UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30,~~March ~~2018~~31, 2019

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. 000-55652

Best Hometown Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	81-1959486
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

100 East Clay Street, Collinsville, Illinois	62234
(Address of Principal Executive Offices)	Zip Code

(618) 345-1121

(Registrant’s telephone number)

Not Applicable

(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 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES x NO ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and emerging growth company in Rule 12b-2 of the Exchange Act. (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 check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

As of ~~November~~April 819, ~~2018~~2019, there were 826,208 shares of the Registrant’s common stock issued and outstanding.

Securities registered pursuant to Section 12(b) of the Act: None

BEST HOMETOWN BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

PART I. FINANCIAL INFORMATION	~~PART I. FINANCIAL INFORMATION~~
ITEM 1.	FINANCIAL STATEMENTS	2
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	2827
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3633
ITEM 4.	CONTROLS AND PROCEDURES	3633
PART II. OTHER INFORMATION	~~PART II. OTHER INFORMATION~~
ITEM 1.	LEGAL PROCEEDINGS	3633
ITEM 1A.	RISK FACTORS	3633
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3633
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3733
ITEM 4.	MINE SAFETY DISCLOSURES	3733
ITEM 5.	OTHER INFORMATION	3733
ITEM 6.	EXHIBITS	3733
SIGNATURES		3734
INDEX TO EXHIBITS		3835

BEST HOMETOWN BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

(Unaudited)

ITEM 1. FINANCIAL STATEMENTS

	September 30,			December 31,
	March 31,			December 31,
	2018			2017
	2019			2018
ASSETS
Cash and due from banks	$	12,~~568~~649		$	1,~~331~~289
Interest-earning deposits in banks		2,~~241~~584			31,~~859~~950
Total cash and cash equivalents		35,~~809~~233			53,~~190~~239
Available-for-sale securities		1312,~~442~~359			1612,~~211~~841
Loans		8687,~~487~~248			8286,~~343~~851
Allowance for loan losses		(1,~~220~~169	)		(1,~~215~~205	)
Net loans		8586,~~267~~079			8185,~~128~~646
Premises and equipment, net		3,~~159~~062			3,~~312~~120
Bank owned life insurance		3,~~559~~609			3,~~482~~584
Real estate owned, net		81121			81
Accrued interest receivable
Investment securities		~~262~~43			~~249~~41
Loans receivable		47296			51273
Deferred tax asset		~~135~~85			80107
Restricted equity securities		~~563~~307			~~405~~338
Other assets		104			~~104~~105
Total assets	$	~~110~~111,~~428~~298		$	~~110~~109,~~293~~375
LIABILITIES
Deposits
Noninterest-bearing	$	45,~~667~~052		$	54,~~082~~715
Interest-bearing		7987,~~705~~245			8185,~~744~~692
Total deposits		8492,~~372~~297			8690,~~826~~407
Federal Home Loan Bank ("FHLB") advances		125,500			95,~~000~~500
Accrued defined benefit pension and postretirement plans		~~1,172~~830			~~1,785~~827
Other liabilities		~~385~~336			~~219~~284
Total liabilities		98,~~429~~963			97,~~830~~018
Commitments and contingencies
Redeemable common stock held by ESOP plan		~~122~~124			77113
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value, 1,000,000 shares authorized; none issued and outstanding		-			-
Common stock, $0.01 par value, 30,000,000 shares authorized, 826,208 shares issued and outstanding		8			8
Additional paid-in capital		6,~~852~~855			6,~~847~~854
Retained earnings - substantially restricted		76,~~220~~957			87,~~096~~087
Unearned Employee Stock Ownership Plan ("ESOP") common stock, 57,061 and 59,539 shares		(571	)		(595	)
Unearned Employee Stock Ownership Plan ("ESOP") common stock, 55,521 and 56,356 shares		(553	)		(562	)
Accumulated other comprehensive loss, net of tax:
Net unrealized losses on available-for-sale securities		(~~512~~322	)		(~~302~~402	)
Net unrealized losses on defined benefit pension plan and postretirement medical plans, net		(~~998~~610	)		(~~1,591~~628	)
Total accumulated other comprehensive loss, net of tax		(~~1,510~~932	)		(1,~~893~~030	)
Less maximum cash obligation related to ESOP shares		(~~122~~124	)		(77113	)
Total shareholders' equity		1112,~~877~~211			12,~~386~~244
Total liabilities and shareholders' equity	$	~~110~~111,~~428~~298		$	~~110~~109,~~293~~375

See accompanying notes to the condensed consolidated financial statements

BEST HOMETOWN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2018			2017			2018			2017
	2019			2018
Interest income:
Loans receivable	$	~~928~~981		$	~~868~~870		$	~~2,706~~		$	~~2,561~~
Investment securities, taxable		6066			8474			~~201~~			~~290~~
Other interest-earning assets		1419			811			34			27
Total interest income		1,~~002~~066			~~960~~955			~~2,941~~			~~2,878~~
Interest expense:
Deposits		~~299~~403			~~272~~254			~~821~~			~~799~~
Advances from FHLB		6632			4843			~~171~~			~~137~~
Total interest expense		~~365~~435			~~320~~297			~~992~~			~~936~~
Net interest income		~~637~~631			~~640~~658			~~1,949~~			~~1,942~~
Provision for loan losses		-			-			-			-
Net interest income after provision for loan losses		~~637~~631			~~640~~658			~~1,949~~			~~1,942~~
Noninterest income:
Service charges on deposit accounts		2014			2426			68			63
Income on bank owned life insurance		2625			2726			77			55
Gain (Loss) on mortgage loans sold		9			-			13			-
Other		5			7
Gain (Loss) on sales of securities		-			-			-			(19	)
Total noninterest income		44			59
Gain (Loss) on sale of real estate owned		14			-			4			1
Noninterest expense:
Other		6			21			18			29
Salaries and employee benefits		419			431
Total noninterest income		75			72			180			129
Occupancy and equipment		121			123
Noninterest expense:
Data processing		71			71
Salaries and employee benefits		383			391			1,769			1,244
Professional and supervisory fees		94			99
Occupancy and equipment		125			124			365			358
Office expense		13			12
Data processing		93			56			250			163
Advertising		11			12
Professional and supervisory fees		106			151			317			376
FDIC deposit insurance		8			8
Office expense		13			16			37			40
Provision for real estate owned and related expenses		4			6
Advertising		15			12			40			45
Other		64			56
FDIC deposit insurance		8			10			22			25
Total noninterest expense		805			818
Provision for real estate owned and related expenses		5			4			15			19
Loss before income taxes		(130	)		(101	)
Other		64			59			190			164
Income tax expense		-			-
Total noninterest expense		812			823			3,005			2,434
Net loss	$	(130	)	$	(101	)
Loss before income taxes		(100	)		(111	)		(876	)		(363	)
Basic net loss per share	$	(0.17	)	$	(0.13	)
Income tax expense		-			-			-			-
Net loss	$	(100	)	$	(111	)	$	(876	)	$	(363	)
Basic net loss per share	$	(0.13	)	$	(0.15	)	$	(1.14	)	$	(0.47	)

See accompanying notes to the condensed consolidated financial statements

BEST HOMETOWN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands, except share and per share data)

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2018			2017			2018			2017
	2019			2018
Net loss	$	(~~100~~130	)	$	(~~111~~101	)	$	~~(876~~	)	$	~~(363~~	)
Other comprehensive income:
Unrealized gain (loss) on available-for-sale securities:
Unrealized holding gain (loss) arising during the period		~~(59~~100	)	$	33(156	)		~~(264~~	)		69
Reclassification adjustment for gains (losses) included in net income		-			-			-			19
Tax effect		(20	)		32
Tax effect		12			(11	)		54			(29	)
Net of tax		80			(124	)
Net of tax		(47	)		22			(210	)		59
Defined benefit pension and post retirement medical plans:
Defined benefit pension and post retirement medical plans:
Net gain (loss) arising during the period on plans		-			-
Net gain (loss) arising during the period on plans		-			-			-			-
Reclassification adjustment for settlement of portion of accumulated benefit obligation		-
Reclassification adjustment for settlement of portion of accumulated benefit obligation		-						561
Reclassification adjustment for amortization of prior service cost and net gain/loss included in net periodic pension cost		18			24
Reclassification adjustment for amortization of prior service cost and net gain/loss included in net periodic pension cost		-			25			32			74
Tax effect		-			-
Tax effect		-			-			-			-
Net of tax		18			24
Net of tax		-			25			593			74
Total other comprehensive income		98			(100	)
Total other comprehensive income		(47	)		47			383		$	133
Comprehensive loss	$	(32	)	$	(201	)
Comprehensive loss	$	(147	)	$	(64	)	$	(493	)	$	(230	)

See accompanying notes to the condensed consolidated financial statements

BEST HOMETOWN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share and per share data)

(Unaudited)

														Net Unrealized
														Losses
											Net Unrealized			On Defined			Maximum
			Additional					Unearned			Losses			Benefit Pension and			Cash Obligation
	Common		Paid-In		Retained			ESOP			On Available-for-sale			Postretirement			Related to
	Stock		Capital		Earnings			Shares			Securities, Net			Medical Plans, Net			ESOP Shares			Total
Balance at December 31, 2016	$	8	$	6,839	$	8,330		$	(628	)	$	(269	)	$	(1,481	)	$	(41	)	$	12,758
Balance at December 31, 2017	$	8	$	6,847	$	8,096		$	(595	)	$	(302	)	$	(1,591	)	$	(77	)	$	12,386
Net loss		-		-		(~~363~~101	)		-			-			-			-			(~~363~~101	)
Other comprehensive income		-		-		-			-			59(124	)		7424			-			~~133~~(100	)
ESOP shares earned		-		62		-			248			-			-			-			3010
Change related to ESOP shares cash obligation		-		-		-			-			-			-			(319	)		(319	)
Balance at September 30, 2017	$	8	$	6,845	$	7,967		$	(604	)	$	(210	)	$	(1,407	)	$	(72	)	$	12,527
Balance at March 31, 2018	$	8	$	6,849	$	7,995		$	(587	)	$	(426	)	$	(1,567	)	$	(86	)	$	12,186
Balance at December 31, 2017		8		6,847		8,096			(595	)		(302	)		(1,591	)		(77	)		12,386
Balance at December 31, 2018		8		6,854		7,087			(562	)		(402	)		(628	)		(113	)		12,244
Net loss		-		-		(~~876~~130	)		-			-			-			-			(~~876~~130	)
Other comprehensive income		-		-		-			-			~~(210~~80	)		~~593~~18			-			~~383~~98
ESOP shares earned		-		51		-			249			-			-			-			2910
Change related to ESOP shares cash obligation		-		-		-			-			-			-			(4511	)		(4511	)
Balance at September 30, 2018	$	8	$	6,852	$	7,220		$	(571	)	$	(512	)	$	(998	)	$	(122	)	$	11,877
Balance at March 31, 2019	$	8	$	6,855	$	6,957		$	(553	)	$	(322	)	$	(610	)	$	(124	)	$	12,211

See accompanying notes to the condensed consolidated financial statements

BEST HOMETOWN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(Amounts in thousands, except share and per share data)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31
	2018			2017
	2019			2018
Cash flows from operating activities:
Net loss	$	(~~876~~130	)	$	(~~363~~101	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization, net		~~410~~106			~~533~~141
Provision for loan losses		-			-
Income on bank owned life insurance		(25	)		(26	)
Income on bank owned life insurance		(77	)		(55	)
ESOP compensation expense		10			10
(Gain) loss on sale of real estate owned		(4	)		(1	)
(Gain) loss on sales of securities		-			19
ESOP compensation expense		29			30
Net change in operating assets and liabilities:
Accrued interest receivable		(925	)		46
Accrued interest payable		6-			(13	)
Other		~~139~~76			51215
Net cash provided by (used in) operating activities		(382	)		217
Net cash provided by operating activities		12			242
Cash flows from investing activities:
Loan originations and repayments, net		(~~4,204~~473	)		~~(6,484~~170	)
Purchases of available-for-sale securities		-			(1,816	)
Proceeds from maturities, paydowns and calls of available-for-sale securities		534			722
Proceeeds from maturities, paydowns and calls of available-for-sale securities		2,299			3,844
Redemptions (purchases) of FHLB stock, net		31			79
Proceeds from sales of available-for-sale securities		-			2,998
Net cash provided by investing activities		92			971
Purchase of bank owned life insurance		-			(3,400	)
Redemptions (purchases) of FHLB stock, net		(158	)		432
Purchases of premises and equipment		(24	)		(426	)
Proceeds from sale of foreclosed real estate		42			33
Net cash used in investing activities		(2,045	)		(4,819	)
Cash flows from financing activities:
Net change in deposits		(21,~~454~~890	)		~~318~~(361	)
Borrowings of FHLB advances		~~16,500~~-			32,000
Repayments of FHLB advances		~~(13,000~~-	)		-(4,000	)
Net cash provided by financing activities		1,046			3,318
Net cash provided by (used in) financing activities		1,890			(2,361	)
Change in cash and cash equivalents		(1,~~381~~994	)		(1,~~284~~148	)
Cash and cash equivalents at beginning of period		53,~~190~~239			5,~~459~~190
Cash and cash equivalents at end of period	$	35,~~809~~233		$	4,~~175~~042
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits	$	~~821~~403		$	~~799~~253
Interest on advances from FHLB		~~166~~32			~~138~~46
Real estate acquired in settlement of loans	$	3840		$	~~113~~38

See accompanying notes to the condensed consolidated financial statements

BEST HOMETOWN BANCORP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(1) BASIS OF PRESENTATION

General

On June 29, 2016, Best Hometown Bank (the “Bank”) (formerly known as Home Federal Savings and Loan Association of Collinsville) completed its conversion (the “Conversion”) from a federally-chartered mutual savings association to the capital stock form of organization, including the establishment of a stock holding company, Best Hometown Bancorp, Inc. (referred to herein as “the Company,” “we,” “us,” or “our”), as parent of the Bank. The stock holding company is organized under the laws of the State of Maryland and owns all of the outstanding common stock of the Bank. In connection with the Conversion, the Company sold 826,208 shares of its common stock, including 66,096 shares (8% of shares sold) that were purchased by the Bank’s employee stock ownership plan (“ESOP”), at a price of $10.00 per share, for gross offering proceeds of $8.3 million. The cost of the conversion and issuance of common stock was $1.4 million, which was deducted from the gross offering proceeds. The Company contributed $5.0 million of the net proceeds from the offering by the Company to the Bank, and $1.2 million was retained by the Company. In addition, $661,000 of the net proceeds were used to fund a loan to the ESOP, with which the ESOP purchased Company shares.

Voting rights are held and exercised exclusively by the shareholders of the holding company. Deposit account holders continue to be insured by the FDIC up to the applicable limits. A liquidation account was established in an amount equal to the Bank’s total equity as of the latest balance sheet date in the final offering circular used in the conversion. Each eligible account holder or supplemental account holder are entitled to a proportionate share of this account in the event of a complete liquidation of the Bank, and only in such event. This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record and will cease to exist if the account is closed. The liquidation account will never be increased despite any increase after conversion in the related deposit balance.

The Bank may not pay a dividend on its capital stock, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements. In addition, the stock holding company is subject to certain regulations related to the repurchase of its capital stock.

The Conversion was accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and equity unchanged as a result.

The accompanying unaudited consolidated financial statements of Best Hometown Bancorp, Inc., which include the accounts of its wholly owned subsidiary Best Hometown Bank have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Intercompany accounts and transactions are eliminated during consolidation.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included to present fairly the financial position as of ~~September~~March 3031, ~~2018~~2019 and December 31, ~~2017 and~~2018 and the results of operations and cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 and ~~2017~~2018. All interim amounts have not ~~been~~ been audited and the results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, herein are not necessarily indicative of the results of operations to be expected for the entire year.

Cash and cash equivalents include cash on hand, federal funds sold, overnight interest-bearing deposits and amounts due from other depository institutions.

BEST HOMETOWN BANCORP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

Use of Estimates

The preparation of condensed consolidated 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 date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. 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 real estate, fair values of financial instruments, measurement of defined benefit pension and postretirement medical plans and valuation of deferred tax assets.

Contingencies

The Company is involved in certain legal actions arising from normal business activities. Management believes that the outcome of such proceedings will not have any material adverse effect on the financial statements of the Company.

(2) NEW ACCOUNTING STANDARDS

The Company is an emerging growth company and as such will be subject to the effective dates noted for the private companies if they differ from the effective dates noted for public companies.

In ~~June~~May ~~2016~~2014, the FASB issued ~~ASU~~Accounting ~~No.~~Standards ~~2016~~Update (“ASU”) 2014-1309, ~~Financial~~Revenue ~~Instruments — Credit~~from ~~Losses~~Contracts ~~(Topic 326) — Measurement~~with Customers. The core principle of ~~Credit~~the guidance is that ~~Losses~~an onentity ~~Financial~~should ~~Instruments.~~recognize ~~The~~revenue ~~provisions~~to ofdepict ~~ASU~~the ~~2016-13~~transfer ~~were~~of ~~issued~~promised togoods ~~provide~~or ~~financial~~services ~~statement~~to ~~users~~customers ~~with~~in ~~more~~an ~~decision-useful information~~amount ~~about~~that reflects the ~~expected~~consideration ~~credit~~to ~~losses~~which onthe ~~financial~~entity ~~instruments~~expects ~~that~~to ~~are~~be ~~not~~entitled ~~accounted~~in exchange for atthose ~~fair~~goods ~~value~~and ~~through~~services. ~~net~~On ~~income~~July 9, ~~including~~ ~~loans~~2015, ~~held~~the FASB ~~for~~approved ~~investment,~~amendments ~~held-to-maturity~~deferring ~~debt~~the ~~securities,~~effective ~~trade~~date ~~and~~by ~~other~~one ~~receivables,~~year. ~~net~~ASU ~~investment~~2014-09 inis ~~leases~~now ~~and other~~effective ~~commitments~~for toannual ~~extend~~reporting ~~credit~~periods ~~held~~beginning after byDecember 15, a2017, ~~reporting~~including ~~entity~~interim atperiods ~~each~~within that reporting ~~date~~period. ~~ASU~~In March and April 2016~~-13~~, ~~requires~~the ~~that~~FASB ~~financial~~issued ~~assets~~final ~~measured~~amendments at(ASU ~~amortized~~2016-08 ~~cost~~and beASU ~~presented~~2016-10) atto clarify the ~~net~~implementation ~~amount~~guidance ~~expected~~for toprincipal beversus ~~collected~~agent considerations, identifying ~~through~~performance anobligations ~~allowance~~and the accounting for ~~credit~~licenses ~~losses that~~of isintellectual ~~deducted~~property. ~~from~~In May 2016, the ~~amortized~~FASB ~~cost~~issued final ~~basis~~amendments (ASU-11) to clarify guidance related to collectability, noncash considerations, presentation of sales tax, and transition. The amendments incan ~~ASU~~be ~~2016-13~~applied ~~eliminate~~retrospectively ~~the~~to ~~probable~~each ~~incurred~~prior ~~loss~~reporting ~~recognition in~~period ~~current~~or ~~GAAP~~retrospectively ~~and~~with ~~reflect~~the ancumulative effect ~~entity’s~~of ~~current~~initially ~~estimate~~applying ofthis ~~all~~Update ~~expected~~recognized ~~credit~~at ~~losses~~the date of initial application. ~~The~~Early ~~measurement~~application ofis ~~expected~~permitted ~~credit~~but not ~~losses~~before isthe ~~based~~original ~~upon~~public ~~historical~~entity ~~experience~~effective date, ~~current conditions~~i.e., ~~and~~annual ~~reasonable~~periods ~~and~~beginning ~~supportable~~after ~~forecasts~~December 15, ~~that~~2016. ~~affect~~This ~~the~~new ~~collectibility~~guidance ofwill not have a material effect on the consolidated financial ~~assets~~statements. This will be effective for year-end December 31, 2019.

~~For~~On ~~purchased~~January 6, ~~financial~~2016, ~~assets~~the ~~with~~FASB aissued ASU ~~more~~2016-~~than~~01, Financial Instruments – Overall (Subtopic 825-~~insignificant amount~~10): Recognition and Measurement of ~~credit~~Financial ~~deterioration~~Assets ~~since~~and ~~origination~~Financial Liabilities. ~~(“PCD~~This ~~assets”)~~update applies to all entities that ~~are~~hold ~~measured~~financial atassets ~~amortized~~or ~~cost,~~owe financial liabilities and is intended to provide more useful information on the ~~initial~~recognition, ~~allowance~~measurement, presentation, and disclosure of financial instruments. The portion of ~~for~~the ~~credit~~ASU ~~losses~~2016-01 that is ~~added~~likely to ~~the~~have ~~purchase~~an ~~price~~effect ~~rather~~on ~~than~~our ~~being~~financial ~~reported~~statements asand disclosures relates a ~~credit~~clarification ~~loss~~of ~~expense~~accounting standards with respect to deferred tax assets arising from unrealized losses on available-for-sale securities. ~~Subsequent~~This ~~changes~~ASU in2016-01 requires an entity to evaluate the ~~allowance~~ need for ~~credit~~a ~~losses~~valuation allowance on ~~PCD~~a deferred tax assets ~~are~~related ~~recognized~~to ~~through~~available-for-sale securities in combination with the ~~statement~~entity’s ofother ~~income~~deferred astax assets. As an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 31, 2021, and interim periods within years beginning after December 31, 2022. The Company does not believe that this new guidance will have a ~~credit~~material ~~loss~~effect ~~expense~~on the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit ~~losses~~Losses ~~relating~~(Topic 326) — Measurement of Credit Losses on Financial Instruments. The provisions of ASU 2016-13 were issued to ~~available~~provide financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for~~-sale~~ at fair value through net income, including loans held for investment, held-to-maturity debt securities, ~~will~~trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost be ~~recorded~~presented at the net amount expected to be collected, through an allowance for credit losses ~~rather~~that is ~~than~~deducted asfrom athe ~~direct~~amortized ~~write~~cost basis. The amendments in ASU 2016-~~down~~13 toeliminate the ~~security~~probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

As an emerging growth company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years beginning after December 15, 2021. The Company is reviewing the technology required to source and models data for the purposes of meeting this standard. While the Company generally expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, the Company cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the Company’s consolidated financial statements.8

InBEST ~~May 2014,~~HOMETOWN ~~the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09~~BANCORP, ~~“Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers~~INC. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016 the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications.

8NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~BEST HOMETOWN BANCORP, INC.~~(Unaudited)

~~NOTES~~(Amounts TOin ~~THE~~thousands, ~~CONDENSED~~except ~~CONSOLIDATED~~share ~~FINANCIAL~~and ~~STATEMENTS~~per share data)

For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (~~Unaudited~~“PCD assets”) that are measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as a credit loss expense.

~~(Amounts~~Credit inlosses ~~thousands,~~relating ~~except~~to ~~share and~~available-for-sale ~~per~~debt ~~share~~securities ~~data)~~will be recorded through an allowance for credit losses rather than as a direct write-down to the security.

As an emerging growth company, ~~these~~ASU ~~amendments~~2016-13 ~~are~~is effective, for ~~annual~~fiscal ~~reporting~~years ~~periods~~ beginning after December 15, ~~2018~~2021, and ~~for~~ interim periods within ~~annual~~those ~~periods~~fiscal ~~beginning after December 15, 2019~~years. The Company’s ~~revenue~~ is ~~primarily~~currently ~~comprised~~working ofwith ~~net~~its ~~interest~~core ~~income~~data onprocessor ~~financial~~in ~~assets~~compiling ~~and financial liabilities, which is explicitly excluded from~~ the ~~scope~~necessary ofloan ~~ASU 2014-09. The~~data ~~Company is continuing~~ to ~~evaluate~~comply with the ~~impact~~ASU, ofand ~~adopting~~we ~~ASU~~have ~~2014-09,~~not ~~but~~completed ~~does~~our ~~not~~evaluation ~~expect~~of the ~~impact~~effects toof ~~have~~implementing athis ~~material~~ASU ~~impact~~will have on ~~the~~our ~~Company’s~~allowance, our financial ~~position or~~statements ~~results~~and ~~of operation~~disclosures.

In ~~August 2016~~March 2017, the FASB issued ASU ~~2016~~ 2017-1508, Receivables—Nonrefundable ~~Statement~~Fees ofand ~~Cash~~Other ~~Flows~~Costs (~~Topic~~Subtopic ~~230~~310-20). The update ~~provides~~changes ~~guidance on~~ the ~~classification~~amortization period of ~~certain~~associated premiums ~~cash~~with ~~receipts~~the ~~and~~purchase ~~cash payments~~of ~~for~~callable ~~presentation~~debt insecurities from amortization over the ~~statement~~life of ~~cash~~the ~~flows.~~security Asto anthe ~~emerging~~earliest ~~growth~~call ~~company,~~date of the ~~amendments~~security. inThe ~~this~~standard ~~ASU~~takes ~~are~~effect ~~effective~~ for fiscal years ~~beginning after December 15, 2018,~~ and interim periods within those fiscal years, beginning after ~~December~~ Dec. 15, ~~2019~~2018. 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. AnThe ~~entity~~Company ~~that elects~~ early adopted ~~adoption~~this ~~must~~standard, ~~adopt~~and ~~all~~there ofhave ~~the~~been ~~amendments~~no inpurchases ~~the~~of ~~same~~callable ~~period~~debt securities. ~~The~~Accordingly, ~~Company believes that~~ the adoption of this ~~ASU~~ standard will not have aan ~~material~~ effect toon ~~our~~the Company’s consolidated financial statements as the company does not own any callable debt securities.

In ~~January 2016~~March 2017, the FASB issued ASU ~~2016~~ 2017-0108, ~~Financial~~“Premium ~~Instruments — Overall~~Amortization ~~(Subtopic~~on ~~825-10):~~Purchased ~~Recognition~~Callable ~~and Measurement of Financial Assets and Financial Liabilities~~Debt.” This ~~Update~~ASU applies to all entities that hold ~~financial~~investments ~~assets~~in orcallable debt ~~owe~~securities ~~financial~~that ~~liabilities~~have ~~and~~an isamortized ~~intended to~~cost ~~provide~~basis ~~more~~in ~~useful~~excess ~~information~~of onthe amount that is repayable by the ~~recognition,~~issuer ~~measurement,~~at ~~presentation,~~the ~~and~~earliest ~~disclosure~~call date of(that ~~financial~~is, ~~instruments~~at a premium). The ~~portion~~ of ASU ~~2016-01~~requires ~~that~~the ispremium ~~likely~~to be amortized to ~~have~~the anearliest ~~effect~~call ondate, ~~our~~not ~~financial~~the ~~statements~~maturity ~~and~~date. ~~disclosures~~The amendments ~~relates~~do anot ~~clarification~~require of an accounting ~~standards~~change ~~with~~for ~~respect~~securities toheld ~~deferred~~at ~~tax~~a ~~assets~~discount; ~~arising~~the ~~from~~discount ~~unrealized~~continues ~~losses~~to onbe ~~available-for-sale~~amortized ~~securities.~~to ~~This~~maturity. As an emerging growth company, ASU ~~2016~~2017-0108 ~~requires~~is aneffective ~~entity~~as to ~~evaluate~~ the ~~need~~Company for ayears ~~valuation~~beginning ~~allowance~~after onDecember a15, ~~deferred~~2019 ~~tax~~and ~~asset~~interim periods ~~related~~within toyears ~~available-for-sale securities~~beginning after December 15, 2020. Early adoption is permitted. Management is still in ~~combination~~the ~~with~~process of evaluating the ~~entity~~impact of adopting this guidance, but does not expect the ASU to have a material effect on the Company’s ~~other~~financial ~~deferred~~position or ~~tax~~results ~~assets~~of operations.

AsOther anaccounting ~~emerging~~standards growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within years beginning after December 15, 2019. Early adoption of the amendments in the 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, proposed by ~~all other entities, that have not yet been made available for issuance, are permitted as of~~ the ~~beginning~~FASB ofor ~~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 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 cumulativestandards-~~effect~~setting ~~adjustment~~bodies toare the balance sheet as of the beginning of the fiscal year of adoption. The Company is continuing to evaluate the impact of adopting this new guidance on its consolidated financial statements, but the adoption of ASU 2016-01 is not expected to have a material impact on the Company’s financial position, or results of ~~operation~~operations or cash flows.

~~Adoption of New Accounting Pronouncement~~9

~~Effective~~BEST ~~December~~HOMETOWN 31BANCORP, ~~2017, the Company early adopted guidance related to income taxes~~INC. The new guidance was applied in the period of adoption. Current accounting principles require that the effect of a change in tax laws or rates on deferred tax liabilities or assets to be included in income from continuing operations in the reporting period that includes the enactment date, even if the related income tax effects were originally charged or credited directly to accumulated other comprehensive income (“AOCI”). The Company’s accounting policy for the release of stranded tax effects in AOCI in on an aggregate portfolio basis. The new guidance allows a reclassification of AOCI to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“US Tax Reform”). The Company early adopted this standard effective December 31, 2017 and reclassified $300 from AOCI to retained earnings due to re-measuring from 35% to 21% the federal deferred taxes on the accumulated other comprehensive income components related to available for sale securities, and the defined benefit and postretirement medical plans.

~~Other~~NOTES ~~accounting~~TO ~~standards~~THE ~~that~~CONDENSED ~~have~~CONSOLIDATED ~~been~~FINANCIAL ~~issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.~~STATEMENTS

9(Unaudited)

~~BEST~~(Amounts ~~HOMETOWN~~in ~~BANCORP~~thousands, ~~INC.~~except share and per share data)

~~NOTES~~(3) TOEARNINGS ~~THE~~(LOSS) ~~CONDENSED~~PER ~~CONSOLIDATED FINANCIAL STATEMENTS~~SHARE

~~(Unaudited)~~Basic EPS or loss per common share is determined by dividing net earnings or loss available to common shareholders by the weighted average number of common shares outstanding for the period. ESOP shares are considered outstanding for this calculation unless unearned. The factors used in the earnings per common share computation follow:

(Amounts in thousands, except share and per share data)

	Three Months Ended
	March 31,			March 31,
	2019			2018

Loss per share
Net loss	$	(130	)	$	(101	)
Weighted average common shares outstanding		826,208			826,208
Less: average unearned ESOP shares		(55,939	)		(59,126	)
Weighted average common shares outstanding		770,270			767,082

Basic loss per share	$	(0.17	)	$	(0.13	)

~~(3)~~Given ~~EARNINGS~~a ~~(LOSS)~~net ~~PER~~loss ~~SHARE~~for the three ended March 31, 2019 and 2018, only basic loss per share is applicable.

~~Basic~~(4) ~~EPS~~SECURITIES orAVAILABLE ~~loss~~FOR per common share is determined by dividing net earnings or loss available to common shareholders by the weighted average number of common shares outstanding for the period. ESOP shares are considered outstanding for this calculation unless unearned. The factors used in the earnings per common share computation follow:SALE

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2018			2017			2018			2017
Loss per share
Net loss	$	(100	)	$	(111	)	$	(876	)	$	(363	)
Weighted average common shares outstanding		826,208			826,208			826,208			826,208
Less: average unearned ESOP shares		(57,474	)		(60,778	)		(58,300	)		(61,605	)
Weighted average common shares outstanding		768,734			765,430			767,908			764,603
Basic loss per share	$	(0.13	)	$	(0.15	)	$	(1.14	)	$	(0.47	)

Debt and mortgage-backed securities have been classified in the condensed consolidated balance sheets according to management’s intent. U.S. Government agency mortgage-backed securities consist of securities issued by U.S. Government agencies and U.S. Government sponsored enterprises. Investment securities at March 31, 2019 and December 31, 2018 are as follows:

Given a net loss for the three and nine months ended September 30, 2018 and 2017, only basic loss per share is applicable.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
March 31, 2019	Cost		Gains		Losses			Value
Debt securities:
U.S. Government agency SBAP security	$	585	$	-	$	(17	)	$	568
U.S. Government agency mortgage-backed securities - residential		12,182		-		(391	)		11,791
	$	12,767	$	-	$	(408	)	$	12,359

(4) SECURITIES AVAILABLE FOR SALE

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2018	Cost		Gains		Losses			Value
Debt securities:
U.S. Government agency SBAP security	$	586	$	-	$	(21	)	$	565
U.S. Government agency mortgage-backed securities - residential		12,763		-		(487	)		12,276
	$	13,349	$	-	$	(508	)	$	12,841

~~Debt~~As ~~and mortgage-backed securities have been classified in the condensed consolidated balance sheets according to management’s intent. U.S. Government agency mortgage-backed securities consist~~ of ~~securities~~March ~~issued~~31, by2019 ~~U.S. Government agencies~~ and ~~U.S.~~December ~~Government sponsored enterprises. Investment securities at September 30~~31, 2018, no ~~and~~investment ~~December~~securities ~~31,~~were ~~2017~~pledged ~~are~~for aspublic ~~follows:~~deposits.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
September 30, 2018	Cost		Gains		Losses			Value
Debt securities:
U.S. Government agency SBAP security	$	676	$	-	$	(39	)	$	637
U.S. Government agency mortgage-backed securities - residential		13,413		-		(608	)		12,805
	$	14,089	$	-	$	(647	)	$	13,442

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2017	Cost		Gains		Losses			Value
Debt securities:
U.S. Government agency SBAP security	$	786	$	-	$	(24	)	$	762
U.S. Government agency mortgage-backed securities - residential		15,808		-		(359	)		15,449
	$	16,594	$	-	$	(383	)	$	16,211

BEST HOMETOWN BANCORP, INC.

AsNOTES ofTO ~~September~~THE ~~30,~~CONDENSED ~~2018~~CONSOLIDATED ~~and December 31,~~FINANCIAL ~~2017, no investment securities were pledged for public deposits.~~STATEMENTS

10(Unaudited)

~~BEST~~(Amounts ~~HOMETOWN~~in ~~BANCORP~~thousands, ~~INC.~~except share and per share data)

~~NOTES~~The TOfollowing ~~THE~~tables ~~CONDENSED~~show ~~CONSOLIDATED~~the ~~FINANCIAL~~fair value ~~STATEMENTS~~and unrealized loss of securities that have been in unrealized loss positions for less than twelve months and for more than twelve months at March 31, 2019 and December 31, 2018. The tables also show the number of securities in an unrealized loss position for each category of investment security as of the respective dates.

Because the actual cash flows for the Small Business Administration Program (~~Unaudited~~“SBAP”) asset backed security and mortgage-backed securities may differ from their contractual maturities, a maturity table is not shown.

(Amounts in thousands, except share and per share data)

	Less than 12 Months						12 Months or Longer
					Number in							Number in
	Fair		Unrealized		Unrealized		Fair		Unrealized			Unrealized
March 31, 2019	Value		Loss		Loss (1)		Value		Loss			Loss (1)
U.S. Government agency SBAP security	$	-	$	-		-	$	568	$	(17	)		1
U.S. Government agency mortgage-backed securities - residential		-		-		-		11,791		(391	)		27
	$	-	$	-		-	$	12,359	$	(408	)		28

The following tables show the fair value and unrealized loss of securities that have been in unrealized loss positions for less than twelve months and for more than twelve months at September 30, 2018 and December 31, 2017. The tables also show the number of securities in an unrealized loss position for each category of investment security as of the respective dates.

	Total
						Number in
	Fair		Unrealized			Unrealized
March 31, 2019	Value		Loss			Loss (1)
U.S. Government agency SBAP security	$	568	$	(17	)		1
U.S. Government agency mortgage-backed securities - residential		11,791		(391	)		27
Total	$	12,359	$	(408	)		28

Because the actual cash flows for the Small Business Administration Program (“SBAP”) asset backed security and mortgage-backed securities may differ from their contractual maturities, a maturity table is not shown.

	Less than 12 Months						12 Months or Longer
					Number in							Number in
	Fair		Unrealized		Unrealized		Fair		Unrealized			Unrealized
December 31, 2018	Value		loss		Loss (1)		Value		loss			Loss (1)
U.S. Government agency bonds	$	-	$	-		-	$	565	$	(21	)		1
U.S. Government agency mortgage-backed securities - residential		-		-		-		12,276		(487	)		27
Total	$	-	$	-		-	$	12,841	$	(508	)		28

	Less than 12 Months							12 Months or Longer
	Total
						Number in							~~Number in~~
	Fair		Unrealized			Unrealized		~~Fair~~		~~Unrealized~~			~~Unrealized~~
September 30, 2018	Value		Loss			Loss (1)		Value		Loss			Loss (1)
December 31, 2018	Value		Loss			Loss (1)
U.S. Government agency SBAP security	$	-	$	-			-	$	637	$	(39	)		1
U.S. Government agency bonds	$	565	$	(21	)		1
U.S. Government agency mortgage-backed securities - residential		-12,276		-(487	)		-27		~~12,805~~		~~(608~~	)		27
	$	-	$	-			-	$	13,442	$	(647	)		28
Total	$	12,841	$	(508	)		28

	Total
						Number in
	Fair		Unrealized			Unrealized
September 30, 2018	Value		Loss			Loss (1)
U.S. Government agency SBAP security	$	637	$	(39	)		1
U.S. Government agency mortgage-backed securities - residential		12,805		(608	)		27
Total	$	13,442	$	(647	)		28

(1)

Represents actual number of securities in an unrealized loss position.

	Less than 12 Months							12 Months or Longer
						Number in							Number in
	Fair		Unrealized			Unrealized		Market		Unrealized			Unrealized
December 31, 2017	Value		loss			Loss (1)		Value		loss			Loss (1)
U.S. Government agency bonds	$	-	$	-			-	$	762	$	(24	)		1
U.S. Government agency mortgage-backed securities - residential		1,607		(15	)		3		13,842		(344	)		24
Total	$	1,607	$	(15	)		3	$	14,604	$	(368	)		25

	Total
						Number in
	Fair		Unrealized			Unrealized
December 31, 2017	Value		Loss			Loss (1)
U.S. Government agency bonds	$	762	$	(24	)		1
U.S. Government agency mortgage-backed securities - residential		15,449		(359	)		27
Total	$	16,211	$	(383	)		28

BEST HOMETOWN BANCORP, INC.

~~(1)~~NOTES ~~Represents~~TO ~~actual~~THE ~~number~~CONDENSED ofCONSOLIDATED ~~securities in an unrealized loss position.~~FINANCIAL STATEMENTS

11(Unaudited)

~~BEST~~(Amounts ~~HOMETOWN~~in ~~BANCORP~~thousands, ~~INC.~~except share and per share data)

~~NOTES~~The TOSBAP ~~THE~~agency ~~CONDENSED~~security ~~CONSOLIDATED~~is ~~FINANCIAL~~an investment ~~STATEMENTS~~comprised of a pool of loans issued under the Small Business Administration, which come with an unconditional guarantee by the U.S. government for the timely payment of principal and interest.

The Company evaluates securities for other-than-temporary impairments (~~Unaudited~~“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company considers the length of time and the extent to which the fair value has been less than cost and the financial condition and near-term prospects of the issuer. Additionally, the Company considers its intent to sell or whether it will be more likely than not it will be required to sell the security prior to the security's anticipated recovery in fair value. In analyzing an issuer's financial condition, the Company may consider whether the securities are issued by Federal Government agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition.

~~(Amounts~~Total infair ~~thousands~~value securities with unrealized losses at March 31, ~~except~~2019 ~~share~~and December 31, 2018, was $12,359 and $12,841, which was 100% at March 31, 2019 and December 31, 2018, ~~per~~respectively, ~~share~~of ~~data)~~the Company’s available-for-sale securities. None of the unrealized losses at March 31, 2019 were recognized into net income for the three months ended March 31, 2019 because the issuers’ bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value of these securities is expected to recover as they approach their maturity date or reset date. None of the unrealized losses at December 31, 2018 were recognized as having OTTI during the three months ended March 31, 2019.

~~The~~There ~~SBAP~~were ~~agency~~no ~~security~~sales ~~is an investment comprised~~ of asecurities ~~pool~~for ~~of loans issued under~~ the ~~Small Business Administration, which come with an unconditional guarantee by the~~ ~~U.S.~~three ~~government~~months ~~for~~ended ~~the~~March ~~timely~~31, ~~payment~~2019 ~~of principal~~ and ~~interest~~2018.

~~The Company evaluates securities for other-than-temporary impairments~~ (~~“OTTI”~~5) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company considers the length of time and the extent to which the fair value has been less than cost and the financial condition and near-term prospects of the issuer. Additionally, the Company considers its intent to sell or whether it will be more likely than not it will be required to sell the security prior to the security's anticipated recovery in fair value. In analyzing an issuer's financial condition, the Company may consider whether the securities are issued by Federal Government agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition.LOANS

~~Total~~The ~~fair~~components ~~value~~of ~~securities~~loans ~~with unrealized losses~~ at ~~September~~March ~~30, 2018 and December~~ 31, ~~2017, was $13,442 and $16,211, which was 100% at September 30, 2018 and December~~2019 31, 2017, respectively, of the Company’s available-for-sale securities. None of the unrealized losses at September 30, 2018 were recognized into net income for the three or nine months ended September 30, 2018 because the issuers’ bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value of these securities is expected to recover as they approach their maturity date or reset date. None of the unrealized losses at December 31, ~~2017~~2018 were ~~recognized~~ as ~~having OTTI during the three or nine months ended September 30, 2018.~~follows:

There were no sales of securities for the three or nine months ended September 30, 2018. For the nine months ended September 30, 2017, proceeds and gross losses on sales of securities were $2,998 and $19, respectively.

	March 31,		December 31,
	2019		2018
Real estate loans:
One-to four-family, owner occupied	$	40,322	$	41,159
One-to four-family, non-owner occupied		10,767		10,787
Commercial and multi-family		27,821		26,664
Construction and land		3,412		3,598
Commercial business loans		2,593		2,587
Consumer loans		2,300		2,031
		87,215		86,826
Net deferred loan (fees) costs		33		25
Total	$	87,248	$	86,851

~~(5) LOANS~~12

~~The~~BEST ~~components~~HOMETOWN ~~of loans at September 30~~BANCORP, ~~2018~~ ~~and December 31, 2017 were as follows:~~INC.

	September 30,		December 31,
	2018		2017
Real estate loans:
One-to four-family, owner occupied	$	42,378	$	44,660
One-to four-family, non-owner occupied		6,316		6,651
Commercial and multi-family		21,779		23,790
Construction and land		3,649		3,619
Commercial business loans		10,451		2,048
Consumer loans		1,895		1,584
		86,468		82,352
Net deferred loan (fees) costs		19		(9	)
Total	$	86,487	$	82,343

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12(Unaudited)

~~BEST~~(Amounts ~~HOMETOWN~~in ~~BANCORP~~thousands, ~~INC.~~except share and per share data)

~~NOTES~~The TOfollowing ~~THE~~tables ~~CONDENSED~~present ~~CONSOLIDATED~~the ~~FINANCIAL~~activity ~~STATEMENTS~~in the allowance for loan losses for the three months ended March 31, 2019 and 2018 by portfolio segment:

(Unaudited)

	Beginning										Ending
	Balance		Provision			Charge-offs			Recoveries		Balance
Three Months Ended March 31, 2019
Real estate loans:
One-to-four family, owner occupied	$	423	$	42		$	(36	)	$	-	$	429
One-to-four family, non-owner occupied		139		(11	)		-			-		128
Commercial and multi-family		431		19			-			-		450
Construction and land		34		(3	)		-			-		31
Commercial business loans		52					-			-		52
Consumer loans		52		7			-			-		59
Unallocated		74		(54	)		-			-		20
	$	1,205	$	-		$	(36	)	$	-	$	1,169

(Amounts in thousands, except share and per share data)

	Beginning									Ending
	Balance		Provision			Charge-offs		Recoveries		Balance
Three Months Ended March 31, 2018
Real estate loans:
One-to-four family, owner occupied	$	525	$	(12	)	$	-	$	-	$	513
One-to-four family, non-owner occupied		81		(4	)		-		2		79
Commercial and multi-family		407		(6	)		-		-		401
Construction and land		34		4			-		-		38
Commercial business loans		41		18			-		-		59
Consumer loans		39		4			-		-		43
Unallocated		88		(4	)		-		-		84
	$	1,215	$	-		$	-	$	2	$	1,217

~~The following tables present the activity in the allowance for loan losses for the three and nine months ended September 30, 2018 and 2017 by portfolio segment:~~13

	Beginning									Ending
Three Months Ended September 30, 2018	Balance		Provision			Charge-offs		Recoveries		Balance
Real estate loans:
One-to-four family, owner occupied	$	440	$	(15	)	$	-	$	-	$	425
One-to-four family, non-owner occupied		77		(1	)		-		1		77
Commercial and multi-family		374		(1	)		-		-		373
Construction and land		43		(7	)		-		-		36
Commercial business loans		165		44			-		-		209
Consumer loans		44		4			-		-		48
Unallocated		76		(24	)		-		-		52
	$	1,219	$	-		$	-	$	1	$	1,220

BEST HOMETOWN BANCORP, INC.

	Beginning										Ending
Three Months Ended September 30, 2017	Balance		Provision			Charge-offs			Recoveries		Balance
Real estate loans:
One-to-four family, owner occupied	$	618	$	(70	)	$	-		$	-	$	548
One-to-four family, non-owner occupied		108		-			(5	)		-		103
Commercial and multi-family		389		21			-			-		410
Construction and land		43		(15	)		-			-		28
Commercial business loans		34		4			-			-		38
Consumer loans		40		6			-			-		46
Unallocated		-		54			-			-		54
	$	1,232	$	-		$	(5	)	$	-	$	1,227

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Beginning									Ending
Nine Months Ended September 30, 2018	Balance		Provision			Charge-offs		Recoveries		Balance
Real estate loans:
One-to-four family, owner occupied	$	525	$	(100	)	$	-	$	-	$	425
One-to-four family, non-owner occupied		81		(9	)		-		5		77
Commercial and multi-family		407		(34	)		-		-		373
Construction and land		34		2			-		-		36
Commercial business loans		41		168			-		-		209
Consumer loans		39		9			-		-		48
Unallocated		88		(36	)		-		-		52
	$	1,215	$	-		$	-	$	5	$	1,220

(Unaudited)

13(Amounts in thousands, except share and per share data)

~~BEST~~The ~~HOMETOWN~~following ~~BANCORP~~tables present the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at March 31, ~~INC.~~2019 and December 31, 2018:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Ending Allowance on Loans						Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Impairment		Impairment		Total		Impairment		Impairment		Total
March 31, 2019
Real estate loans:
One-to four-family, owner occupied	$	-	$	429	$	429	$	536	$	39,786	$	40,322
One-to four-family, non-owner occupied		-		128		128		74		10,693		10,767
Commercial and multi-family		-		450		450		-		27,821		27,821
Construction and land		-		31		31		12		3,400		3,412
Commercial business loans		-		52		52		-		2,593		2,593
Consumer loans		-		59		59		-		2,300		2,300
Unallocated		-		20		20		-		-		-
	$	-	$	1,169	$	1,169	$	622	$	86,593	$	87,215

(Unaudited)

	Ending Allowance on Loans						Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated		Evaluated
	Impairment		Impairment		Total		Impairment		Impairment		Total
December 31, 2018
Real estate loans:
One-to four-family, owner occupied	$	-	$	423	$	423	$	543	$	40,616	$	41,159
One-to four-family, non-owner occupied		-		139		139		75		10,712		10,787
Commercial and multi-family		-		431		431		-		26,664		26,664
Construction and land		-		34		34		13		3,585		3,598
Commercial business loans		-		52		52		-		2,587		2,587
Consumer loans		-		52		52		-		2,031		2,031
Unallocated		-		74		74		-		-		-
	$	-	$	1,205	$	1,205	$	631	$	86,195	$	86,826

~~(Amounts in thousands, except share and per share data)~~14

	Beginning										Ending
Nine Months Ended September 30, 2017	Balance		Provision			Charge-offs			Recoveries		Balance
Real estate loans:
One-to-four family, owner occupied	$	657	$	(123	)	$	(34	)	$	42	$	542
One-to-four family, non-owner occupied		113		(2	)		(5	)		3		109
Commercial and multi-family		309		101			-			-		410
Construction and land		42		(21	)		-			7		28
Commercial business loans		18		20			-			-		38
Consumer loans		26		20			-			-		46
Unallocated		49		5			-			-		54
	$	1,214	$	-		$	(39	)	$	52	$	1,227

BEST HOMETOWN BANCORP, INC.

~~The~~NOTES ~~following~~TO ~~tables~~THE ~~present~~CONDENSED ~~the~~CONSOLIDATED ~~recorded~~FINANCIAL ~~balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at September 30, 2018 and December 31, 2017:~~STATEMENTS

	Ending Allowance on Loans						Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
September 30, 2018	Impairment		Impairment		Total		Impairment		Impairment		Total
Real estate loans:
One-to four-family, owner occupied	$	-	$	425	$	425	$	572	$	41,806	$	42,378
One-to four-family, non-owner occupied		-		77		77		76		6,240		6,316
Commercial and multi-family		-		373		373		-		21,779		21,779
Construction and land		-		36		36		13		3,636		3,649
Commercial business loans		-		209		209		-		10,451		10,451
Consumer loans		-		48		48		-		1,895		1,895
Unallocated		-		52		52		-		-		-
	$	-	$	1,220	$	1,220	$	661	$	85,807	$	86,468

(Unaudited)

	Ending Allowance on Loans						Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated		Evaluated
December 31, 2017	Impairment		Impairment		Total		Impairment		Impairment		Total
Real estate loans:
One-to four-family, owner occupied	$	-	$	525	$	525	$	635	$	44,025	$	44,660
One-to four-family, non-owner occupied		-		81		81		116		6,535		6,651
Commercial and multi-family		-		407		407		-		23,790		23,790
Construction and land		-		34		34		13		3,606		3,619
Commercial business loans		-		41		41		-		2,048		2,048
Consumer loans		-		39		39		-		1,584		1,584
Unallocated		-		88		88		-		-		-
	$	-	$	1,215	$	1,215	$	764	$	81,588	$	82,352

(Amounts in thousands, except share and per share data)

14The Company, at times, will maintain an unallocated allowance for loan losses due to uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance for loan losses is maintained to cover probable and incurred credit losses inherent in the loan portfolio but not captured in the general component, such as historical loss experience data that may not precisely correspond to individual loan portfolio segments and to uncertainties in economic conditions.

~~BEST~~The ~~HOMETOWN~~tables ~~BANCORP~~below present loans that were individually evaluated for impairment by portfolio segment at March 31, ~~INC~~2019 and December 31, 2018.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	March 31, 2019						December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
With no recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	689	$	536	$	-	$	698	$	543	$	-
One-to four-family, non-owner occupied		98		74		-		99		75		-
Commercial and multi-family		-		-		-		-		-		-
Construction and land		12		12		-		13		13		-
Commercial business loans		-		-		-		-		-		-
Consumer loans		-		-		-		-		-		-
Total	$	799	$	622	$	-	$	810	$	631	$	-

With recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	-	$	-	$	-	$	-	$	-	$	-
One-to four-family, non-owner occupied		-		-		-		-		-		-
Commercial and multi-family		-		-		-		-		-		-
Construction and land		-		-		-		-		-		-
Commercial business loans		-		-		-		-		-		-
Consumer loans		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-

Totals:
Real estate loans	$	799	$	622	$	-	$	810	$	631	$	-
Commercial loans		-		-		-		-		-		-
Consumer and other loans		-		-		-		-		-		-
Total	$	799	$	622	$	-	$	810	$	631	$	-

~~(Unaudited)~~Generally, impaired loans with identified losses have been reduced by partial charge-offs and are carried at their estimated net realizable value. The Company believes no further allowance for loan losses were necessary at March 31, 2019 and December 31, 2018.

~~(Amounts~~There inwere ~~thousands,~~no ~~except~~loans ~~share~~modified as troubled debt restructurings during the three months ended March 31, 2019 and 2018 or commitments to lend additional funds to borrowers ~~per~~with ~~share~~loans ~~data)~~whose terms have been modified as a troubled debt restructure.

~~The~~At ~~Company,~~March ~~at times~~31, ~~will~~2019 ~~maintain~~there ~~an unallocated~~were ~~allowance~~no ~~for~~loans loan losses due to uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance for loan losses is maintained to cover probable and incurred credit losses inherent in ~~the~~ ~~loan portfolio but not captured in~~ the ~~general~~process ~~component,~~of ~~such as historical loss experience data that may not precisely correspond to individual loan portfolio segments and to uncertainties in economic conditions~~foreclosure.

~~The tables below present loans that were individually evaluated for impairment by portfolio segment at September 30, 2018 and December 31, 2017.~~15

	September 30, 2018						December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
With no recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	726	$	572	$	-	$	800	$	635	$	-
One-to four-family, non-owner occupied		99		76		-		153		116		-
Commercial and multi-family		-		-		-		-		-		-
Construction and land		13		13		-		13		13		-
Commercial business loans		-		-		-		-		-		-
Consumer loans		-		-		-		-		-		-
Total	$	838	$	661	$	-	$	966	$	764	$	-
With recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	-	$	-	$	-	$	-	$	-	$	-
One-to four-family, non-owner occupied		-		-		-		-		-		-
Commercial and multi-family		-		-		-		-		-		-
Construction and land		-		-		-		-		-		-
Commercial business loans		-		-		-		-		-		-
Consumer loans		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-
Totals:
Real estate loans	$	838	$	661	$	-	$	966	$	764	$	-
Commercial loans		-		-		-		-		-		-
Consumer and other loans		-		-		-		-		-		-
Total	$	838	$	661	$	-	$	966	$	764	$	-

BEST HOMETOWN BANCORP, INC.

~~Generally,~~NOTES ~~impaired~~TO ~~loans~~THE ~~with~~CONDENSED ~~identified losses~~CONSOLIDATED ~~have been reduced by partial charge-offs and are carried at their estimated net realizable value. The Company believes no~~FINANCIAL ~~further allowance for loan losses were necessary at September 30, 2018 and December 31, 2017.~~STATEMENTS

There were no loans modified as troubled debt restructurings during the three and nine months ended September 30, 2018 and 2017 or commitments to lend additional funds to borrowers with loans whose terms have been modified as a troubled debt restructure. (Unaudited)

At(Amounts ~~September~~in 30thousands, ~~2018~~except ~~there~~share ~~was one residential~~and ~~real~~per ~~estate~~share ~~loans in the process of foreclosure.~~data)

15The tables below present the average recorded investment of loans individually evaluated for impairment and the amount of interest earned on those loans for the three months ended March 31, 2019 and 2018:

BEST HOMETOWN BANCORP, INC.

	Three Months Ended
	March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	694	$	12	$	607	$	11
One-to four-family, non-owner occupied		98		1		96		1
Commercial and multi-family		-		-		-		-
Construction and land		12		-		13		-
Commercial business loans		-		-		-		-
Consumer loans		-		-		-		-
Total	$	804	$	13	$	716	$	12

With recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	-	$	-	$	-	$	-
One-to four-family, non-owner occupied		-		-		-		-
Commercial and multi-family		-		-		-		-
Construction and land		-		-		-		-
Commercial business loans		-		-		-		-
Consumer loans		-		-		-		-
Total	$	-	$	-	$	-	$	-

Totals:
Real estate loans	$	804	$	13	$	716	$	12
Commercial business loans		-		-		-		-
Consumer and other loans		-		-		-		-
Total	$	804	$	13	$	716	$	12

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~16

~~(Unaudited)~~BEST HOMETOWN BANCORP, INC.

~~(Amounts~~NOTES inTO ~~thousands,~~THE ~~except~~CONDENSED ~~share~~CONSOLIDATED ~~and~~FINANCIAL ~~per share data)~~STATEMENTS

The tables below present the average recorded investment of loans individually evaluated for impairment and the amount of interest earned on those loans for the three and nine months ended September 30, 2018 and 2017:(Unaudited)

	Three Months Ended								Nine Months Ended
	September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	580	$	11	$	642	$	10	$	577	$	22	$	648	$	31
One-to four-family, non-owner occupied		77		1		78		1		77		2		79		4
Commercial and multi-family		-		-		-		-		-		-		-		-
Construction and land		13		-		13		-		13		-		13		-
Commercial business loans		-		-		-		-		-		-		-		-
Consumer loans		-		-		-		-		-		-		-		-
Total	$	670	$	12	$	733	$	11	$	667	$	24	$	740	$	35
With recorded allowance:
Real estate loans:
One-to four-family, owner occupied	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
One-to four-family, non-owner occupied		-		-		-		-		-		-		-		-
Commercial and multi-family		-		-		-		-		-		-		-		-
Construction and land		-		-		-		-		-		-		-		-
Commercial business loans		-		-		-		-		-		-		-		-
Consumer loans		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Totals:
Real estate loans	$	670	$	12	$	733	$	11	$	667	$	24	$	740	$	35
Commercial business loans		-		-		-		-		-		-		-		-
Consumer and other loans		-		-		-		-		-		-		-		-
Total	$	670	$	12	$	733	$	11	$	667	$	24	$	740	$	35

(Amounts in thousands, except share and per share data)

16The following tables present the aging of past due loans as well as nonaccrual loans. Nonaccrual loans and accruing loans past due 90 days or more include both smaller balance homogenous loans and larger balance loans that are evaluated either collectively or individually for impairment.

BEST HOMETOWN BANCORP, INC.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Current		Total		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More
March 31, 2019
Real estate loans:
One-to four-family, owner occupied	$	140	$	185	$	67	$	39,930	$	40,322	$	-	$	67
One-to four-family, non-owner occupied		209		-		-		10,558		10,767		-		-
Commercial and multi-family		-		188		-		27,633		27,821		-		-
Construction and land		-		-		-		3,412		3,412		13		-
Commercial business loans		-		-		-		2,593		2,593		-		-
Consumer loans		307		-		-		1,993		2,300		-		-
	$	656	$	373	$	67	$	86,119	$	87,215	$	13	$	67

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Current		Total		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More
December 31, 2018
Real estate loans:
One-to four-family, owner occupied	$	339	$	207	$	71	$	40,542	$	41,159	$	71	$	-
One-to four-family, non-owner occupied		24		-		-		10,763		10,787		-		-
Commercial and multi-family		189		-		-		26,475		26,664		-		-
Construction and land		-		-		-		3,598		3,598		13		-
Commercial business loans		-		-		-		2,587		2,587		-		-
Consumer loans		26		-		-		2,005		2,031		-		-
	$	578	$	207	$	71	$	85,970	$	86,826	$	84	$	-

~~(Unaudited)~~Loan Grades:

~~(Amounts~~Loan ~~in thousands, except share and per share data)~~Grades:

The ~~following~~Company ~~tables~~utilizes ~~present~~a ~~the~~grading ~~aging~~system whereby ofall ~~past~~loans ~~due~~are ~~loans~~assigned asa ~~well~~grade asbased ~~nonaccrual~~on ~~loans~~the risk profile of each loan. ~~Nonaccrual~~Loan ~~loans~~grades ~~and~~are ~~accruing~~determined ~~loans~~based ~~past~~on ~~due~~an 90evaluation ~~days~~of orrelevant information ~~more~~about ~~include~~the ~~both~~ability ~~smaller~~of borrowers to service their debt such as current financial information, historical payment experience, ~~balance~~credit ~~homogenous~~documentation, ~~loans~~public information, and ~~larger~~current ~~balance~~economic trends, among other factors. All loans, ~~that~~regardless of size, are analyzed ~~evaluated~~and ~~either~~are ~~collectively~~given ora ~~individually~~grade ~~for~~based ~~impairment~~upon the management’s assessment of the ability of borrowers to service their debts.

September 30, 2018	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Current		Total		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More
Real estate loans:
One-to four-family, owner occupied	$	328	$	-	$	166	$	41,884	$	42,378	$	166	$	-
One-to four-family, non-owner occupied		24		89		-		6,203		6,316		-		-
Commercial and multi-family		-		-		-		21,779		21,779		-		-
Construction and land		-		-		-		3,649		3,649		13		-
Commercial business loans		14		-		-		10,437		10,451		-		-
Consumer loans		6		-		5		1,884		1,895		-		5
	$	372	$	89	$	171	$	85,836	$	86,468	$	179	$	5

Pass: Loan assets of this grade conform to a preponderance of our underwriting criteria and are acceptable as a credit risk, based upon the current net worth and paying capacity of the obligor. Loans in this category also include loans secured by liquid assets and secured loans to borrowers with unblemished credit histories.

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Current		Total		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More
Real estate loans:
One-to four-family, owner occupied	$	620	$	93	$	-	$	43,947	$	44,660	$	-	$	-
One-to four-family, non-owner occupied		24		-		39		6,588		6,651		-		39
Commercial and multi-family		-		-		-		23,790		23,790		-		-
Construction and land		-		-		-		3,619		3,619		13		-
Commercial business loans		-		-		-		2,048		2,048		-		-
Consumer loans		-		-		-		1,584		1,584		-		-
	$	644	$	93	$	39	$	81,576	$	82,352	$	13	$	39

Pass-Watch: Loan assets of this grade represent our minimum level of acceptable credit risk. This grade may also represent obligations previously rated “Pass”, but with significantly deteriorating trends or previously rated.

~~Loan~~Special ~~Grades~~Mention: Loan assets of this grade have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the loan or of the institution’s credit position at some future date.

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

The Company utilizes a grading system whereby all loans are assigned a grade based on the risk profile of each loan. Loan grades are determined based on an evaluation of relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. All loans, regardless of size, are analyzed and are given a grade based upon the management’s assessment of the ability of borrowers to service their debts.17

~~Pass: Loan~~BEST ~~assets~~HOMETOWN ~~of this grade conform to a preponderance of our underwriting criteria and are acceptable as a credit risk~~BANCORP, ~~based upon the current net worth and paying capacity of the obligor~~INC. ~~Loans in this category also include loans secured by liquid assets and secured loans to borrowers with unblemished credit histories.~~

~~Pass-Watch: Loan~~NOTES ~~assets~~TO ~~of this~~THE ~~grade~~CONDENSED ~~represent~~CONSOLIDATED ~~our minimum level of acceptable credit risk. This grade may also represent obligations previously rated “Pass”,~~FINANCIAL ~~but with significantly deteriorating trends or previously rated.~~STATEMENTS

Special Mention: Loan assets of this grade have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the loan or of the institution’s credit position at some future date.(Unaudited)

~~Substandard: Loan assets~~(Amounts ofin ~~this~~thousands, ~~grade~~except ~~are~~share ~~inadequately protected by the current net worth~~ and ~~paying capacity of the obligor or of the collateral~~ ~~pledged,~~per ifshare any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.data)

17Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

~~BEST~~Loss: Loans ~~HOMETOWN~~classified ~~BANCORP~~loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, ~~INC~~but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future.

~~NOTES~~Loan TOPortfolio ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Segments:

~~(Unaudited)~~The Company groups loans of similar type that share common risk characteristics. We segment our loan portfolio along with assigning individual risk grades to each loan as part of our methodology for determining our allowance for loan losses. Those portfolio segments and significant risk characteristics are as follows:

~~(Amounts~~One-to infour-family, ~~thousands~~owner occupied: One-to four-family, ~~except~~owner ~~share~~occupied loans consist primarily of loans secured by first or second mortgages on primary residences, and are ~~per~~originated ~~share~~as ~~data)~~primarily as fixed-rate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the Company’s market area. 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 on residential properties.

~~Doubtful: Loans~~The Company currently originates residential ~~classified~~mortgage asloans ~~doubtful~~for ~~have~~our ~~all~~portfolio ~~the~~with ~~weaknesses~~loan-to-value ~~inherent~~ratios inof ~~those~~up ~~classified~~to as80% ~~substandard,~~for ~~with~~traditional ~~the~~owner-occupied ~~added~~homes. ~~characteristic~~For ~~that~~traditional homes, the ~~weaknesses~~Company ~~make~~may ~~collection~~originate orloans ~~liquidation~~with inloan-to-value ~~full,~~ratios onin ~~the~~excess ~~basis~~ of ~~currently~~80% ~~existing~~if ~~facts,~~the ~~conditions,~~borrower ~~and~~provides ~~values,~~additional ~~highly questionable~~readily ~~and improbable~~marketable collateral.

~~Loss: Loans~~One-to ~~classified~~four-family, ~~loss~~non-owner occupied: One-to ~~are~~four-family, ~~considered~~non-owner ~~uncollectible~~occupied ~~and~~loans ofare ~~such~~similar ~~little~~to ~~value~~owner ~~that~~occupied ~~their~~one-to ~~continuance~~four-family asloans ~~bankable~~in ~~assets~~terms isof ~~not~~collateral, ~~warranted.~~but ~~This~~they ~~classification~~carry ~~does~~greater ~~not~~inherent ~~mean~~risks ~~that~~than owner occupied loans, since the ~~asset~~repayment ~~has~~ability ~~absolutely~~of nothe ~~recovery~~borrower oris ~~salvage~~generally ~~value,~~reliant ~~but~~on ~~rather~~the ~~that~~success of itthe isincome ~~not~~generated ~~practical~~from orthe ~~desirable~~property. The Company currently originates one-to ~~defer writing~~four-family, ~~off~~non-owner ~~this~~occupied ~~basically~~mortgage ~~worthless~~loans for ~~asset~~our ~~even~~portfolio ~~though~~with ~~partial~~loan-to-value ~~recovery~~ratios ~~may~~of beup ~~effected~~to in80% ~~the~~for ~~future~~traditional owner-occupied homes.

~~Loan~~Commercial ~~Portfolio~~and ~~Segments~~multi-family: Commercial real estate loans are secured primarily by office buildings, churches and various income producing properties. Multi-family real estate loans are secured by generally apartment complexes. Commercial and multifamily real estate loans are underwritten based on the economic viability of the property and creditworthiness of the borrower, with emphasis given to projected cash flow as a percentage of debt service requirements. These loans carry increased risks as they involve larger balances concentrated with single borrowers or groups of related borrowers. Repayment of loans secured by income producing properties depends on the successful operation of the real estate and the economy. The Company generally obtains personal guarantees on these loans.

The Company ~~groups~~currently ~~loans~~originates ~~of similar type~~commercial ~~that~~and ~~share~~multi-family ~~common~~loans ~~risk~~in ~~characteristics.~~amounts Weof ~~segment~~up ~~our~~to ~~loan~~80% ~~portfolio~~of ~~along~~the ~~with~~lesser ~~assigning~~of ~~individual~~the ~~risk~~appraised ~~grades~~value toor ~~each~~the ~~loan as~~purchase ~~part~~price of ~~our~~the ~~methodology~~property ~~for~~with an ~~determining~~appropriate ~~our~~projected ~~allowance~~debt ~~for~~service ~~loan~~coverage ~~losses~~ratio. ~~Those portfolio segments and significant risk characteristics are as follows:~~

~~One-to~~Construction ~~four-family,~~and ~~owner occupied~~Land: ~~One-to~~The ~~four-family,~~Company ~~owner~~makes ~~occupied~~construction loans ~~consist~~to ~~primarily~~individuals offor ~~loans~~the ~~secured~~construction byof ~~first~~their ~~or second mortgages on~~ primary residences, and ~~are~~to commercial businesses for ~~originated~~their asreal ~~primarily~~estate asneeds. ~~fixed-rate~~These loans ~~for~~generally ~~the~~have ~~construction~~maximum terms of nine months, ~~purchase~~and orupon ~~refinancing~~completion of aconstruction convert to conventional amortizing mortgage loans. ~~These~~Residential construction loans ~~are~~have ~~collateralized by~~rates ~~owner~~and terms comparable to one-~~occupied~~to-four ~~properties~~family ~~located~~residential mortgage inloans that the Company’s ~~market area~~originates. ~~Repayment~~Commercial ofconstruction ~~these~~loans have rates and terms comparable to other commercial real estate loans isthat ~~primarily~~we ~~dependent~~originate. onDuring the ~~personal~~ ~~income~~construction ofphase, the ~~borrowers~~borrower generally pays interest only. Generally, ~~which~~the ~~can~~maximum loan-to-value beratio ~~impacted~~of byour ~~economic~~owner-occupied ~~conditions~~construction inloans ~~their~~is ~~market~~80%. ~~areas,~~Residential ~~such~~construction asloans ~~unemployment~~are ~~levels~~generally underwritten pursuant to the same guidelines used for originating permanent residential mortgage loans. Commercial ~~Repayment~~construction ~~can~~loans ~~also~~are begenerally ~~impacted~~underwritten bypursuant ~~changes~~to inthe ~~property~~same ~~values~~guidelines onused ~~residential~~for ~~properties~~originating other commercial real estate loans.

The Company currently originates residential mortgage loans for our portfolio with loan-to-value ratios of up to 80% for traditional owner-occupied homes. For traditional homes, the Company may originate loans with loan-to-value ratios in excess of 80% if the borrower provides additional readily marketable collateral.18

~~One-to~~BEST ~~four-family,~~HOMETOWN ~~non-owner occupied: One-to four-family~~BANCORP, non-owner occupied loans are similar to owner occupied one-to four-family loans in terms of collateral, but they carry greater inherent risks than owner occupied loans, since the repayment ability of the borrower is generally reliant on the success of the income generated from the propertyINC. ~~The Company currently originates one-to four-family, non-owner occupied mortgage loans for our portfolio with loan-to-value ratios of up to 80% for traditional owner-occupied homes.~~

~~Commercial~~NOTES ~~and~~TO ~~multi-family: Commercial real~~THE ~~estate~~CONDENSED ~~loans~~CONSOLIDATED ~~are secured primarily by office buildings, churches and various income producing properties. Multi-family real~~FINANCIAL estate loans are secured by generally apartment complexes. Commercial and multifamily real estate loans are underwritten based on the economic viability of the property and creditworthiness of the borrower, with emphasis given to projected cash flow as a percentage of debt service requirements. These loans carry increased risks as they involve larger balances concentrated with single borrowers or groups of related borrowers. Repayment of loans secured by income producing properties depends on the successful operation of the real estate and the economy. The Company generally obtains personal guarantees on these loans.STATEMENTS

The Company currently originates commercial and multi-family loans in amounts of up to 80% of the lesser of the appraised value or the purchase price of the property with an appropriate projected debt service coverage ratio.(Unaudited)

18(Amounts in thousands, except share and per share data)

~~BEST~~The ~~HOMETOWN~~Company ~~BANCORP~~also makes interim construction loans for nonresidential properties. In addition, ~~INC~~the Company occasionally makes loans for the construction of homes “on speculation,” but the Company generally permits a borrower to have only two such loans at a time. These loans generally have a maximum term of nine months, and upon completion of construction, borrowers can convert to conventional amortizing nonresidential real estate loans. These construction loans have rates and terms comparable to permanent loans secured by property of the type being constructed that we originate. Generally, the maximum loan-to-value ratio of these construction loans is 85%.

~~NOTES~~Commercial TObusiness ~~THE~~loans: Commercial, non-real ~~CONDENSED~~estate, ~~CONSOLIDATED~~loans ~~FINANCIAL~~are offered to businesses and professionals in the Company’s market area. These loans generally have ~~STATEMENTS~~short and medium terms on a collateralized basis. The structure of these loans are largely determined by the loan purpose and collateral. Sources of collateral can include a lien on equipment, inventory, receivables and other assets of the company. A UCC-1 is typically filed to perfect our lien on these assets.

~~(Unaudited)~~Commercial loans typically are underwritten on the basis of the borrower’s ability to make repayment from the cash flow of its business and generally are collateralized by business assets. As a result, such loans and leases involve additional complexities, variables and risks and require more thorough underwriting and servicing than other types of loans and leases. Repayment of commercial loans largely depends on the successful operation of the business for which and operating loan is utilized.

~~(Amounts~~Consumer inloans: The ~~thousands~~Company offers installment loans for various consumer purposes, ~~except~~including ~~share~~the purchase of automobiles, boats, and for other legitimate ~~per~~personal ~~share~~purposes. ~~data)~~The maximum terms of consumer loans is 12 months for unsecured loans and 12 to 60 months for loans secured by a vehicle, depending on the age of the vehicle. The Company generally only extends consumer loans to existing customers or their immediate family members, and these loans generally

Construction and Land: The Company makes construction loans to individuals for the construction of their primary residences and to commercial businesses for their real estate needs. These loans generally have ~~maximum~~relatively ~~terms~~low ~~of nine months, and upon completion of construction convert to conventional amortizing mortgage loans~~balances. ~~Residential~~We ~~construction~~also ~~loans~~originate ~~have~~floating ~~rates and terms comparable to one-to-four family residential~~rate ~~mortgage~~home ~~loans~~equity ~~that~~lines ~~the~~of ~~Company~~credit ~~originates. Commercial construction loans have rates~~ and ~~terms~~home ~~comparable~~improvement ~~to other commercial real estate~~ loans ~~that~~secured weby ~~originate.~~second ~~During the construction phase, the borrower generally pays interest only~~mortgages. Generally, the maximum loan-to-value ratio of our owner-occupied construction loans is 80%. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential mortgage loans. Commercial construction loans are generally underwritten pursuant to the same guidelines used for originating other commercial real estate loans.

~~The~~Consumer ~~Company~~loans ~~also~~may ~~makes~~entail ~~interim~~greater ~~construction~~credit ~~loans~~risk ~~for~~than ~~nonresidential~~a ~~properties.~~typical Inresidential ~~addition~~mortgage loan, ~~the~~particularly ~~Company~~in ~~occasionally makes loans for~~ the ~~construction~~case of ~~homes~~consumer ~~“on speculation,”~~loans ~~but~~that ~~the~~are ~~Company~~unsecured ~~generally~~or ~~permits~~are asecured ~~borrower~~by rapidly todepreciable ~~have~~assets, ~~only two~~ such ~~loans~~as atautomobiles. aIn ~~time.~~addition, ~~These~~consumer ~~loans~~loan ~~generally~~collections ~~have a~~are ~~maximum~~dependent ~~term~~on ofthe ~~nine~~borrower’s ~~months~~continuing financial stability, and ~~upon~~thus ~~completion~~are ofmore ~~construction,~~likely ~~borrowers can convert~~ to ~~conventional~~be ~~amortizing~~affected ~~nonresidential real~~by ~~estate~~adverse ~~loans~~personal circumstances. ~~These~~Furthermore, ~~construction~~the ~~loans~~application ~~have~~of various ~~rates~~federal and ~~terms~~state ~~comparable~~laws, toincluding ~~permanent~~bankruptcy ~~loans~~and ~~secured~~insolvency bylaws, ~~property~~may oflimit the ~~type being constructed that we originate. Generally~~amount, ~~the~~which ~~maximum~~can ~~loan-to-value~~be ~~ratio~~recovered ofon ~~these construction~~ such loans ~~is 85%~~.

Commercial business loans: Commercial, non-real estate, loans are offered to businesses and professionals in the Company’s market area. These loans generally have short and medium terms on a collateralized basis. The structure of these loans are largely determined by the loan purpose and collateral. Sources of collateral can include a lien on equipment, inventory, receivables and other assets of the company. A UCC-1 is typically filed to perfect our lien on these assets.19

~~Commercial~~BEST ~~loans~~HOMETOWN ~~typically are underwritten on the basis of the borrower’s ability to make repayment from the cash flow of its business and generally are collateralized by business assets. As a result~~BANCORP, ~~such loans and leases involve additional complexities, variables and risks and require more thorough underwriting and servicing than other types of loans and leases~~INC. ~~Repayment of commercial loans largely depends on the successful operation of the business for which and operating loan is utilized.~~

~~Consumer~~NOTES ~~loans: The~~TO ~~Company offers~~THE ~~installment~~CONDENSED ~~loans~~CONSOLIDATED ~~for various consumer purposes, including the purchase of automobiles, boats, and for other legitimate~~FINANCIAL personal purposes. The maximum terms of consumer loans is 12 months for unsecured loans and 12 to 60 months for loans secured by a vehicle, depending on the age of the vehicle. The Company generally only extends consumer loans to existing customers or their immediate family members, and these loans generallySTATEMENTS

~~have relatively low balances. We also originate floating rate home equity lines of credit and home improvement loans secured by second mortgages.~~(Unaudited)

~~Consumer~~(Amounts ~~loans may entail greater credit risk than a typical residential mortgage loan, particularly~~ in ~~the case of consumer loans that are unsecured or are secured by rapidly depreciable assets~~thousands, ~~such~~except asshare ~~automobiles. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability,~~ and ~~thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of~~ ~~various~~per ~~federal~~share ~~and state laws, including bankruptcy and insolvency laws, may limit the amount, which can be recovered on such loans.~~data)

19The following tables present total loans by risk grade and portfolio segment at March 31, 2019 and December 31, 2018:

BEST HOMETOWN BANCORP, INC.

					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss		Total
March 31, 2019
Real estate loans:
One-to four-family, owner occupied	$	38,686	$	250	$	101	$	1,285	$	-	$	-	$	40,322
One-to four-family, non-owner occupied		10,439		-		254		74		-		-		10,767
Commercial and multi-family		27,821		-		-		-		-		-		27,821
Construction and land		3,199		-		200		13		-		-		3,412
Commercial business loans		2,365		-		228		-		-		-		2,593
Consumer loans		2,295		-		5		-		-		-		2,300
	$	84,805	$	250	$	788	$	1,372	$	-	$	-	$	87,215

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss		Total
December 31, 2018
Real estate loans:
One-to four-family, owner occupied	$	39,433	$	350	$	102	$	1,274	$	-	$	-	$	41,159
One-to four-family, non-owner occupied		10,457		-		254		76		-		-		10,787
Commercial and multi-family		26,664		-		-		-		-		-		26,664
Construction and land		3,386		-		200		12		-		-		3,598
Commercial business loans		2,353		-		234		-		-		-		2,587
Consumer loans		2,026		-		5		-		-		-		2,031
	$	84,319	$	350	$	795	$	1,362	$	-	$	-	$	86,826

(~~Unaudited~~6) FHLB Advances

~~(Amounts~~At inMarch ~~thousands~~31, ~~except~~2019 ~~share~~ and December 31, 2018, ~~per~~advances ~~share~~from ~~data)~~the Federal Home Loan Bank were as follows:

The following tables present total loans by risk grade and portfolio segment at September 30, 2018 and December 31, 2017:

	Interest			March 31,		December 31,
Maturity Date	Rate			2019		2018

April 10, 2019		2.38	%		1,500		1,500
July 18, 2019		2.21	%		2,000		2,000
October 2, 2019		2.46	%		2,000		2,000
Total				$	5,500	$	5,500

					Special
September 30, 2018	Pass		Watch		Mention		Substandard		Doubtful		Loss		Total
Real estate loans:
One-to four-family, owner occupied	$	40,493	$	454	$	143	$	1,288	$	-	$	-	$	42,378
One-to four-family, non-owner occupied		5,984		-		256		76		-		-		6,316
Commercial and multi-family		21,779		-		-		-		-		-		21,779
Construction and land		3,636		-		-		13		-		-		3,649
Commercial business loans		10,268		-		183		-		-		-		10,451
Consumer loans		1,895		-		-		-		-		-		1,895
	$	84,055	$	454	$	582	$	1,377	$	-	$	-	$	86,468

Each advance is payable at its maturity date, with a prepayment penalty if paid earlier than its maturity date. The advances were collateralized by $53,767 and $53,885 of first mortgage loans under a blanket lien arrangement at March 31, 2019 and December 31, 2018. Based on this collateral and the Company’s holdings of FHLB stock, the Company is eligible to borrow up to a total of $44,367 at March 31, 2019.

					Special
December 31, 2017	Pass		Watch		Mention		Substandard		Doubtful		Loss		Total
Real estate loans:
One-to four-family, owner occupied	$	42,482	$	740	$	146	$	1,292	$	-	$	-	$	44,660
One-to four-family, non-owner occupied		6,535		-		-		116		-		-		6,651
Commercial and multi-family		23,790		-		-		-		-		-		23,790
Construction and land		3,438		168		-		13		-		-		3,619
Commercial business loans		1,844		-		204		-		-		-		2,048
Consumer loans		1,584		-		-		-		-		-		1,584
	$	79,673	$	908	$	350	$	1,421	$	-	$	-	$	82,352

20BEST HOMETOWN BANCORP, INC.

~~BEST~~NOTES ~~HOMETOWN~~TO ~~BANCORP,~~THE ~~INC.~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~(Unaudited)

(~~Unaudited~~Amounts in thousands, except share and per share data)

(~~Amounts~~7) inEMPLOYEE ~~thousands,~~STOCK ~~except~~OWNERSHIP ~~share and per share data)~~PLAN

Employees participate in an Employee Stock Ownership Plan (6“ESOP”). ~~FHLB~~The ~~Advances~~ESOP borrowed from the Company to purchase 66,096 shares of the Company’s common stock at $10 per share on June 29, 2016. The Bank may make discretionary contributions to the ESOP and pays dividends on unallocated shares to the ESOP. The ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Any dividends on allocated shares increase participant accounts. Participants receive the shares at the end of employment.

AtNo ~~September~~contributions ~~30,~~to ~~2018~~the ~~and~~ESOP ~~December~~were made during the three months ended March 31, ~~2017,~~ ~~advances~~2019. ~~from~~The expense recognized for the ~~Federal~~three ~~Home~~months ~~Loan~~ended ~~Bank~~March ~~were~~31, as2019 ~~follows:~~and 2018 was $10, and is reported in salaries and wages.

	Interest			September 30,		December 31,
Maturity Date	Rate			2018		2017
February 12, 2018		1.27	%		-		3,000
March 12, 2018		4.92	%		-		1,000
July 18, 2018		1.84	%		-		3,000
September 18, 2018		2.14	%		-		-
October 16, 2018		2.30	%		3,000		-
October 19, 2018		2.19	%		2,000		-
January 2, 2019		2.19	%		2,000		-
April 10, 2019		2.38	%		1,500
July 18, 2019		2.21	%		2,000		2,000
October 2, 2019		2.46	%		2,000		-
Total				$	12,500	$	9,000

ESOP shares at March 31, 2019 and December 31, 2018 are summarized as follows:

Each advance is payable at its maturity date, with a prepayment penalty if paid earlier than its maturity date. The advances were collateralized by $53,399 and $51,532 of first mortgage loans under a blanket lien arrangement at September 30, 2018 and December 31, 2017. Based on this collateral and the Company’s holdings of FHLB stock, the Company is eligible to borrow up to a total of $37,699 at September 30, 2018.

	March 31,		December 31,
	2019		2018
Committed to be released to participants		835		-
Allocated to participants		9,740		9,740
Unearned		55,521		56,356
Total ESOP shares		66,096		66,096

Fair value of unearned shares	$	652	$	654

~~(7)~~At ~~EMPLOYEE~~March ~~STOCK~~31, ~~OWNERSHIP~~2019, ~~PLAN~~the fair value of the 10,575 allocated shares held by the ESOP is $124 and is reported on the balance sheet as mezzanine capital. The fair value of all shares subject to the repurchase obligation is $777.

~~Employees~~In ~~participate~~the inevent anthe ~~Employee~~ESOP ~~Stock~~is unable ~~Ownership~~to ~~Plan~~satisfy ~~(“ESOP”).~~the ~~The~~obligation ~~ESOP~~to ~~borrowed~~repurchase ~~from~~the shares held by each beneficiary upon the beneficiary’s termination or retirement, the Company is obligated to purchase ~~66,096~~such shares ofat their fair market value based on the ~~Company’s~~most ~~common~~recent valuation ~~stock~~report atany ~~$10~~time ~~per~~within ~~share~~60 ondays ~~June~~of ~~29,~~the ~~2016~~distribution date. ~~The~~If ~~Bank~~this ~~may~~right ~~make~~is ~~discretionary~~not ~~contributions~~exercised, toan additional 60-day exercise period is available in the ~~ESOP~~year following the year in which the distribution is made and ~~pays~~begins ~~dividends~~after ona ~~unallocated~~new valuation of the stock ~~shares~~has been determined and communicated to the ~~ESOP~~participant or beneficiary. The allocated shares held by the ESOP ~~uses~~and ~~funds~~the outstanding itshares ~~receives~~held toby ~~repay~~former employees subject to the ~~loan.~~repurchase ~~When~~option ~~loan~~totaled ~~payments~~10,575 ~~are~~and ~~made~~6,557 ~~ESOP~~at ~~shares~~March ~~are~~31, ~~allocated~~2019 toand ~~participants~~2018. At March 31, 2019 the 10,575 shares had a fair value of $124,256 ($11.75 per share based on ~~relative~~the ~~compensation~~most recent valuation report) and ~~expense~~have isbeen ~~recorded~~classified as mezzanine capital. ~~Any~~At ~~dividends~~March on31, ~~allocated~~2018 the 6,557 shares ~~increase~~had ~~participant~~a ~~accounts.~~fair value of $76,717 ~~Participants~~($11.70 ~~receive~~per ~~the~~share ~~shares~~based aton the ~~end~~most ofrecent ~~employment~~valuation report) and have been classified as mezzanine capital.

No contributions to the ESOP were made during the three and nine months ended September 30, 2018. The expense recognized for the three and nine months ended September 30, 2018 was $10 and $29, respectively, and is reported in salaries and wages.21

~~ESOP~~BEST ~~shares~~HOMETOWN ~~at September 30~~BANCORP, ~~2018 and December 31, 2017 are summarized as follows:~~INC.

	September 30,		December 31,
	2018		2017
Committed to be released to participants		2,478		-
Allocated to participants		6,557		6,557
Unearned		57,061		59,539
Total ESOP shares		66,096		66,096
Fair value of unearned shares	$	810	$	697

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

21(Unaudited)

~~BEST~~(Amounts ~~HOMETOWN~~in ~~BANCORP~~thousands, ~~INC.~~except share and per share data)

~~NOTES~~(8) TODEFINED ~~THE~~BENEFIT ~~CONDENSED~~AND ~~CONSOLIDATED~~POST ~~FINANCIAL~~RETIREMENT ~~STATEMENTS~~MEDICAL PLANS

~~(Unaudited)~~Net periodic cost for the defined benefit pension plan and postretirement medical plan for the three months ended March 31, 2019 and 2018 included the following components:

(Amounts in thousands, except share and per share data)

	Defined Benefit						Postretirement
	Pension Plan						Medical Plan
	Three Months Ended						Three Months Ended
	March 31,			March 31,			March 31,			March 31,
	2019			2018			2019			2018

Service cost	$	-		$	-		$	-		$	-
Interest cost		23			29			4			7
Expected return on plan assets		(26	)		(36	)		-			-
Settlements		-			-			-			-
Amortization:
Unrecognized net loss		25			25			-			1
Unrecognized prior service cost		-			-			(7	)		(2	)
Asset (loss) gain deferred		-			-			-			-
Net periodic cost	$	22		$	18		$	(3	)	$	6

~~(8) DEFINED BENEFIT AND POST RETIREMENT MEDICAL PLANS~~22

~~Net~~BEST ~~periodic~~HOMETOWN ~~cost for the defined benefit pension plan and postretirement medical plan for the three and nine months ended September 30~~BANCORP, ~~2018 and 2017 included the following components:~~INC.

	Defined Benefit						Postretirement
	Pension Plan						Medical Plan
	Three Months Ended						Three Months Ended
	September 30,			September 30,			September 30,			September 30,
	2018			2017			2018			2017
Service cost	$	-		$	-		$	-		$	-
Interest cost		34			33			7			9
Expected return on plan assets		(42	)		(36	)		-			-
Settlements		-			-			-			-
Amortization:
Unrecognized net loss		10			25			1			(2	)
Unrecognized prior service cost		-			-			(2	)		2
Asset (loss) gain deferred		-			-			-			-
Net periodic cost	$	2		$	22		$	6		$	9

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Defined Benefit						Postretirement
	Pension Plan						Medical Plan
	Nine Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2018			2017			2018			2017
Service cost	$	-		$	-		$	-		$	-
Interest cost		56			99			22			18
Expected return on plan assets		(68	)		(108	)		-			-
Settlements		561			-			-			-
Amortization:
Unrecognized net loss		34			74			3			4
Unrecognized prior service cost		-			-			(6	)		(4	)
Net periodic cost	$	583		$	65		$	19		$	18

(Unaudited)

22(Amounts in thousands, except share and per share data)

~~BEST~~The ~~HOMETOWN~~following ~~BANCORP~~table summarizes plan assets for the defined benefit pension plan, ~~INC.~~measured at fair value on a recurring basis at March 31, 2019 and December 31, 2018, segregated by the level of the inputs (as defined in Note 9) within the hierarchy used to measure fair value:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

							Total
	Level 1		Level 2		Level 3		Fair Value
March 31, 2019
Pooled separate accounts	$	-	$	2,078	$	-	$	2,078

(Unaudited)

							Total
	Level 1		Level 2		Level 3		Fair Value
December 31, 2018
Pooled separate accounts	$	-	$	1,965	$	-	$	1,965

~~(Amounts~~During inthe ~~thousands~~three months ended March 31, 2019, ~~except~~benefits ~~share~~paid, employer contributions and the actual return on plan assets for the defined benefit pension plan were $73, ~~per~~$0 ~~share~~and ~~data)~~$166 respectively. During three months ended March 31, 2018, benefits paid, employer contributions, and the actual return on plan assets were $116, $0, and $72.

The ~~following~~Company’s ~~table summarizes plan assets for the~~ defined benefit pension plan, ~~measured~~target atallocations ~~fair value on a recurring basis at September 30, 2018~~ and ~~December~~weighted-average ~~31,~~allocations ~~2017, segregated~~ by ~~the~~asset ~~level~~category ofare ~~the inputs (~~as ~~defined in Note 9) within the hierarchy used to measure fair value~~follows:

September 30, 2018	Level 1				Level 2				Level 3		Total Fair Value
			March 31,				December 31,
Pooled separate accounts	$	-			$	2,154			$	-	$	2,154
	Target Allocation 2019		2019				2018
Pooled separate accounts
Equity	30%-40%			35	%			32	%
Debt	60%-70%			65	%			68	%

December 31, 2017		Level 1				Level 2				Level 3				Total Fair Value
Pooled separate accounts		$	-			$	2,654			$	-			$	2,654

The Company’s investment strategy is to maintain a diversified investment portfolio. Rebalancing occurs on a periodic basis to maintain the target allocations, but normal market activity may result in deviations. As a result of the percentage of equities held, actual return of plan assets for any period may fluctuate significantly due to changes in the stock market.

During the three and nine months ended September 30, 2018, benefits paid, employer contributions and the actual return on plan assets for the defined benefit pension plan were $52, $0 and $58 and $1,202, $600 and $97 respectively. Of the benefits paid, $1,012 was paid as a result of retirement payments made to some of our previous employees. During nine months ended September 30, 2017, benefits paid, employer contributions, and the actual return on plan assets were $205, $69, and $219.23

23BEST HOMETOWN BANCORP, INC.

~~BEST~~NOTES ~~HOMETOWN~~TO ~~BANCORP,~~THE ~~INC.~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~(Unaudited)

(~~Unaudited~~Amounts in thousands, except share and per share data)

~~(Amounts~~Changes in ~~thousands,~~accumulated ~~except~~other ~~share~~comprehensive loss associated with the defined benefit and ~~per~~ ~~share~~postretirement ~~data)~~medical plans are as follows:

The Company’s defined benefit pension plan target allocations and weighted-average allocations by asset category are as follows:

	Defined Benefit				Postretirement
	Pension Plan				Medical Plan
	Three Months Ended				Three Months Ended
	March 31				March 31
	2019		2018		2019			2018
Settlements	$	-	$	-	$	-		$	-
Amortization of:
Unrecognized net loss		25	$	25		-			1
Unrecognized prior service cost		-		-		(7	)		(2	)
		25		25		(7	)		(1	)
Tax effect		-		-		-			-
Unrecognized net (gain) loss, net of tax	$	25	$	25	$	(7	)	$	(1	)

	Target Allocation 2017	September 30, 2018			December 31, 2017
Pooled separate accounts
Equity	30%-40%		34	%		40	%
Debt	60%-70%		66	%		60	%

~~The~~BEST ~~Company’s~~HOMETOWN ~~investment strategy is to maintain a diversified investment portfolio. Rebalancing occurs on a periodic basis to maintain the target allocations~~BANCORP, ~~but normal market activity may result in deviations~~INC. ~~As a result of the percentage of equities held, actual return of plan assets for any period may fluctuate significantly due to changes in the stock market.~~

~~Changes~~NOTES inTO ~~accumulated~~THE ~~other~~CONDENSED ~~comprehensive loss~~CONSOLIDATED ~~associated with the defined benefit and postretirement medical plans are as follows:~~FINANCIAL STATEMENTS

	Defined Benefit				Postretirement
	Pension Plan				Medical Plan
	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
Settlements	$	-	$	-	$	-		$	-
Amortization of:
Unrecognized net loss		10	$	25		1			2
Unrecognized prior service cost		-		-		(2	)		(2	)
		10		25		(1	)		-
Tax effect		-		-		-			-
Unrecognized net (gain) loss, net of tax	$	10	$	25	$	(1	)	$	-

(Unaudited)

	Defined Benefit				Postretirement
	Pension Plan				Medical Plan
	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
Settlements	$	561	$	-	$	-		$	-
Amortization of:
Unrecognized net loss		34		74		3			4
Unrecognized prior service cost		-		-		(6	)		(4	)
		595		74		(3	)		-
Tax effect		-		-		-			-
Unrecognized net (gain) loss, net of tax	$	595	$	74	$	(3	)	$	-

(Amounts in thousands, except share and per share data)

24(9) FAIR VALUE OF FINANCIAL INSTRUMENTS

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

~~NOTES~~Level TO1: ~~THE~~Quoted ~~CONDENSED~~prices ~~CONSOLIDATED~~(unadjusted) ~~FINANCIAL~~for identical ~~STATEMENTS~~assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

~~(Unaudited)~~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.

~~(Amounts~~Level in3: ~~thousands,~~Significant ~~except~~unobservable ~~share~~inputs ~~and~~that reflect ~~per~~a ~~share~~reporting ~~data)~~entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

~~(9)~~Investment ~~FAIR VALUE OF FINANCIAL INSTRUMENTS~~Securities:

~~Fair~~The ~~value~~fair isvalues ~~the~~for ~~exchange~~investment ~~price~~securities are ~~that~~determined ~~would be~~by ~~received~~quoted ~~for~~market anprices, ~~asset~~if oravailable ~~paid~~(Level to1). ~~transfer~~For asecurities ~~liability~~where ~~(exit~~quoted ~~price)~~prices inare ~~the~~not ~~principal~~available, orfair ~~most~~values are ~~advantageous~~calculated based on market ~~for~~prices ~~the~~of ~~asset or~~similar ~~liability~~securities in(Level an2). ~~orderly~~For ~~transaction~~securities ~~between~~where quoted prices or market ~~participants~~prices onof ~~the~~similar securities ~~measurement~~are ~~date.~~not ~~There~~available, fair values are ~~three~~calculated ~~levels~~using ofdiscounted ~~inputs~~cash ~~that may~~flows beor ~~used~~other tomarket ~~measure~~indicators ~~fair~~(Level ~~values:~~3).

~~Level~~Impaired 1Loans: ~~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~~The 2:fair ~~Significant~~value ~~other~~of ~~observable~~impaired ~~inputs~~loans ~~other~~with specific ~~than~~allocations ~~Level~~of 1the ~~prices~~allowance ~~such~~for asloan ~~quoted~~losses ~~prices~~is ~~for~~generally ~~similar~~based ~~assets~~on recent real estate appraisals. These appraisals may utilize a single valuation approach or ~~liabilities;~~a ~~quoted~~combination ~~prices~~of inapproaches ~~markets~~including ~~that~~comparable sales and the income approach. Adjustments are routinely ~~not~~made ~~active;~~in orthe ~~other~~appraisal process by the appraisers to adjust for differences between the comparable sales and income data ~~inputs~~available. ~~that~~Such adjustments are ~~observable~~typically orsignificant ~~can~~and result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be ~~corroborated~~valued byusing ~~observable~~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 ~~data~~conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

~~Investment~~Assets ~~Securities:~~acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. 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.

~~The~~Appraisals ~~fair values~~ for ~~investment~~both ~~securities~~collateral-dependent impaired loans and real estate owned are ~~determined~~performed by ~~quoted~~certified ~~market~~general ~~prices,~~appraisers if(for ~~available~~commercial properties) or certified residential appraisers (~~Level~~for 1residential properties). ~~For~~whose ~~securities~~qualifications ~~where~~and ~~quoted~~licenses ~~prices~~have ~~are~~been ~~not~~reviewed ~~available~~and verified by the Company. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair ~~values~~value ~~are~~in ~~calculated~~comparison ~~based~~with onindependent ~~market~~data ~~prices~~sources ofsuch ~~similar~~as ~~securities~~recent ~~(Level~~market 2)data or industry-wide statistics. ~~For~~On ~~securities~~an ~~where~~annual ~~quoted~~basis, ~~prices~~the orCompany compares ~~market~~the ~~prices~~actual selling price of ~~similar securities~~collateral ~~are~~that ~~not~~has ~~available,~~been ~~fair~~sold ~~values~~to ~~are~~the ~~calculated~~most ~~using~~recent ~~discounted~~appraised ~~cash~~value ~~flows~~to ordetermine ~~other~~what ~~market~~additional adjustment ~~indicators~~should ~~(Level~~be 3)made to the appraisal value to arrive at fair value.

~~Impaired Loans:~~25

~~The~~BEST ~~fair~~HOMETOWN 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 appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisalBANCORP, 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 client and client’s business, resulting in a Level 3 fair value classificationINC. ~~Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.~~

~~Real~~NOTES ~~Estate~~TO ~~Owned:~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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. 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.(Unaudited)

~~Appraisals for both collateral-dependent impaired loans and real estate owned are performed by certified general appraisers~~ (~~for~~Amounts ~~commercial~~in ~~properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received~~thousands, ~~management~~except ~~reviews~~share ~~the assumptions~~ and ~~approaches utilized in the appraisal as well as the overall resulting fair value~~ inper ~~comparison~~share ~~with independent~~ data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.)

25Assets and liabilities measured at fair value on a recurring basis at March 31, 2019 and December 31, 2018 are summarized below:

BEST HOMETOWN BANCORP, INC.

	Level 2
	March 31,		December 31,
	2019		2018
Financial Assets
Available-for-sale securities	$	12,359	$	12,841

~~NOTES~~There TOwere ~~THE~~no ~~CONDENSED~~financial or ~~CONSOLIDATED~~nonfinancial ~~FINANCIAL STATEMENTS~~assets that required nonrecurring level 3 adjustments for the three months ended March 31, 2019 and 2018.

~~(Unaudited)~~Fair Value of Financial Instruments

~~(Amounts~~Many of the Company’s assets and liabilities are short-term financial instruments whose carrying amounts reported in ~~thousands~~the consolidated balance sheet approximate fair value and are considered Level 1 assets and liabilities. These items include cash and cash equivalents, ~~except~~accrued ~~share~~interest receivable and accrued interest payable balances. The estimated fair values of the Company’s remaining on-balance sheet financial instruments ~~per~~at ~~share~~September ~~data)~~30, 2018 and December 31, 2017 are summarized below:

Assets and liabilities measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017 are summarized below:

	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
March 31, 2019
Financial assets
Available-for-sale securities	$	12,359	$	-	$	12,359	$	-	$	12,359
Restricted equity securities (1)		307		NA		NA		NA		NA
Loans, net		86,079		-		-		81,274		81,274

Financial liabilities
Deposits	$	92,297	$	22,703	$	69,468	$	-	$	92,171
FHLB Advances		5,500		-		5,503		-		5,503

December 31, 2018
Financial assets
Available-for-sale securities	$	12,841	$	-	$	12,841	$	-	$	12,841
Restricted equity securities (1)		338		NA		NA		NA		NA
Loans, net		85,646		-		-		81,812		81,812

Financial liabilities
Deposits	$	90,407	$	22,961	$	67,555	$	-	$	90,516
FHLB Advances		5,500		-		5,503		-		5,503

	Level 2
	September 30,		December 31,
	2018		2017
Financial Assets
Available-for-sale securities	$	13,442	$	16,211

(1) It is not practicable to determine fair value of restricted equity securities due to restrictions placed on transferability.

~~There were no financial or nonfinancial assets that required nonrecurring level 3 adjustments for the three and nine months ended September 30, 2018 and 2017.~~26

~~Fair~~PART ~~Value~~1. ofFINANCIAL ~~Financial Instruments~~INFORMATION

Many of the Company’s assets and liabilities are short-term financial instruments whose carrying amounts reported in the consolidated balance sheet approximate fair value and are considered Level 1 assets and liabilities. These items include cash and cash equivalents, accrued interest receivable and accrued interest payable balances. The estimated fair values of the Company’s remaining on-balance sheet financial instruments at September 30, 2018 and December 31, 2017 are summarized below:

	Carrying		Fair Value
September 30, 2018	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale securities	$	13,442	$	-	$	13,442	$	-	$	13,442
Restricted equity securities (1)		563		NA		NA		NA		NA
Loans, net		85,267		-		-		83,247		83,247
Financial liabilities
Deposits	$	84,372	$	23,604	$	60,890	$	-	$	84,494
FHLB Advances		12,500		-		12,495		-		12,495
December 31, 2017
Financial assets
Available-for-sale securities	$	16,211	$	-	$	16,211	$	-	$	16,211
Restricted equity securities (1)		405		NA		NA		NA		NA
Loans, net		81,128		-		-		81,686		81,686
Financial liabilities
Deposits	$	86,826	$	27,391	$	60,305	$	-	$	87,696
FHLB Advances		9,000		-		9,013		-		9,013

(1) It is not practicable to determine fair value of restricted equity securities due to restrictions placed on transferability.

BEST HOMETOWN BANCORP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

The following methods and assumptions were used in estimating the fair values shown above:

Loans:

The fair value of loans is computed for each loan category using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Deposits:

Deposits with no defined maturities, such as checking accounts, savings accounts and money market deposit accounts are, by definition, equal to the amount payable on demand at the balance sheet date. The fair values of certificate accounts are computed using interest rates currently being offered to deposit customers.

FHLB advances:

FHLB advances are valued at current market interest rates of FHLB advances.

Off-balance sheet commitments:

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to either 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.

PART 1. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations at ~~September~~March 3031, ~~2018~~2019 and for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019 and ~~2017~~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 Condensed Consolidated Financial Statements and the notes thereto, appearing in Part 1, Item 1 of this report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

statements regarding the asset quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Form 10-Q, except as required by law.

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

general economic conditions, either nationally or in our market areas, that are worse than expected;

competition among depository and other financial institutions;

changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

adverse changes in the securities markets;

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

our ability to enter new markets successfully and capitalize on growth opportunities;

changes in consumer spending, borrowing and savings habits;

changes in accounting policies and practices, as may be adopted by the Securities and Exchange Commission, the Financial Accounting Standards Board and the Public Company Accounting Oversight Board;

changes in our organization, compensation and benefit plans;

changes in our financial condition or results of operations that reduce capital; and

changes in the financial condition or future prospects of issuers of securities that we own.

2827

Additional factors that may affect our results are discussed in Best Hometown Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 as filed with the Securities and Exchange Commission on March 2928, ~~2018~~2019, including under the section titled “Risk Factors”. These factors and the other factors listed above should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K for Best Hometown Bancorp, Inc. for the year ended December 31, ~~2017~~2018.

Comparison of Financial Condition at ~~September~~March 3031, ~~2018~~2019 and ~~December~~ December 31, ~~2017~~2018

Our total assets increased by $~~135~~1.9 million,~~000,~~ or 01.1276%, to $~~110~~111.43 million at ~~September~~March 3031, ~~2018~~2019 from $~~110~~109.34 million at December 31, ~~2017~~2018. The increase in total assets is primarily due to the net ~~decrease~~increase of $12.40 million in total cash and cash equivalents and the decrease of $~~2.8~~482,000 ~~million~~ in available-for-sale securities, offset partially by an increase of $~~4.1~~397,000 ~~million~~ in gross loans and ana ~~increase~~decrease in ~~FHLB~~allowance ~~stock~~for loan loss of $~~158~~36,000. The ~~decrease in~~increase in total cash and cash equivalents reflects the ~~use~~increase ofin ~~available~~total ~~cash~~deposits inof ~~originating~~$1.9 ~~new loans~~million. The decrease in available-for-sale ~~securities~~ securities reflects the repayments of principal on available-for-sale securities of $~~2.3~~534,000 ~~million~~ and ana ~~increase~~decrease in gross unrealized losses on these securities of $~~273~~100,000.

Gross loans increased by $~~4.1~~397,000 ~~million~~ to $8687.5 2 million at ~~September~~March 3031, ~~2018~~2019 from $8286.39 million at December 31, ~~2017~~2018. One-to four-family, owner occupied and non-owner in total decreased by $~~2.6~~857,000 ~~million~~ to $4851.71 million at ~~September~~March 3031, ~~2018~~2019 from $51.39 million at December 31, ~~2017~~2018, which reflects normal principal reductions on amortizing loans and our shift in focus toward commercial and multi-family real estate and commercial business lending. Commercial and multi-family loans ~~decreased~~increased ~~modestly~~ by $21.01 million to $2127.8 million at ~~September~~March 3031, ~~2018~~2019 from $2326.8 7 million at December 31, ~~2017~~2018. ~~These decreases~~ There were ~~offset~~also by increases in construction and land loans, commercial business loans, and consumer loans, which increased in total by $~~8.7~~89,000 ~~million~~ to a combined total for these portfolio segments of $168.03 million at ~~September~~March 3031, ~~2018~~2019 from $78.32 million at December 31, ~~2017~~2018.

Available-for-sale securities decreased by $~~2.8 million~~482,000, or 173.175%, to $1312.43 million at ~~September~~March 3031, ~~2018~~2019 from $1612.28 million at December 31, ~~2017~~2018. The decrease is attributable to ~~paydowns~~pay downs on our mortgage-backed securities ~~and an increase in unrealized losses on our securities portfolio of $264,000 to $647,000 at September 30, 2018 from $383,000 at December 31, 2017~~. ~~The increase in total unrealized losses reflects the effects of rising interest rates on bond pricing.~~

Real estate owned, ~~net~~increased ~~remained~~by ~~the~~$40,000, or ~~same~~49. ~~One~~38%, ~~foreclosure in the first quarter of 2018 on a one-~~to ~~four-family~~$121,000 ~~loan~~at ~~was~~March ~~sold~~31, in2019 ~~the~~from ~~second~~$81,000 ~~quarter~~ at aDecember ~~loss of $10~~31,~~000~~ 2018. In ~~the~~The ~~third~~increase ~~quarter~~was ~~two~~the ~~land~~result ~~lots~~of ~~were~~a ~~sold~~foreclosure aton a ~~gain~~one-to four-family ~~of $14,000~~loan.

Our deposits ~~decreased~~increased $21.59 million, or 2.809%, to $8492.43 million at ~~September~~March 3031, ~~2018~~2019 from $8690.84 million at December 31, ~~2017~~2018. Interest-bearing deposits ~~decreased~~increased by $21.05 million, or 21.581%, to $7987.72 million at ~~September~~March 3031, ~~2018~~2019 from $8185.7 million at December 31, ~~2017~~2018. Noninterest-bearing deposits ~~decreased~~ increased by $~~415~~337,000 or 87.215%, to $45.70 million at ~~September~~March 3031, ~~2018~~2019 from $54.17 million at December 31, ~~2017~~2018. ~~The decrease in interest-bearing deposits is attributable to a decrease in certificates of deposits from maturing certificates and customers moving the deposits into the market.~~

FHLB advances ~~increased~~remained tounchanged at $125.5 ~~million~~ million at ~~September~~March 3031, ~~2018~~2019 from ~~$9.0 million at~~ December 31, ~~2017. The increase of $3.5 million in FHLB advances reflects borrowings of $16.5 million of new advances and repayments of $13.0 of advances during the nine months ended September 30,~~ 2018. The weighted-average rate of our total outstanding advances is 2.2936%.

Shareholders’ equity decreased by $~~509~~51,000, or 40.142%, to $1112.92 million at ~~September~~March 3031, ~~2018~~2019 from $12.42 million at December 31, ~~2017~~2018. The decrease in shareholders’ equity reflects our net loss of $~~876~~130,000 and ana ~~increase~~decrease in net unrealized losses on available-for-sale securities of $~~210~~80,000, ~~offset~~ ~~partially by the decreases in accumulated other comprehensive losses related to our defined benefit~~ and ~~postretirement medical plans of $593,000, and~~ the combined increase in our unearned ESOP and additional paid-in capital of $2910,000 from the recognition of ESOP compensation expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019.

2928

Nonperforming Assets

The table below sets forth the amounts and categories of our nonperforming assets at the dates indicated.

	September 30,			December 31,
	March 31			December 31,
	2018			2017
	2019			2018
	(Dollars in thousands)
Nonaccrual loans:
Real estate mortgage loans:
One- to four-family, owner occupied	$	~~166~~-		$	-71
One- to four-family, non-owner occupied		-			-
Commercial and multi-family		-			-
Construction and land		13			13
Commercial business loans		-			-
Consumer loans		-			-
Total nonaccrual loans		~~179~~13			1384
Accruing loans past due 90 days or more:
One- to four-family, non-owner occupied		567			39-
Accruing troubled debt restructured loans:
Real estate mortgage loans:
One- to four-family, owner occupied		8280			8481
One- to four-family, non-owner occupied		-			-
Commercial and multi-family		-			-
Construction and land		-			-
Commercial business loans		-			-
Consumer loans		-			-
Total accruing troubled debt restructured loans		8280			8481
Total nonperforming loans		~~266~~160			~~136~~165
Foreclosed real estate held for sale:
One- to four-family		81121			81
Commercial and multi-family		-			-
Construction and land		-			-
Total foreclosed real estate held for sale		81121			81
Total nonperforming assets	$	~~347~~281		$	~~217~~246
Total nonperforming loans to total gross loans		0.3118	%		0.1719	%
Total nonperforming assets to total assets		0.3125	%		0.2022	%
Allowance for loan loss to nonperforming loans		4.59			8.93
Gross loans		86,468			82,352
Allowance		1,220			1,215
Total assets		110,428			110,293

Interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was less than $1,000 for the three ~~and nine~~ months ended March ~~September 30~~31, ~~2018~~2019 and ~~2017~~2018. No interest income was recognized on these loans during these periods.

Interest income that would have been recorded had our trouble debt restructured loan been current in accordance with its original term was $1,000 and $21,000 for ~~both the~~ three ~~and~~ ~~nine~~ months ended ~~September~~March 3031, ~~2018~~2019 and ~~2017~~2018. Interest income recognized for both the three ~~and nine~~ months ended was $1,000 and $21,000 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019 and ~~2017~~2018.

~~The decrease in nonperforming assets as a percentage of total gross loans reflection of strong credit quality within our loan portfolio.~~29

Analysis of Net Interest Margin

The following table sets forth average balance sheets, average annualized yields and rates, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances but have been reflected in the tables as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are amortized or accreted to income.

	Three Months Ended
	September 30, 2018								September 30, 2017
	March 31, 2019								March 31, 2018
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans	$	8587,~~931~~121		$	~~928~~981		4.2350	%	$	8179,~~520~~825		$	~~868~~870		4.2636	%
Investment securities		1312,~~732~~625			6066		12.7109			2022,~~280~~512			8474		1.6631
Interest-bearing deposits		2,~~634~~537			1419		23.0800			2,~~590~~357			811		1.2487
Total interest-earning assets		102,~~297~~283			1,~~002~~066		34.8317			104,~~390~~694			~~960~~955		3.6865
Noninterest-earning assets		78,~~220~~835								87,~~820~~668
Total assets	$	~~110~~111,~~094~~118							$	~~113~~112,~~210~~362
Liabilities and equity:
Interest-bearing liabilities:
Checking accounts	$	~~379~~394		$	1		1.0503	%	$	~~433~~443		$	1		0.92	%
Savings accounts		6,~~747~~549			13		0.0619			7,~~557~~488			21		0.1005
Money market accounts		11,~~916~~183			2123		0.7083			14,~~442~~175			1719		0.4754
Certificates of deposit		6068,~~618~~848			~~276~~376		12.8121			61,~~389~~556			~~252~~233		1.6354
Total interest-bearing deposits		7986,~~660~~974			~~299~~403		1.4988			83,~~821~~662			~~272~~254		1.2923
FHLB advances		115,~~833~~500			6632		2.2136			98,~~000~~786			4843		21.1298
Total interest-bearing liabilities		9192,~~493~~474			~~365~~435		1.5891			92,~~821~~448			~~320~~297		1.3730
Noninterest bearing deposits		45,~~604~~087								5,~~666~~238
Other noninterest-bearing liabilities		1,~~591~~239								2,~~121~~168
Total liabilities		9798,~~688~~800								~~100~~99,~~608~~854
Equity		12,~~406~~318								12,~~602~~508
Total liabilities and equity	$	~~110~~111,~~094~~118							$	~~113~~112,~~210~~362
Net interest income				$	~~637~~631							$	~~640~~658
Interest rate spread							2.2526	%							2.3235	%
Net interest margin							2.4447	%							2.4551	%
Average interest-earning assets to average interest-bearing liabilities		1.1211	X							1.1213	X

3130

	Nine Months Ended
	September 30, 2018								September 30, 2017
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans	$	84,294		$	2,706		4.23	%	$	79,398		$	2,561		4.30	%
Investment securities		14,620			201		1.81			23,276			290		1.66
Interest-bearing deposits		1,613			34		2.78			2,590			27		1.39
Total interest-earning assets		100,527			2,941		3.86			105,264			2,878		3.65
Noninterest-earning assets		9,057								7,695
Total assets	$	109,584							$	112,959
Liabilities and equity:
Interest-bearing liabilities:
Checking accounts	$	402		$	3		0.98	%	$	457		$	3		0.88	%
Savings accounts		6,879			4		0.08			7,563			4		0.07
Money market accounts		12,814			58		0.60			14,081			48		0.46
Certificates of deposit		59,598			756		1.67			61,929			744		1.61
Total interest-bearing deposits		79,693			821		1.36			84,030			799		1.27
FHLB advances		10,556			171		2.14			8,833			137		2.07
Total interest-bearing liabilities		90,249			992		1.45			92,863			936		1.35
Noninterest bearing deposits		4,874								5,279
Other noninterest-bearing liabilities		3,001								2,160
Total liabilities		98,124								100,302
Equity		11,460								12,657
Total liabilities and equity	$	109,584							$	112,959
Net interest income				$	1,949							$	1,942
Interest rate spread							2.41	%							2.30	%
Net interest margin							2.56	%							2.46	%
Average interest-earning assets to average interest-bearing liabilities		1.11	X							1.13	X

Comparison of Operating Results for the Three Months Ended September 30, 2018 and 2017

General. We recognized a net loss of $~~100~~130,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 compared to a net loss of $~~111~~101,000 for the three months ended ~~September~~March 3031, ~~2017~~2018.

Interest Income. Interest income increased $42111,000, or 411.46%, to $1.01 million for the three months ended ~~September~~March 3031, ~~2018~~2019 from $~~960~~955,000 for the three months ended ~~September~~March 3031, ~~2017~~2018. The increase in interest income reflects the increase in the yield on interest-earning assets of ~~15.0 basis~~52 basis points to 34.8317% for the three months ended ~~September~~March 3031, ~~2018~~2019 from 3.6865% for the three months ended ~~September~~March 3031, ~~2017~~2018, which offset the decrease of $2.14 million, or 2.03%, in the average balances of our interest-earning assets to $102.3 million for the three months ended ~~September~~March 3031, ~~2018~~2019 from $104.47 million for the three months ended ~~September~~March 3031, ~~2017~~2018.

Interest income on loans increased by $60111,000, or 612.976%, to $~~928~~981,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $~~868~~870,000 for the three months ended ~~September~~March 3031, ~~2017~~2018. The increase in loan interest income reflects the increase in the average balance of our loans of $47.43 million, or 59.41%, to $8587.9 1 million for the three months ended ~~September~~March 3031, ~~2018~~2019 from $8179.58 million for the three months ended ~~September~~March 3031, ~~2017,~~2018. ~~which~~The ~~offset the light decrease in the~~ yield on ~~our~~ loans ofincreased 14 ~~3.0~~ basis points to 4.2350% from 4.2636% for the same periods.

32Interest income on investment securities decreased by $8,000, or 10.8% to $66,000 for the three months ended March 31, 2019 from $74,000 for the three months ended March 31, 2018. The decrease reflects a decrease in the average balance of our investment securities of $9.9 million, or 44.0%, to $12.6 million for the three months ended March 31, 2019 from $22.5 million for the three months ended March 31, 2018, which offset the increase in yield on our investment securities of 78 basis points to 2.09% for the three months ended March 31, 2019 from 1.31% for the three months ended March 31, 2018. The decrease in the average balance of our investment securities reflects paydowns on our available-for-sale investment portfolio and no purchases of securities for 2019 as we are investing available funds into new loans.

Interest ~~income~~from oninterest-bearing ~~investment securities~~deposits ~~decreased~~increased ~~by $24,000, or 28.6%~~ to $6019,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $8411,000 for the three months ended ~~September~~ 30March 31, ~~2017~~2018. The ~~decrease~~increase in ~~reflects~~interest aincome ~~decrease~~reflects inhigher ~~the~~rates ~~average~~paid ~~balance~~on of our ~~investment~~excess ~~securities~~funds ofon ~~$6.6~~deposit ~~million,~~with orother 32institutions.~~5%, to~~ ~~$13.7~~Our ~~million for the three months ended September 30, 2018 from $20.3 million for the three months ended September 30, 2017, which offset the increase in~~ yield on ~~our~~interest-bearing deposits ~~investment~~increased ~~securities of 5 basis points~~ to 13.710% for the three months ended ~~September 30~~March 31, ~~2018~~2019 from 1.6687% for the three months ended ~~September~~March 3031, ~~2017. The decrease in the average balance of our investment securities reflects paydowns on our available-for-sale investment portfolio and no purchases of securities for~~ 2018 ~~as we are investing available funds into new loans~~.

Interest ~~from interest-bearing deposits~~Expense. Interest expense increased by $138,000, or 46.5%, to $14435,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $8297,000 for the three months ended ~~September~~March 3031, ~~2017~~2018. The increase in interest ~~income~~expense reflects ~~higher~~an ~~rates~~increase ~~paid~~in interest expense on ~~our~~deposits ~~excess~~which ~~funds~~was onoffset ~~deposit~~by a ~~with~~decrease ~~other~~in ~~institutions~~interest on FHLB advances. Our ~~yield~~average oncost ~~interest-bearing deposits~~of funds increased 61 basis points to 21.~~08%~~91 basis points for the three months ended ~~September~~March 3031, ~~2018~~2019 from 1.~~24%~~30 basis points for the three months ended ~~September~~March 3031, ~~2017~~2018.

~~Interest~~Deposit ~~Expense. Interest~~ interest expense increased by $45149,000, or 1458.07%, to $~~365~~403,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $~~320~~254,000 for the three months ended ~~September~~March 3031, ~~2017~~2018. The ~~increase in~~ deposit interest expense ~~reflects~~yield ~~both~~increased anto ~~increase~~1.88%, inor ~~interest~~65 ~~expense~~basis onpoints, ~~deposits~~for ~~and~~the ~~FHLB~~three ~~advances~~months ended March 31, 2019 from 1.23% for the three ~~Our~~months ~~average~~ended ~~cost~~March 31, 2018 due to the rising rate environment. Interest expense on certificates of ~~funds~~deposit increased 21$143,000 to ~~basis~~$376,000 ~~points~~for tothe ~~1.58~~three ~~basis~~months ~~points~~ended March 31, 2019 from $233,000 for the three months ended ~~September~~March 3031, 2018. The increase in the average rate of our certificates of deposit reflects a larger portion of higher rate, longer-term certificates within our total certificates of deposits. As shorter-term, lower rate certificates mature, depositors are beginning to invest their funds by rolling their funds over into another higher rate certificate of deposit, as well as moving funds from 1demand deposits or money markets into certificate of deposits.37 This is evidenced by the increase in the average balance of our certificate of deposits of $7.2 million, ~~basis~~or ~~points~~11.7%, to $68.8 million for the three months ended ~~September~~March 3031, ~~2017~~2019 from $61.5 million at March 31, 2018.

~~Deposit~~Interest ~~interest~~ expense ~~increased~~on FHLB advances decreased by $2711,000, or 925.96%, to $~~299~~32,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $~~272~~43,000. ~~The deposit interest expense yield increased to 1.49%, or 20 basis points,~~ for the three months ended ~~September~~March 3031, 2018 ~~from 1~~.~~29%~~ The ~~for~~decrease ~~the~~in ~~three~~FHLB ~~months~~interest ~~ended~~expense ~~September~~reflects ~~30, 2017~~the ~~due~~decrease toin the ~~rising~~average ~~rate~~advance ~~environment.~~balances, ~~Interest~~which ~~expense~~decreased onby ~~certificates~~$3.3 ofmillion, ~~deposit increased $24~~or 37.5%,~~000~~ to $~~276,000~~5.5 million for the three months ended ~~September~~March 3031, ~~2018~~2019 from $~~252,000~~8.8 million for the three months ended ~~September~~March 3031, ~~2017~~2018. The ~~increase in the average rate of~~ ~~our~~yield ~~certificates~~on ofFHLB ~~deposit~~advances ~~reflects~~increased ato ~~larger portion of higher rate, longer-term certificates within our total certificates of deposits~~2. ~~As shorter-term~~36%, ~~lower~~or ~~rate~~38 ~~certificates~~basis ~~mature~~points, ~~depositors~~for ~~are beginning to invest their funds in~~ the ~~market~~three asmonths ~~opposed to~~ended ~~rolling~~March ~~their~~31, ~~funds~~2019 ~~over~~from ~~into another certificate of deposit or into one of our other deposit products. This is evidenced by the decrease in the average balance of our deposits of $4.~~1 ~~million, or 4~~.998%, ~~to $79.7 million~~ for the three months ended ~~September 30~~March 31, 2018 ~~from~~as ~~$83.8~~a ~~million~~result atof ~~September~~the ~~30,~~rising ~~2017~~rate environment.

Net Interest ~~expense on FHLB advances increased~~Income. Net byinterest decreased $1827,000 ~~or 37.5%,~~ to $66631,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $48658,000 for the three months ended ~~September~~March 3031, ~~2017. The increase in FHLB interest expense reflects the increase in the average cost of advances, which increased to 2.21% for the three months ended September 30,~~ 2018 ~~from 2~~.12% for the three months ended September 30, 2017. The increase in the average cost of advances interest expense also reflects the increase in the average balance of FHLB advances to $11.8 million for the three months ended September 30, 2018 from $9.0 million for the three months ended September 30, 2017.

~~Net Interest Income. Net interest decreased $3,000 to $637,000 for the three months ended September 30, 2018 from $640,000 for the three months ended September 30, 2017.~~31

Provision for Loan Losses. There was no provision for loan losses for the three months ended ~~September~~March 3031, ~~2018~~2019 or ~~2017~~2018, which is a reflection of our continued ~~strong~~ strong credit quality as evidenced by our continued low and decreasing levels of nonperforming loans.

Our total allowance for loans losses was 1.434% of total gross loans at ~~September~~March 3031, ~~2018~~2019 and 1.539% at December 31, ~~2017~~2018. We do not have an allowance for specifically identified impaired loans as we generally charge-off identified impairments on impaired loans to the allowance for loan losses to a net realizable value on those loans. As needed, we may have an unallocated portion in our general allowance that we believe represents those probable incurred losses within our loan portfolio not specifically identified with any particular portfolio segment.

Noninterest Income. Noninterest income ~~increased~~decreased $315,000, or 425.24%, to $7544,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $7259,000 for the three months ended ~~September~~March 3031, ~~2017~~2018. The ~~increase~~decrease is the ~~net~~ effect of the ~~gain on sale of mortgage loans of $9,000 and gain on sale of real estate owned of $14,000 offset by the~~ decrease of service charge income of $412,000, a decrease of bank owned life insurance income of $1,000 and a decrease of other income of $152,000 for three months ended ~~September~~March 3031, ~~2018~~2019 compared to the three months ended March ~~September 30~~31, ~~2017~~2018.

Noninterest Expense. Noninterest expense decreased $1113,000, or 1.36%, to $~~812~~805,000 for the three months ended ~~September~~March 3031, ~~2018~~2019 from $~~823~~818,000 for the three months ended march ~~September 30~~31, ~~2017~~2018. The decrease was largely attributed to decrease in ~~professional~~salaries and ~~supervisory~~employee ~~fees~~benefits ~~offset~~which ~~by the increases of data processing. Professional and supervisory fees~~ decreased by $4512,000, or 29 2.8%, to $~~106~~419,000 for the three months ended ~~September 30,~~March ~~2018 as compared to $151~~31,~~000~~ ~~for~~2019 ~~the three months ended September 30, 2017. Data processing increased $37,000, or 66.1%, to $93,000 for three months ended September 30, 2018~~ as compared to $56431,000 for the three months ended ~~September~~March 3031, ~~2017~~2018. ~~Data processing expense increases reflects certain upgrades to our existing core operating system capabilities.~~

33Income Tax Expense. There was no provision for income taxes for the three months ended March 31, 2019 or March 31, 2018. A valuation allowance has been recorded against all components of the net deferred tax asset, except for the unrealized loss on available-for-sale securities, based upon our cumulative operating losses in recent years.

Income Tax Expense. There was no provision for income taxes for the three months ended September 30, 2018 or September 30, 2017. A valuation allowance has been recorded against all components of the net deferred tax asset, except for the unrealized loss on available-for-sale securities, based upon our cumulative operating losses in recent years.

The deferred tax asset will only be recognized in future periods upon the Company’s ability to realize and maintain profitable results of operations.

Comparison of Operating Results for the Nine Months Ended September 30, 2018 and 2017

General. We recognized a net loss of $876,000, an increase of $513,000, or 141.3% for the nine months ended September 30, 2018 compared to a net loss of $363,000 for the nine months ended September 30, 2017. The increase in net loss was primarily attributed to a net increase in noninterest expense of $570,000, or, 23.4%, to $3.0 million for the nine months ended September 30, 2018 compared to $2.4 million for the nine months ended September 30, 2017. This increase was largely attributed to an increase in salaries and employee benefits of $525,000, or 42.2%, to $1.8 million for the nine months ended September 30, 2018 from $1.2 million for the nine months ended September 30, 2017. The increase was related to $561,000 in pension expense associated with settlement payments of pension benefits to some of our former employees. The increase in noninterest expense was partially offset by increases in net interest income of $7,000 and noninterest income of $51,000 for the three months ended September 30, 2018 as compared to 2017.

Interest Income. Interest income increased by $63,000, or 2.2%, to $2.9 million for the nine months ended September 30, 2018. The increase in interest income reflects the increase in the yield on interest-earning assets of 21.0 basis points to 3.86% for the nine months ended September 30, 2018 from 3.65% for the nine months ended September 30, 2017. The increase in yield offset the decrease in the average balance of our interest-earning assets to $100.5 million for the nine months ended September 30, 2018 from $105.3 million for the nine months ended September 30, 2017. The increase in the yield on interest-earning assets reflects changes to the asset portfolio mix and a shift towards higher-yielding assets.

Interest income on loans increased by $145,000, or 5.7%, to $2.7 million for the nine months ended September 30, 2018 from $2.6 million for the nine months ended September 30, 2017. The increase in loan interest income reflects the increase in the average balance of our loans of $4.9 million, or 6.2%, to $84.3 million for the nine months ended September 30, 2018 from $79.4 million for the nine months ended September 30, 2017, which offset the decrease in yield on our loans of 7.0 basis points to 4.30% from 4.23%. The increase in the average balance of our loans reflects increased loan demand in our market area.

Interest income on investment securities decreased by $89,000, or 30.7% to $201,000 for the nine months ended September 30, 2018 from $290,000 for the nine months ended September 30, 2017. The decrease reflects a decrease in the average balance of our investment securities to $14.6 million for the nine months ended September 30, 2018 compared to $23.3 million for the nine months ended September 30, 2017. The decrease in the average balance of our investment securities more than offset the increase in yield of 16 basis points to 1.81% from 1.66% for the same periods. The decrease in the average balance of our investment securities reflects paydowns on our available-for-sale investment portfolio and no purchases of securities for 2018 as we are investing available funds into new loans.

Interest from interest-bearing deposits increased to $34,000 for the nine months ended September 30, 2018 from $27,000 for the nine months ended September 30, 2017. The increase in interest income reflects higher rates paid on our excess funds on deposit with other institutions. Our yield on interest-bearing deposits increased to 2.78% for the nine months ended September 30, 2018 from 1.39% for the nine months ended September 30, 2017.

Interest Expense. Interest expense increased by $56,000, or 6.0%, to $992,000 for the nine months ended September 30, 2018 from $936,000 for the nine months ended September 30, 2017. Our average cost of funds increased 10.0 basis points to 1.45% for the nine months ended September 30, 2018 from 1.35% for the nine months ended September 30, 2017.

Deposit interest expense increased by $22,000, or 2.8%, to $821,000 for the nine months ended September 30, 2018 from $799,000. The increase in deposit interest expense reflects the increase in the average yield of our deposits by 9 basis points to 1.36% for the nine months ended September 30, 2018 from 1.27% for the nine months ended September 30, 2017. The average balance of our deposits decreased $4.3 million, or 5.1%, to $79.7 million for the nine months ended September 30, 2017 from $84.0 million for the nine months ended September 30, 2017. The largest decrease in our deposits came from a decrease of $2.3 million, or 3.7%, in certificates of deposit to $59.6 million for the nine months ended September 30, 2018 from $61.9 million for the nine months ended September 30, 2017. The decrease in the average balance of our deposits is primarily attributed to the decrease in the average balance of our certificates of deposit. As certificates mature, some customers are investing their funds in the market as opposed to rolling their funds into another certificate of deposit or into one of our other deposit products.

Interest expense on FHLB advances increased by $34,000 or 24.8% to $171,000 for the nine months ended September 30, 2018 from $137,000 for the nine months ended September 30, 2017. The increase in FHLB interest expense reflects the increase in the average rate on advances, which increased to 2.14% for the nine months ended September 30, 2018 from 2.07% for the nine months ended September 30, 2017. The average balance of our FHLB advances increased $1.8 million to $10.6 million for the nine months ended September 30, 2018 from $8.8 million for the nine months ended September 30, 2017.

Net Interest Income. Net interest income increased $7,000, or 0.36%, to $1.9 million for the nine months ended September 30, 2018, which was largely a reflection of the increases in our interest rate spread and net interest margin. The interest rate spread increased to 2.41% for the nine months ended September 30, 2018 from 2.30% for the nine months ended September 30, 2017, and our net interest margin increased to 2.56% from 2.46% for the same periods.

Provision for Loan Losses. There was no provision for loan losses for the six months ended September 30, 2018 or 2017, which is a reflection of our continued strong credit quality as evidenced by our continued low and decreasing levels of nonperforming loans.

Our total allowance for loans losses was 1.4% of total gross loans at September 30, 2018 and December 31, 2017. We do not have an allowance for specifically identified impaired loans as we generally charge-off identified impairments on impaired loans to the allowance for loan losses to a net realizable value on those loans. As needed, we may have an unallocated portion in our general allowance that we believe represents those probable incurred losses within our loan portfolio not specifically identified with any particular portfolio segment.

Noninterest Income. Noninterest income increased $51,000, or 39.5%, to $180,000 for the nine months ended September 30, 2018 from $129,000 for the nine months ended September 30, 2017. The increase is primarily related to the increase of $22,000 of income on bank owned life insurance for the nine months ended September 30, 2018 to $77,000 from $55,000 for the nine months ended September 30, 2017 and to a net loss of $19,000 on sales of investment securities for the nine months ended September 30, 2017. In March of 2017, we purchased $3.4 million in bank owned life insurance. Therefore, income on bank owned life insurance for the nine months ended September 30, 2017 only reflects approximately 6 months. An additional increase in noninterest income came from gain on sales of mortgage loans, which increased to $13,000, or 100%, for the nine months ended September 30, 2018 from $0 for the nine months ended September 30, 2017.

Noninterest Expense. Noninterest expense increased $570,000, or 23.4%, to $3.0 million for the nine months ended September 30, 2018 from $2.4 million for the nine months ended September 30, 2017. The increase was largely attributed to increases in salaries and employee benefits and data processing. Salaries and employee benefits increased by $525,000, or 42.2%, to $1.8 million for the nine months ended September 30, 2018 as compared to $1.2 million for the nine months ended September 30, 2017. This increase was attributable to $561,000 in pension expense recognized as a result of pension settlement payments to some of our former employees. The increase in data processing expenses reflects certain upgrades to our existing core operating system capabilities.

Income Tax Expense. There was no provision for income taxes for the six months ended September 30, 2018 or September 30, 2017. A valuation allowance has been recorded against all components of the net deferred tax asset, except for the unrealized loss on available-for-sale securities, based upon our cumulative operating losses in recent years.

The deferred tax asset will only be recognized in future periods upon the Company’s ability to realize and maintain profitable results of operations.

Liquidity and Capital Resources

Our primary sources of funds consist of deposit inflows, loan repayments, FHLB advances, and repayments, maturities and calls of investment securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of ~~September~~March 3031, ~~2018~~2019.

We regularly monitor and adjust our investments in liquid assets based upon our assessment of: (i) expected loan demand; (ii) expected deposit flows; (iii) yields available on interest-earning deposits and securities; and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning and non interest-earning deposits and short- and medium-term securities.

35Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, we have borrowing agreements with the Federal Home Loan Bank of Chicago (FHLB) that provide an additional source of funds. Our FHLB advances totaled $5.5 million at March 31, 2019. In addition, the Company has an irrevocable standby letter of credit with the FHLB of $3.9 million at March 31, 2019 to secure public deposits. At March 31, 2019, we had the ability to borrow up to an additional $44.4 million from the FHLB, subject to pledging additional collateral. We also have an unused open line of credit at The Independent BankersBank that would allow us to borrow up to $2.5 million at March 31, 2019.

~~Liquidity~~The ~~management~~Company is ~~both~~subject ato ~~daily~~various ~~and~~regulatory ~~long-term~~capital ~~function of business management. If we require funds beyond our ability to generate them internally~~requirements, weincluding ~~have~~a ~~borrowing agreements~~risk-based ~~with~~capital ~~the~~measure. ~~Federal~~The ~~Home~~risk-based ~~Loan~~capital ~~Bank~~guidelines ofinclude ~~Chicago~~both ~~(FHLB)~~a ~~that~~definition ~~provide an additional source~~ of ~~funds. Our FHLB advances totaled~~capital ~~$12.5~~and ~~million~~a atframework ~~September~~for ~~30,~~calculating ~~2018.~~risk-weighted Inassets ~~addition,~~by ~~the~~assigning ~~Company~~balance ~~has~~sheet anassets ~~irrevocable~~and ~~standby~~off-balance ~~letter~~sheet ofitems ~~credit~~to ~~with~~broad ~~the FHLB of $3.2~~risk ~~million~~categories. atAt ~~September~~March 3031, ~~2018~~2019 toand ~~secure~~December ~~public deposits. At September 30~~31, 2018, ~~we had~~ the ~~ability~~Company toexceeded ~~borrow~~all upregulatory tocapital ~~an additional $37~~requirements.7 ~~million~~The ~~from~~Company ~~the~~is ~~FHLB, subject to pledging additional collateral. We also have an unused open line of credit at The Independent~~considered ~~BankersBank~~ ~~that~~“well ~~would~~capitalized” ~~allow~~under usregulatory ~~to borrow up to $2~~guidelines.~~5 million at September 30, 2018.~~

The Company 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 September 30, 2018 and December 31, 2017, the Company exceeded all regulatory capital requirements. The Company is considered “well capitalized” under regulatory guidelines.

The net proceeds from the stock offering significantly increased our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of new loans. Our results of operations will be enhanced by the net proceeds from the stock offering, resulting in increased net interest income. However, due to the increase in equity resulting from the net proceeds raised in the stock offering, our return on equity will be adversely affected.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable, as the Registrant is a smaller reporting company.

ITEM 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of the Bank’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of ~~September~~March 3031, ~~2018~~2019. Based on on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Principal Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

During the quarter ended ~~September~~March 3031, ~~2018,~~ 2019, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Best Hometown Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017 (“Form 10-K”) as filed with the Securities and Exchange Commission on March 29, 2018, including under the section titled “Risk Factors, which could materially affect our business, financial condition or future results. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. At ~~September~~March 3031, ~~2018~~2019, the risk factors for Best Hometown Bancorp, Inc. have not changed materially from those reported in our Form 10-K. However, the risks described in the Form 10-K are not the only risks that we face.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed in the “Index to Exhibits” immediately following the Signatures.

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.

	BEST HOMETOWN BANCORP, INC.
Date: November 8, 2018	/s/ Ronnie R. Shambaugh
Date: May 14, 2019	/s/ Ronnie R. Shambaugh
	Ronnie R. Shambaugh
	President and Chief Executive Officer
Date: November 8, 2018	/s/ Jennifer M. Lanzafame
Date: May 14, 2019	/s/ Jennifer M. Lanzafame
	Jennifer M. Lanzafame
	Principal Financial Officer

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INDEX TO EXHIBITS

Exhibit number		Description
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
32.1		Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0		The following materials from Best Hometown Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2018~~2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements

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Filing Compare · Best Hometown Bancorp, Inc.