,274							$	50,854
Interest-bearing liabilities:
Demand accounts	$	2,397			1		0.17	%	$	2,186			1		0.18	%
Savings and money market accounts		25,470			16		0.25	%		22,559			15		0.27	%
Certificates of deposit		7,561			17		0.90	%		7,983			15		0.75	%
Total deposits		35,428			34		0.38	%		32,728			31		0.38	%
FHLB advances		2,522			19		3.01	%		1,000			10		4.00	%
Total interest-bearing liabilities		37,950			53		0.56	%		33,728			41		0.49	%
Noninterest-bearing liabilities		8,215								8,050
Total liabilities		46,165								41,778
Equity		8,109								9,076
Total liabilities and equity	$	54,274							$	50,854
Net interest income				$	454							$	406
Net interest rate spread (2)							3.43	%							3.15	%
Net interest-earning assets (3)	$	12,816							$	15,457
Net interest margin (4)							3.57	%							3.30	%
Average interest-earning assets to interest-bearing liabilities		133.77	%							145.83	%

(1) Consists of stock in the FHLB and interest-bearing deposits in other banks.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

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Community Savings Bancorp, Inc.

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

Interest Income. Interest income increased $60,000, or 13.4%, to $507,000 for the three months ended March 31, 2019 from $447,000 for the three months ended March 31, 2018. The increase resulted primarily from a $51,000 increase in loan interest income. The average balance of loans receivable increased $3.5 million, or 10.6%, to $36.0 million during the three months ended March 31, 2019 from $32.6 million during the three months ended March 31, 2018, while the average yield on loans increased 14 basis points to 4.58% during the three months ended March 31, 2019 from 4.44% during the year earlier period, reflecting higher market interest rates. The average balance of investment securities decreased $1.8 million, or 25.0%, to $5.4 million during the three months ended March 31, 2019 from $7.2 million during the three months ended March 31, 2018, which was partially offset by an increase in the average yield on investment securities of 26 basis points to 2.48% for the 2019 period from 2.22% for the 2018 period.

Interest Expense. Interest expense increased $12,000, or 29.3%, to $53,000 for the three months ended March 31, 2019 from $41,000 for the three months ended March 31, 2018. Interest expense on deposits increased $3,000, or 9.7%, to $34,000 for the three months ended March 31, 2019 from $31,000 for the three months ended March 31, 2018. The average cost of deposits was 0.38% for the three months ended March 31, 2019 and 2018, respectively. There was an increase in average total deposits of $2.7 million, or 8.2%, to $35.4 million for the three months ended March 31, 2019, compared to $32.7 million for the three months ended March 31, 2018. Interest expense on borrowings increased $9,000, or 90.0%, to $19,000 for the three months ended March 31, 2019 from $10,000 for the three months ended March 31, 2018. The average balance of FHLB advances increased $1.5 million to $2.5 million for the three months ended March 31, 2019 from $1.0 million for the three months ended March 31, 2018, while the average cost of these advances decreased 99 basis points to 3.01% from 4.00% period-to-period.

Net Interest Income. Net interest income increased $47,000, or 11.6%, to $453,000 for the three months ended March 31, 2019 from $406,000 for the three months ended March 31, 2018. Our net interest rate spread increased to 3.43% for the three months ended March 31, 2019 from 3.15% for the three months ended March 31, 2018, and our net interest margin increased to 3.57% for the three months ended March 31, 2019 from 3.30% for the comparable three-month period in 2018.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies – Allowance for Loan Losses,” we did not record a provision for loan losses for either of the three months ended March 31, 2019 or 2018. The allowance for loan losses was $239,000, or 0.66%, of total loans at March 31, 2019, compared to $253,000, or 0.78%, of total loans at March 31, 2018. Total nonperforming loans were $629,000 at March 31, 2019, compared to $397,000 at March 31, 2018. Classified (substandard, doubtful and loss) loans were $928,000 at March 31, 2019, compared to $862,000 at March 31, 2018, and total loans past due greater than 30 days were $164,000 and $275,000 at March 31, 2019 and 2018, respectively. The Bank had $14,000 in charge offs during the three months ended March 31, 2019 and no net charge-offs during the three months ended March 31, 2018. As a percentage of nonperforming loans, the allowance for loan losses was 38.0% at March 31, 2019 compared to 64.2% at March 31, 2018.

The allowance for loan losses reflects the estimate we believe to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at March 31, 2019 and 2018. At the onset of the indirect automobile lending financing program, two qualitative risk factors were increased in order to ensure sufficient allocation of risk related to the new program.  Even with this increase in estimated risk, the calculations show a sufficient level of reserve for potential loan losses.  Presently, the reserve is in excess of the calculated estimate. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations.

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Community Savings Bancorp, Inc.

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

Noninterest Income. Noninterest income increased $12,000, or 16.7%, to $84,000 for the three months ended March 31, 2019 from $72,000 for the three months ended March 31, 2018. The increase was due primarily to an increase of $16,000 in service charges and fees, and decrease of $4,000 in other operating income in the period ended March 31, 2019.

Noninterest Expense. Noninterest expense decreased $15,000, or 2.4%, to $608,000 for the three months ended March 31, 2019 compared to $623,000 for the three months ended March 31, 2018. Other expense increased $32,000, or 57.1%, due to a $42,000 increase in loan expense directly related to our indirect auto lending program. The indirect lending program is a program where auto loan applications are completed at car dealerships. This program was implemented beginning in June of 2018. Loan expense was partly offset by a $13,000 decrease in data processing costs. Salaries and benefits increased $22,000, or 10.9%. Professional services decreased $52,000, or 40.6%, primarily because of higher accounting costs during the 2018 period, and lower public filing costs in the 2019 period.

Federal Income Taxes. We recognized a federal income tax benefit of $17,000 for the three months ended March 31, 2019, compared to tax benefit of $37,000 during the three months ended March 31, 2018, a decrease in benefit of $20,000.

Comparison of Operating Results for the Nine-Month Periods Ended March 31, 2019 and 2018

General. For the nine months ended March 31, 2019, we had a net loss of $123,000 compared to a net loss of $300,000 for the nine months ended March 31, 2018, an increase in income of $177,000. The increased income resulted primarily from an increase in net interest income of $123,000 and an increase in noninterest income of $75,000, which were partially offset by a decrease of $18,000 in federal income tax benefits.

Average Balance Sheets. The following table sets forth average balance sheets, average yields and costs, and certain other information for the nine-month periods ended March 31, 2019 and 2018. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are accreted to interest income.

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Community Savings Bancorp, Inc.

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

	For the Nine Months Ended March 31,
	2019								2018
	Average Outstanding Balance			Interest		Yield/Rate			Average Outstanding Balance			Interest		Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	34,525		$	1,195		4.62	%	$	32,529		$	1,078		4.42	%
Investment securities		5,983			101		2.24	%		7,912			124		2.09	%
Other interest-earning assets (1)		7,675			159		2.75	%		8,591			124		1.92	%
Total interest-earning assets		48,183			1,455		4.03	%		49,032			1,326		3.61	%
Noninterest-earning assets		3,701								2,376
Allowance for loan losses		(250	)							(253	)
Total assets	$	51,634							$	51,155
Interest-bearing liabilities:
Demand accounts	$	2,363			3		0.17	%	$	2,208			3		0.18	%
Savings and money market accounts		23,680			46		0.26	%		22,620			47		0.28	%
Certificates of deposit		7,471			46		0.82	%		8,107			45		0.74	%
Total deposits		33,514			95		0.38	%		32,935			95		0.38	%
FHLB advances		1,752			42		3.18	%		1,405			36		3.42	%
Total interest-bearing liabilities		35,266			137		0.52	%		34,340			131		0.51	%
Noninterest-bearing liabilities		8,209								7,578
Total liabilities		43,475								41,918
Equity		8,159								9,237
Total liabilities and equity	$	51,634							$	51,155
Net interest income				$	1,318							$	1,195
Net interest rate spread (2)							3.51	%							3.10	%
Net interest-earning assets (3)	$	12,917							$	14,692
Net interest margin (4)							3.65	%							3.25	%
Average interest-earning assets to interest-bearing liabilities		136.63	%							142.78	%

(1) Consists of stock in the FHLB and interest-bearing deposits in other banks.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

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Community Savings Bancorp, Inc.

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

Interest Income. Interest income increased $128,000, or 9.7%, to $1.5 million for the nine months ended March 31, 2019 from $1.3 million for the nine months ended March 31, 2018. The increase resulted primarily from a $117,000 increase in interest on loans receivable and a $35,000 increase in other interest earning assets, offset by a $23,000 decrease in interest on investment securities. The increase in interest income on loans was due to an increase in the average balance of loans receivable of $2.0 million, or 6.1%, to $34.5 million during the nine months ended March 31, 2019 from $32.5 million during the nine months ended March 31, 2018, and an increase in the average yield on loans, which increased 20 basis points to 4.62% during the nine months ended March 31, 2019 from 4.42% during the year earlier period, reflecting higher market interest rates. The increase in interest on other interest earning assets was due to an 83 basis point increase in average yield to 2.75% for the nine months ended March 31, 2019, partially offset by a $916,000, or 10.7%, decrease in the average balance to $7.7 million. The average balance of investment securities decreased $1.9 million, or 24.1%, to $6.0 million during the nine months ended March 31, 2019 from $7.9 million during the nine months ended March 31, 2018, and the average yield on investment securities increased 15 basis points to 2.24% for the 2019 period from 2.09% for the 2018 period.

Interest Expense. Interest expense increased $6,000, or 4.6%, to $137,000 for the nine months ended March 31, 2019 from $131,000 for the nine months ended March 31, 2018. Interest expense on deposits remained unchanged at $95,000 for the nine months ended March 31, 2019 and 2018. Interest expense on borrowings increased $6,000 to $42,000 for the nine months ended March 31, 2019 from $36,000 for the nine months ended March 31, 2018. The average balance of FHLB advances increased $347,000 to $1.8 million for the nine months ended March 31, 2019 from $1.4 million for the nine months ended March 31, 2018, while the average cost of these advances decreased 24 basis points to 3.18% from 3.42% period-to-period.

Net Interest Income. Net interest income increased $123,000, or 10.3%, to $1.3 million for the nine months ended March 31, 2019 from $1.2 million for the nine months ended March 31, 2018. Our net interest rate spread increased to 3.51% for the nine months ended March 31, 2019 from 3.10% for the nine months ended March 31, 2018, and our net interest margin increased to 3.65% for the nine months ended March 31, 2019 from 3.25% for the comparable nine-month period in 2018.

Provision for Loan Losses. The Company did not record a provision for loan losses for either of the nine months ended March 31, 2019 or 2018. The allowance for loan losses was $239,000, or 0.66% of total loans, at March 31, 2019, compared to $253,000, or 0.79% of total loans, at March 31, 2018. Total nonperforming loans were $629,000 at March 31, 2019, compared to $397,000 at March 31, 2018. Classified (substandard, doubtful and loss) loans were $928,000 at March 31, 2019, compared to $862,000 at March 31, 2018, and total loans past due greater than 30 days were $164,000 and $275,000 at March 31, 2019 and 2018, respectively. The Bank had $14,000 in charge offs during the nine months ended March 31, 2019 and no net charge-offs during the nine months ended March 31, 2018. As a percentage of nonperforming loans, the allowance for loan losses was 38.0% at March 31, 2019 compared to 64.2% at March 31, 2018.

The allowance for loan losses reflects the estimate we believe to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at March 31, 2019. At the onset of the indirect automobile lending financing program, two qualitative risk factors were increased in order to ensure sufficient allocation of risk related to the new program.  Even with this increase in estimated risk, the calculations show a sufficient level of reserve for potential loan losses.  Presently, the reserve is in excess of the calculated estimate. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations.

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Community Savings Bancorp, Inc.

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

Noninterest Income. Noninterest income increased $75,000, or 35.9%, to $284,000 for the nine months ended March 31, 2019 from $209,000 for the nine months ended March 31, 2018. Service charges and fees increased $53,000, or 27.6%, for the nine months ended March 31, 2019, compared to the 2018 period. Income from the increase in cash surrender value of bank owned life insurance increased $5,000 and other operating income increased $6,000 in the nine months ended March 31, 2019, compared to the 2018 period. Also, there was a nonrecurring gain on the sale of foreclosed assets of $11,000 realized during the 2019 period.

Noninterest Expense. Noninterest expense increased $3,000, or 0.2%, to $1.8 million for the nine months ended March 31, 2019 compared to $1.8 million for the nine months ended March 31, 2018. Other expenses increased by $67,000, or 49.3%, primarily due to increased loan expense associated with our indirect auto lending program., The indirect lending program is a program where auto loan applications are completed at car dealerships. This program was implemented beginning in June of 2018. Salaries and benefits increased by $24,000, or 3.8%, and financial institution taxes increased $8,000, or 18.2%, primarily due to the increase in capital as a result of the initial stock offering. Professional services decreased $100,000, 30.8%, to $225,000 for the nine months ended March 31, 2019 from $325,000 for the nine months ended March 31, 2018, primarily because of higher accounting costs during the 2018 period, and lower public filing costs in the 2019 period.

Federal Income Taxes. We recognized a federal income tax benefit of $32,000 for the nine months ended March 31, 2019, compared to a $50,000 federal income tax benefit during the nine months ended March 31, 2018, a decrease in benefit of $18,000.

Liquidity and Capital Resources

Our primary sources of funds are deposits, principal and interest payments on loans, and advances from the FHLB-Cincinnati. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-earning demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used in operating activities was $186,000 and $96,000 for the nine months ended March 31, 2019 and 2018, respectively. Net cash provided by (used in) investing activities was $(1.9 million) and $942,000 for the nine months ended March 31, 2019 and 2018, respectively. The change in cash flows in investing activities resulted primarily from the net increase in loans of $4.3 million, partially offset by maturities of time deposits in other institutions, pay downs of mortgage-backed securities and maturities of available for sale securities. Cash provided by (used in) financing activities was $2.2 million and $(3.4 million) for the nine months ended March 31, 2019 and 2018, respectively. The change is largely due to the fact that we had a net increase in deposits of $1.2 million, period-to-period, and we borrowed $1.5 million in FHLB advances in the nine months ending March 31, 2019, compared to the pay down of $3.5 million in FHLB advances in the same period 2018.

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Community Savings Bancorp, Inc.

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

Community Savings 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 March 31, 2019, Community Savings exceeded all regulatory capital requirements and was categorized as “well-capitalized” under regulatory guidelines.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. At March 31, 2019, we had $561,000 in outstanding commitments to originate loans, we had commitments under undisbursed construction loans of $556,000 and commitments under home equity lines of credit of $1.7 million. We anticipate that we will have sufficient funds available to meet our current loan origination commitments.

Certificates of deposit that are scheduled to mature in less than one year from March 31, 2019 totaled $3.9 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 FHLB-Cincinnati 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, and agreements with respect to borrowed funds and deposit liabilities.

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Community Savings Bancorp, Inc.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of the Registrant’s management, including our Chief Executive Officer and Principal Financial Officer, the Registrant evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures were effective.

(b) Changes in internal controls.

There has been no change made in the Registrant’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

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Community Savings Bancorp, Inc.

Part II

Other Information

ITEM 1. Legal Proceedings

We are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. At March 31, 2019, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

ITEM 1A. Risk Factors

Not applicable.

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	(a)	There were no sales of unregistered securities during the period covered by this report.
	(b)	Not applicable.
	(c)	On November 15, 2018, the Board of Directors authorized a stock repurchase program pursuant to which the Company may repurchase 45,000 shares, or approximately 10.2%, of its outstanding common stock as of September 30, 2018. The following table presents for the periods indicated a summary of the purchases made by or on behalf of the company of shares of its common stock.

							Total Maximum Number
					Total Number of		of Shares That May
	Total				Shares Purchased as		Yet Be Purchased As
	Number of		Average  Price		Part of Publicly		Part of Publicly
	Shares		Paid		Announced Plans or		Announced Plans or
Period	Purchased		per Share		Programs		Programs
January 1 through January 31, 2019		-	$	-		-		23,000
February 1 through February 28, 2019		20,261	$	13.80		20,261		2,739
March 1 through March 31, 2019		-	$	-		-		2,739

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

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ITEM 6. Exhibits

Exhibit
Number	Description
3.1	Articles of Incorporation of Community Savings Bancorp, Inc. (incorporated by reference to Registrant’s Form S-1 filed on September 9, 2016, Exhibit 3.1 (File No. 333-213561))
3.2	Bylaws of Community Savings Bancorp, Inc. (incorporated by reference to Registrant’s Form S-1 filed on September 9, 2016, Exhibit 3.2 (File No. 333-213561))
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Principal Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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Community Savings Bancorp, Inc.

SIGNATURES

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

			Community Savings Bancorp, Inc.
Date:	May 15, 2019	By:	/s/Alvin B. Parmiter
			Alvin B. Parmiter
			President and Chief Executive Officer
Date:	May 15, 2019	By:	/s/Sherman E. Crum
			Sherman E. Crum
			Controller and Principal Financial Officer

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