UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K/A



AMENDMENT NO. 1

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

For the Fiscal Year Ended June 30, 2016



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

For the transition period from             
to

Commission File Number: 001-37676

PB Bancorp, Inc.

(Name of Registrant
as Specified in its Charter)



|Maryland                                                      | 47-5150586                            
|------------------------------------------------------------- | --------------------------------------
|(State or Other Jurisdiction ofIncorporation or Organization) | (I.R.S. EmployerIdentification Number)
|40 Main Street, Putnam, Connecticut                           | 06260                                 
|(Address of Principal Executive Office)                       | (Zip Code)                            



(860) 928-6501

(Registrant’s
Telephone Number including area code)



Securities Registered Under to Section 12(b) of
the Act:

Common Stock, par value $0.01 per share

(Title of Class)

The NASDAQ Stock Market LLC

(Name of exchange on which registered)

Securities Registered Under Section 12(g) of
the Exchange Act:

None

Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES   ̈  NO  x

Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 of 15(d) of the Act. YES   ̈  NO  x

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 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted 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 and post such files).  Yes  x  No  ̈

Indicate by a check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K.  ̈



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



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



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



The aggregate value of the voting stock held
by non-affiliates of the Registrant, computed by reference to the closing price of the Common Stock of PSB Holdings, Inc. as of
December 31, 2015 ($10.15) was $18.4 million.



As of August 31, 2016, there were 7,880,402
shares outstanding of the Registrant’s Common Stock.



DOCUMENTS INCORPORATED BY REFERENCE

None




















PB BANCORP, INC.

FORM 10-K/A



|           |                                                                                                | Page
|---------- | ---------------------------------------------------------------------------------------------- | ----
|           |                                                                                               
|PART I     |                                                                                               
|           |                                                                                               
|ITEM 1.    | Business                                                                                       | 2   
|           |                                                                                                |     
|PART III   |                                                                                               
|           |                                                                                                |     
|ITEM 10.   | Directors, Executive Officers and Corporate Governance                                         | 36  
|           |                                                                                                |     
|ITEM 11.   | Executive Compensation                                                                         | 38  
|           |                                                                                                |     
|ITEM 12.   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 41  
|           |                                                                                                |     
|ITEM 13.   | Certain Relationships and Related Transactions, and Director Independence                      | 42  
|           |                                                                                                |     
|ITEM 14.   | Principal Accountant Fees and Services                                                         | 42  
|           |                                                                                               
|PART IV    |                                                                                               
|           |                                                                                               
|ITEM 15.   | Exhibits and Financial Statement Schedules                                                     | 44  
|           |                                                                                               
|Signatures | 45                                                                                            











Explanatory Note



PB Bancorp, Inc. (the “Company”)
is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the year ended June 30, 2016, as filed
with the Securities and Exchange Commission on September 26, 2016. In accordance with General Instruction G(3), the Company is
now filing this amendment to include in the Form 10-K the information required to be filed pursuant to Part III of Form 10-K. In
addition, the Company is re-filing Item 1 of Part I of the Form 10-K to include the non-performing assets table, which was inadvertently
omitted from the previous filing.



1







PART I



ITEM 1.       Business



Forward Looking Statements



This Annual Report
on Form 10-K contains certain “forward-looking statements” which may be identified by the use of words such as “believe,”
“expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.”
Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results
of operations and business that are subject to various factors which could cause actual results to differ materially from these
estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and
local economic conditions, changes in interest rates, deposit flows, demand for mortgage and other loans, real estate values, competition,
changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive,
governmental, regulatory, and technological factors affecting our operations, pricing products and services. In addition, see Item
1A. Risk Factors.



PB Bancorp, Inc.



PB Bancorp, Inc. (the “Company”)
is a Maryland corporation incorporated in 2015 to be the successor to PSB Holdings, Inc. upon completion of the second step mutual-to-stock
conversion (the “Conversion”) of Putnam Bancorp, MHC, (the “MHC”), the top tier mutual holding company
of PSB Holdings, Inc. PSB Holdings, Inc. was the former mid-tier holding company for Putnam Bank (the “Bank”). Prior
to completion of the Conversion, approximately 57% of the shares of common stock of PSB Holdings, Inc. were owned by the MHC. In
conjunction with the Conversion, the MHC and PSB Holdings, Inc. merged into the Company and the Company became its successor under
the name PB Bancorp, Inc. The Conversion was completed on January 7, 2016. The Company raised gross proceeds of $33.7 million by
selling a total of 4,215,387 shares of common stock at $8.00 per share in the second step offering. Additionally, 317,287 new ESOP
shares were issued for a total of 4,532,674 shares sold in the offering. Concurrent with the completion of the stock offering,
each share of PSB Holdings, Inc. stock owned by public stockholders (stockholders other than the MHC) was exchanged for 1.1907
shares of Company common stock. A total of 3,347,728 shares of Company common stock were issued in the exchange. The Conversion
was accounted for as a capital raising transaction by entities under common control. The historical financial results of the MHC
are immaterial to the results of the Company and therefore the net assets of the MHC have been reflected as an increase to stockholders’
equity.



As
a result of the Conversion, all share and per share information has been revised to reflect the 1.1907-to-one exchange ratio. Such
revised financial information presented in this Form 10-K is derived from the consolidated financial statements of PSB Holdings,
Inc. and its subsidiaries.



PB Bancorp, Inc. also owns
investment securities valued at $10.5 million as of June 30, 2016. We have not engaged in any significant business activity other
than owning the common stock of Putnam Bank and investing in marketable securities. Our executive office is located at 40 Main
Street, Putnam, Connecticut 06260, and our telephone number is (860) 928-6501.



Putnam Bank



Putnam Bank was founded
in 1862 as a state-chartered mutual savings bank. In December 2014, the Bank converted from a federally-chartered savings bank
to a Connecticut-chartered bank that is a member of the Federal Reserve System. The Bank is headquartered at 40 Main Street in
Putnam, Connecticut and conducts substantially all of its business from eight full-service banking offices and one loan origination
center. Putnam Bank is now a wholly-owned subsidiary of the Company. In addition, the Bank maintains a “Special Needs Limited
Branch” and a limited services mobile office. The telephone number at the Bank’s main office is (860) 928-6501.



Available Information



PB Bancorp, Inc. is a public
company, and files interim, quarterly and annual reports with the Securities and Exchange Commission. These respective reports
are on file and a matter of public record with the Securities and Exchange Commission and may be obtained on the Securities and
Exchange Commission’s website (http://www.sec.gov).



Our website address is
www.putnambank.com. Information on our website should not be considered a part of this annual report.



2







General



Our principal business
consists of attracting deposits from the general public in the communities where our offices are located, and investing those deposits,
together with funds generated from operations, primarily in loans secured by real estate, including one-to-four family residential
mortgage loans and commercial real estate loans (including multi-family real estate loans).  To a lesser extent, we originate
commercial loans, residential construction loans and consumer loans.  We also invest in investment securities.



Market Area



Our market area has a relatively
stable population and household base.  We currently operate out of eight offices, which are located in Windham County and
New London County, Connecticut.  Windham County is located in the Northeastern corner of Connecticut and borders both Massachusetts
(to the north) and Rhode Island (to the east).  New London County is to the south of Windham County, located in the Southeastern
corner of Connecticut.  Putnam is approximately 45 miles from Hartford, Connecticut, 30 miles from Providence, Rhode Island,
and 65 miles from Boston, Massachusetts.



According to SNL Financial,
from 2010 to 2016, the population of Windham County decreased by 3.1%, while New London County’s population increased 0.7%. 
At the same time, the population of the state of Connecticut increased by 0.4%, while the United States’ population increased
by 3.8%.  During the same period, the number of households in Windham County declined slightly and was relatively unchanged
in New London County and in Connecticut. Comparatively, the number of households increased on a nationwide basis.  In 2016,
per capita income and median household income for Windham County equaled $27,855 and $57,369, respectively.  In the same year,
per capita income and median household income for New London County equaled $34,681 and $66,791, respectively.  These compare
to 2016 per capita income measures for the state of Connecticut and the United States of $39,536 and $30,002, respectively, and
2016 median household income measures for the state of Connecticut and the United States of $70,677 and $55,551, respectively.



Windham County has a diversified
mix of industry groups and employment sectors, including services, wholesale/retail trade and healthcare.  According to SNL
Financial, these three sectors comprise approximately 70% of the employment base in Windham County.  The same three sectors
comprise approximately 73% of the employment base in New London County.



Windham County’s
June 2016 unemployment rate of 6.2% was higher than the New London County and Connecticut unemployment rate of 5.9%, which were
all higher than the comparable national unemployment rate of 5.1%.  Notably, the unemployment rates for Connecticut, Windham
County, and New London County for June 2016 have all increased relative to their June 2015 unemployment rates of 5.6%, 6.2%, and
5.7%, respectively, while the United States unemployment rate for June 2016 was lower relative to its June 2015 unemployment rate
of 5.5%.  Our primary market area for deposits includes the communities in which we maintain our main office and our branch
office locations.  Our primary lending area is broader than our primary deposit market area and includes all of Windham County,
and parts of the adjacent Connecticut Counties of New London and Tolland, as well as the Rhode Island and Massachusetts communities
adjacent to Windham County.



Competition



We face intense competition
within our market area for deposits and loans. The Town of Putnam and the surrounding area have a high concentration of financial
institutions, including large commercial banks, community banks and credit unions. Several large holding companies operate banks
in our market area. Many of them are significantly larger than us and, therefore, have greater resources. Additionally, some of
our competitors offer products and services that we currently do not offer, such as trust services and private banking. We face
additional competition for deposits from money market funds, brokerage firms, insurance companies, mutual funds and other corporate
and government securities.



As of June 30, 2015, based
on the Federal Deposit Insurance Corporation’s annual Summary of Deposits Report (the most current data available), our market
share of Federal Deposit Insurance Corporation-insured deposits represented 18.1% of deposits in Windham County, giving us the
third largest market share out of ten financial institutions with offices in that county as of that date, and 1.5% of deposits
in New London County, giving us the 11th largest market share out of 15 financial institutions with offices in that
county as of that date.





3







Lending Activities



Historically, our principal
lending activity has been the origination of first mortgage loans for the purchase or refinancing of one-to-four family residential
real estate. Historically, we have sold the majority of longer-term, fixed-rate loans (other than bi-weekly loans) in the secondary
market. However, the additional capital raised in the offering will permit us to retain longer term, fixed-rate loans in our portfolio.



4









Loan Portfolio Composition. The
following table sets forth the composition of our loan portfolio at the dates indicated.





|                              |  | At June 30,            |        
|----------------------------- |  | ---------------------- | -------
|                              |  | 2016                   |        
|                              |  | Amount                 |        
|                              |  | (Dollars in thousands) |        
|                              |  |                        |        
|Real Estate Loans:            |  |                        |        
|Residential (1)               |  | $                      | 197,359
|Commercial                    |  |                        | 45,526 
|Residential construction      |  |                        | 1,756  
|Commercial                    |  |                        | 9,799  
|Consumer and other            |  |                        | 691    
|                              |  |                        |        
|Total loans                   |  |                        | 255,131
|                              |  |                        |        
|Unadvanced construction loans |  |                        | (2,590 
|                              |  |                        | 252,541
|Net deferred loan costs       |  |                        | 1,106  
|Allowance for loan losses     |  |                        | (2,303 
|                              |  |                        |        
|Loans, net                    |  | $                      | 251,344










| | (1) | Residential real estate loans include one-to-four family
mortgage loans, second mortgages, and home equity lines of credit.
| | --- | ---------------------------------------------------------------------------------------------------------------------------



5









Loan Portfolio Maturities
and Yields. The following table summarizes the final maturities of our loan portfolio at June 30, 2016. This table does
not reflect scheduled principal payments, unscheduled prepayments, or the ability of certain loans to reprice prior to maturity
dates. Demand loans, and loans having no stated repayment schedule, are reported as being due in one year or less.





|                                                 |  | Residential
    Real Estate |         |  | Commercial
    Real Estate  |  |      | Residential
    Construction |  |   | Commercial                  |  |  | Consumer and
    Other |      |   | Total Loans                 |  
|------------------------------------------------ |  | --------------------------- | ------- |  | --------------------------- |  | ---- | ---------------------------- |  | - | --------------------------- |  |  | ---------------------- | ---- | - | --------------------------- | -
|                                                 |  | Amount                      |         |  | Weighted 
Average

    Rate |  |      | Amount                       |  |   | Weighted
 Average

    Rate |  |  | Amount                 |      |   | Weighted 
Average

    Rate |  
|                                                 |  | (Dollars in thousands)      |         |  |                             | 
|Due During the Years

Ending After June 30, 2016 |  |                             |         |  |                             |  |      |                              |  |   |                             |  |  |                        |      |   |                             |  
|One year or less                                 |  | $                           | 541     |  |                             |  | 4.65 | %                            |  | $ | 708                         |  |  |                        | 4.04 | % |                             | $
|More than one to five years                      |  |                             | 4,552   |  |                             |  | 4.32 |                              |  |   | 4,750                       |  |  |                        | 5.28 |   |                             |  
|More than five years                             |  |                             | 192,266 |  |                             |  | 3.82 |                              |  |   | 40,068                      |  |  |                        | 5.07 |   |                             |  
|                                                 |  |                             |         |  |                             |  |      |                              |  |   |                             |  |  |                        |      |   |                             |  
|Total                                            |  | $                           | 197,359 |  |                             |  | 3.83 | %                            |  | $ | 45,526                      |  |  |                        | 5.08 | % |                             | $



6







The following table sets
forth the scheduled repayments of fixed and adjustable rate loans at June 30, 2016 that are contractually due after June 30,
2017.





|                   |  | Fixed          |         |  | Adjustable |   |        | Total | 
|------------------ |  | -------------- | ------- |  | ---------- | - | ------ | ----- | 
|                   |  | (In thousands) |        
|Real Estate Loans: |  |                |         |  |            |   |        |       | 
|Residential        |  | $              | 127,290 |  |            | $ | 69,528 |       | 
|Commercial         |  |                | 20,912  |  |            |   | 23,906 |       | 
|Commercial         |  |                | 9,007   |  |            |   | 381    |       | 
|Consumer and other |  |                | 580     |  |            |   | -      |       | 
|                   |  |                |         |  |            |   |        |       | 
|Total              |  | $              | 157,789 |  |            | $ | 93,815 |       | 



At June 30, 2016, the total
amount of loans that had fixed interest rates was $160.3 million, and the total amount of loans that had floating or adjustable
interest rates was $94.8 million.



Residential Real
Estate Loans. Our primary lending activity consists of the origination of one-to-four family residential real estate loans
that are primarily secured by properties located in Windham and New London Counties, Connecticut. At June 30, 2016, $197.4 million,
or 77.4% of our loan portfolio, consisted of one-to-four family residential real estate loans. At June 30, 2016, our residential
real estate loans included $7.2 million of second mortgages and $9.8 million of home equity lines of credit. Generally, one-to-four
family residential real estate loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price
of the property, with private mortgage insurance required on loans with a loan-to-value ratio in excess of 80%. We will not make
loans with a loan-to-value ratio in excess of 100% for loans secured by single family homes. Fixed rate real estate loans generally
are originated for terms of 10 to 30 years. Generally, all fixed rate residential real estate loans are underwritten according
to Fannie Mae policies and procedures. Included in the increase in residential real estate were purchases of $14.6 million in loans
during the fiscal year ended June 30, 2016.



At June 30, 2016, $68.4
million, or 34.7%, of our residential real estate loans were bi-weekly real estate loans. Bi-weekly real estate loans are loans
that require payments to be made every two weeks, thus shortening the duration of the loan. The borrower is required to maintain
a deposit account with us for automatic withdrawal of the mortgage payment.



Historically, we have sold
the majority of longer-term, fixed-rate loans (other than bi-weekly loans) in the secondary market. However, the additional capital
raised in the offering will permit us to retain longer term, fixed-rate loans in our portfolio. We originated $34.3 million of
fixed rate one-to-four family residential loans during the year ended June 30, 2016, of which $5.7 million were sold in the secondary
market.



We also offer adjustable
rate mortgage loans for one-to-four family properties, with an interest rate based on the one-year Constant Maturity Treasury Bill
Index, which adjusts annually from the outset of the loan or which adjusts annually after a three-, five-, seven-, or ten-year
initial fixed rate period. We originated $8.9 million of adjustable rate one-to-four family residential loans during the year ended
June 30, 2016, of which $26,000 was sold in the secondary market. Our adjustable rate mortgage loans generally provide for maximum
rate adjustments of 100 basis points per adjustment, with a lifetime maximum adjustment up to 6% above the initial rate, regardless
of the initial rate. Our adjustable rate real estate loans amortize over terms of up to 30 years.



Adjustable rate real estate
loans decrease the risk associated with changes in market interest rates by periodically repricing, but involve other risks because,
as interest rates increase, the monthly or bi-weekly payments by the borrower increase, thus increasing the potential for default
by the borrower. At the same time, the value of the underlying collateral may be adversely affected by higher interest rates. Upward
adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustments permitted
by our loan documents and, therefore, the effectiveness of adjustable rate real estate loans may be limited during periods of rapidly
rising interest rates. At June 30, 2016, $70.0 million, or 35.5%, of our one-to-four family residential loans had adjustable rates
of interest.



7







In an effort to provide
financing for moderate income home buyers, we offer Veterans Administration (VA), Federal Housing Administration (FHA), Connecticut
Housing Finance Authority (CHFA) and Rural Development loans. These programs offer residential real estate loans to qualified individuals.
These loans are offered with fixed rates of interest and terms of up to 30 years. Such loans are secured by one-to-four family
residential properties. All of these loans are originated using agency underwriting guidelines. VA, FHA and CHFA loans are closed
in the name of Putnam Bank and are immediately sold on a servicing-released basis. All such loans are originated in amounts of
up to 100% of the lower of the property’s appraised value or the sale price. Private mortgage insurance is required on all
such loans.



All residential real estate
loans that we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and
payable if, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan
is not repaid. Regulations limit the amount that a savings association may lend relative to the appraised value of the real estate
securing the loan, as determined by an appraisal of the property at the time the loan is originated. All borrowers are required
to obtain title insurance. We also require homeowner’s insurance and fire and casualty insurance and, where circumstances
warrant, flood insurance, on properties securing real estate loans. At June 30, 2016, our largest residential real estate loan
had a principal balance of $1.1 million and was secured by a residence located in our primary market area. At June 30, 2016, this
loan was performing in accordance with its original terms.



At June 30, 2016, second
mortgages and lines of credit totaled $17.0 million, or 8.7% of our residential real estate loans and 6.7% of total loans. Additionally,
at June 30, 2016, the unadvanced amounts of home equity lines of credit totaled $11.0 million. The underwriting standards utilized
for second mortgages and home equity lines of credit include a determination of the applicant’s credit history, an assessment
of the applicant’s ability to meet existing obligations and payments on the proposed loan and the value of the collateral
securing the loan. Second mortgages are offered with fixed rates of interest and with terms of up to 15 years. The loan-to-value
ratio for a home equity loan is generally limited to 80%. However, we offer special programs to borrowers, who satisfy certain
underwriting criteria, with loan-to-value ratios of up to 100%. Our home equity lines of credit have adjustable rates of interest
which are indexed to the prime rate, as reported in The Wall Street Journal.



Commercial Real Estate
Loans.We originate commercial real estate loans, including multi-family real estate loans. These loans are generally secured
by one-to-four family non-owner occupied investment properties, multi-family real estate of 20 units or less, small commercial
and industrial owner and non-owner occupied properties, hotels, non-owner occupied condominiums and commercial and industrial vacant
land.  The security for these loans is primarily located in our primary market area. At June 30, 2016, commercial mortgage
loans totaled $45.5 million, or 17.8% of total loans. Our commercial real estate underwriting policies provide that such real estate
loans may be made in amounts of up to 80% of the appraised value of the property provided such loan complies with our current loans-to-one-borrower
limit, which at June 30, 2016 was $9.3 million. Our commercial real estate loans may be made with terms of up to five years with
20-year amortization schedules and are offered with interest rates that are fixed or that adjust periodically and are generally
indexed to the prime rate as reported in The Wall Street Journalor to Federal Home Loan Bank advance rates. In reaching
a decision on whether to make a commercial real estate loan, we consider the net operating income of the property, the borrower’s
expertise and credit history, and the profitability of the value of the underlying property. In addition, with respect to commercial
real estate rental properties, we will also consider the term of the lease and the quality of the tenants. We generally require
that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service
to debt service) of at least 1.25x. Environmental surveys are generally required for commercial real estate loans. Generally, multi-family
and commercial real estate loans made to corporations, partnerships and other business entities require personal guarantees by
the principals.



8







A commercial borrower’s
financial information is monitored on an ongoing basis by requiring periodic financial statement updates, payment history reviews
and periodic face-to-face meetings with the borrower. We require commercial borrowers to provide annually updated financial statements
and federal tax returns. These requirements also apply to all guarantors on commercial loans. We also require borrowers with rental
investment property to provide an annual report of income and expenses for the property, including a tenant list and copies of
leases, as applicable. The largest commercial real estate loan in our portfolio at June 30, 2016 was a $2.5 million loan secured
by office buildings located in our primary market area. At June 30, 2016, this loan was performing in accordance with its original
terms.



Loans secured by commercial
real estate, including multi-family properties, generally involve larger principal amounts and a greater degree of risk than one-to-four
family residential real estate loans. Because payments on loans secured by commercial real estate, including multi-family properties,
are often dependent on successful operation or management of the properties, repayment of such loans may be affected by adverse
conditions in the real estate market or the economy.



Residential Construction
Loans. We originate construction loans to individuals for the construction and acquisition of personal residences. At June
30, 2016, construction real estate loans totaled $1.8 million, or 0.7%, of total loans. At June 30, 2016, the unadvanced portion
of these construction loans totaled $903,000.



Construction loans can
be made with a maximum loan-to-value ratio of 95%, provided that the borrower obtains private mortgage insurance on the loan if
the loan balance exceeds 80% of the appraised value or sales price, whichever is less, of the secured property. At June 30, 2016,
our largest outstanding residential construction real estate loan commitment was for $417,000 with $157,000 outstanding. This loan
was performing according to its original terms at June 30, 2016. Construction loans to individuals are generally made on the same
terms as our one-to-four family real estate loans.



Construction financing
is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate.
Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion
of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction
cost is inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of
the property. Additionally, if the estimate of value is inaccurate, we may be confronted with a project, when completed, with a
value that is insufficient to assure full payment.



Commercial Loans.
At June 30, 2016, we had $9.8 million in commercial business loans, which amounted to 3.8% of total loans. We make such commercial
loans primarily in our market area to a variety of professionals, sole proprietorships and small businesses. Commercial lending
products include term loans and revolving lines of credit. Such loans are generally used for longer-term working capital purposes
such as purchasing equipment or furniture. Commercial loans are made with either adjustable or fixed rates of interest. Variable
rates are based on the prime rate, as published in The Wall Street Journal,plus a margin. Fixed rate commercial loans are
set at a margin above the comparable Federal Home Loan Bank advance rate. Included in the increase in commercial loans were purchases
of $4.1 million in loans during the fiscal year ended June 30, 2016.



When making commercial
loans, we consider the financial statements of the borrower, our lending history with the borrower, the debt service capabilities
of the borrower, the projected cash flows of the business and the value of the collateral. Commercial loans are generally secured
by a variety of collateral, primarily accounts receivable, inventory and equipment, and are supported by personal guarantees. Depending
on the collateral used to secure the loans, commercial loans are made in amounts of up to 75% of the value of the collateral securing
the loan. We generally do not make unsecured commercial loans.



Commercial loans generally
have greater credit risk than residential real estate loans. Unlike residential real estate loans, which generally are made on
the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by
real property whose value tends to be more easily ascertainable, commercial loans generally are made on the basis of the borrower’s
ability to repay the loan from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment
of commercial loans may depend substantially on the success of the business itself. Further, any collateral securing the loans
may depreciate over time, may be difficult to appraise and may fluctuate in value. We seek to minimize these risks through our
underwriting standards. At June 30, 2016, our largest commercial loan was a $1.3 million loan secured by business assets located
in our primary market area. This loan was performing according to its original terms at June 30, 2016.





9







Consumer and Other
Loans. We offer a limited range of consumer loans, principally to Putnam Bank customers residing in our primary market
area with acceptable credit ratings. Our consumer loans generally consist of loans on new and used automobiles, loans secured by
deposit accounts and unsecured personal loans. Consumer loans totaled $691,000, or 0.3% of our total loan portfolio, at June 30,
2016.



Origination, Purchase,
Sale and Servicing of Loans. Lending activities are conducted primarily by our loan personnel operating at our eight branch
offices and one loan origination center. All loans originated by us are underwritten pursuant to our policies and procedures. We
originate both adjustable rate and fixed rate loans. Our ability to originate fixed or adjustable rate loans is dependent upon
the relative customer demand for such loans, which is affected by current and expected future levels of market interest rates.
Loans purchased during the fiscal year ended June 30, 2016 included $4.1 million in commercial loans and $14.6 million one-to-four
family residential loans.



Historically, we have sold
the majority of longer-term, fixed-rate loans (other than bi-weekly loans) in the secondary market. However, the additional capital
raised in the offering will permit us to retain longer term, fixed-rate loans in our portfolio. The one-to-four family loans that
we currently originate for sale include mortgage loans which conform to the underwriting standards specified by Fannie Mae. We
also sell all mortgage loans insured by CHFA, FHA, VA and Rural Development. Generally, all one-to-four family loans that we sell
are sold pursuant to master commitments negotiated with Fannie Mae. Generally, we sell our loans without recourse. We generally
retain the servicing rights on the mortgage loans sold to Fannie Mae, but sell all CHFA, VA, FHA and Rural Development loans on
a servicing-released basis.



At June 30, 2016, Putnam
Bank was servicing loans in the amount of $27.3 million. Loan servicing includes collecting and remitting loan payments, accounting
for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of
unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans.



During the fiscal year
ended June 30, 2016, we originated $43.2 million of one-to-four family loans, of which we retained $37.5 million. We recognize
at the time of sale, the cash gain or loss on the sale of the loans based on the difference between the net cash proceeds received
and the carrying value of the loans sold.



Loan Approval Procedures
and Authority. The board of directors establishes the lending policies and loan approval limits of Putnam Bank. Loan officers
generally have the authority to originate real estate loans, consumer loans and commercial loans up to amounts established for
each lending officer. Loans in amounts above the individual authorized limits require the approval of Putnam Bank’s Credit
Committee. The Credit Committee is authorized to approve all one- to four family real estate loans, commercial real estate loans,
commercial loans and secured consumer loans in amounts up to $500,000. All loans of $500,000 or greater must receive the approval
of Putnam Bank’s board of directors.



The board of directors
annually approves independent appraisers used by Putnam Bank. For larger loans, we may require an environmental site assessment
to be performed by an independent professional for all non-residential real estate loans. It is our policy to require hazard insurance
on all real estate loans.



Loan Origination
Fees and Other Income. In addition to interest earned on loans, Putnam Bank receives loan origination fees. Such fees and
costs vary with the volume and type of loans and commitments made and purchased, principal repayments, and competitive conditions
in the mortgage markets, which in turn respond to the demand and availability of money.



10







Loans to One Borrower.
The maximum amount that we may lend to one borrower and the borrower’s related entities is generally limited, by regulation,
to 15% of our stated capital and reserves. At June 30, 2016, our regulatory limit on loans to one borrower was $9.3 million. At
that date, the largest aggregate amount loaned by Putnam Bank to one borrower was $5.0 million, consisting of commercial loans.
The loans comprising this lending relationship were performing in accordance with their original terms as of June 30, 2016.



Delinquencies and Classified Assets



Collection ProceduresA computer-generated delinquency notice is mailed monthly to all delinquent borrowers, advising them of the amount of their
delinquency. When a loan becomes 60 days delinquent, Putnam Bank sends a letter advising the borrower of the delinquency. The borrower
is given 30 days to pay the delinquent payments or to contact Putnam Bank to make arrangements to bring the loan current over a
longer period of time. If the borrower fails to bring the loan current in 30 days or to make arrangements to cure the delinquency
over a longer period of time, the matter is referred to legal counsel and foreclosure proceedings are started. We may consider
forbearance in cases of a temporary loss of income if a plan is presented by the borrower to cure the delinquency in a reasonable
period of time after his or her income resumes.



Loans Past Due and
Non-Performing Assets.  Loans are reviewed on a regular basis.  Management determines that a loan is
impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original
terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral, if the loan
is collateral dependent.  When a loan is determined to be impaired, the measurement of the loan in the allowance for
loan losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for
impairment based on the fair value of the collateral. Non-accrual loans are loans in which collectability is questionable and therefore
interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent
are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual
status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis
or cost recovery method.  At June 30, 2016, we had non-performing loans of $4.3 million and a ratio of non-performing
loans to total loans of 1.69%.



Real estate acquired as
a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned (“OREO”) until such
time as it is sold.  When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded
at its fair value, less estimated costs of disposal.  If the value of the property is less than the loan, less any related
specific loan loss provisions, the difference is charged against the allowance for loan losses.  Any subsequent write-down
of OREO is charged against earnings.  At June 30, 2016, we had OREO of $1.9 million. Other real estate owned is included
in non-performing assets.



A loan is classified as
a troubled debt restructuring if, for economic or legal reasons related to the borrower’s financial difficulties, we grant
a concession to the borrower that we would not otherwise consider. This usually includes a modification of loan terms, such as
a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date and possibly
a partial forgiveness of debt. Interest income on restructured loans is accrued after the borrower demonstrates the ability to
pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months.



11







Non-Performing Assets.
The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. A loan classified in
the table below as “non-accrual” does not necessarily mean that such loan is or has been delinquent. Once a loan is
delinquent 90 days or more or the borrower or collateral securing the loan experiences an event that makes collectability doubtful,
the loan is placed on “non-accrual” status. Our policies require six consecutive months of contractual payments in
order for the loan to be removed from non-accrual status.





|                                                                   |  | At June 30,            |      
|------------------------------------------------------------------ |  | ---------------------- | -----
|                                                                   |  | 2016                   |      
|                                                                   |  | (Dollars in thousands) |      
|                                                                   |  |                        |      
|Non-accrual loans:                                                 |  |                        |      
|Residential real estate loans                                      |  | $                      | 3,367
|Commercial real estate                                             |  |                        | 876  
|Residential construction                                           |  |                        | -    
|Commercial                                                         |  |                        | 16   
|Consumer and other                                                 |  |                        | 1    
|Total                                                              |  |                        | 4,260
|Accruing loans past due 90 days or more:                           |  |                        |      
|Residential real estate loans                                      |  |                        | -    
|Total                                                              |  |                        | -    
|Total non-performing loans                                         |  |                        | 4,260
|Other real estate owned                                            |  |                        | 1,895
|Other non-performing assets                                        |  |                        | -    
|Total non-performing assets                                        |  |                        | 6,155
|Troubled debt restructurings in compliance with restructured terms |  |                        | 2,709
|Troubled debt restructurings and total non-performing assets       |  | $                      | 8,864
|                                                                   |  |                        |      
|Total non-performing loans to total loans                          |  |                        | 1.69 
|Total non-performing assets to total assets                        |  |                        | 1.22 
|Total non-performing assets and                                    |  |                        |      
|troubled debt restructurings to total assets                       |  |                        | 1.76 





| | (1) | The gross interest income that would have been reported if the non-accrual loans had performed in accordance with their original
terms was $248,000 for the year ended June 30, 2016. Actual income recognized on these loans was $67,000 for the year ended June
30, 2016.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The gross interest income that would have been reported if the troubled debt restructurings had
performed in accordance with their original terms was $169,000 for the year ended June 30, 2016. Actual income recognized on these
loans was $31,000 for the year ended June 30, 2016.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Total non-performing assets
decreased $2.6 million to $6.2 million at June 30, 2016 from $8.8 million at June 30, 2015. Non-performing assets as of June 30,
2016 consisted of $1.9 million of other real estate owned, which reflects the repossession of a five-lot residential development
project at a carrying value of $197,000, a one-to-four family condominium unit at a carrying value of $156,000, non-owner occupied
commercial real estate with a carrying value of $399,000, a commercial building at a carrying value of $81,000, commercial land
with a carrying value of $418,000, three lots in a recreational park at a value of $87,000, and 202.5 acres of land with a carrying
value of $557,000. Also included in non-performing assets at June 30 2016 was $4.3 million in non-performing loans. These loans
consisted of 26 residential loans totaling $3.4 million, six commercial real estate loans totaling $876,000, one commercial loan
for $16,000 and one consumer loan for $1,000. Non-performing assets as of June 30, 2015 consisted of $3.2 million of other real
estate owned, which reflects the repossession of a five-lot residential development project at a carrying value of $197,000, a
commercial building at a carrying value of $112,000, three lots in a recreational park at a value of $139,000, a single family
home with a carrying value of $495,000, a single family condominium with a carrying value of $71,000, a single family home with
a carrying value of $51,000, a single family home with a carrying value of $374,000, a commercial building with a carrying value
of $1.1 million and 202.5 acres of land with a carrying value of $599,000. Also included in non-performing assets at June 30 2015
was $5.6 million in non-performing loans. These loans consisted of 18 residential loans totaling $2.7 million, 11 commercial real
estate loans totaling $2.9 million, one commercial loan for $22,000 and one consumer loan for $1,000.



12







Management is focused on
working with borrowers and guarantors to resolve non-performing loans by restructuring or liquidating assets when prudent. We review
the strength of the guarantors; require face to face discussions and offer restructuring suggestions that provide the borrowers
with short-term relief and exit strategies. Overall, we expect to see improvement as solutions are identified and executed. We
obtain a current appraisal on all real estate secured loans that are 180 days or more past due if the appraisal in our file is
older than one year. If the determination is made that there is the potential for collateral shortfall, an allocated reserve will
be assigned to the loan for the expected deficiency. It is our policy to charge off or write down loans or other assets when, in
the opinion of the Credit Committee and loan review, the ultimate amount recoverable is less than the book value, or the collection
of the amount is expected to be unduly prolonged. The level of non-performing assets is expected to fluctuate in response to changing
economic and market conditions, and the relative sizes of the respective loan portfolios, along with management’s degree
of success in resolving problem assets. Management takes a proactive approach with respect to the identification and resolution
of problem loans



The following table sets
forth certain information with respect to our loan portfolio delinquencies at the dates indicated.





|                         |  | Loans Delinquent For   |   |  |                  |  
|------------------------ |  | ---------------------- | - |  | ---------------- | -
|                         |  | 60-89 Days Past Due    |   |  | 90 Days and Over |  
|                         |  | Number                 |   |  | Amount           |  
|                         |  | (Dollars in thousands) |  
|At June 30, 2016         |  |                        |   |  |                  |  
|Residential real estate  |  |                        | - |  |                  | $
|Commercial real estate   |  |                        | - |  |                  |  
|Total                    |  |                        | - |  |                  | $
|                         |  |                        |   |  |                  |  
|At June 30, 2015         |  |                        |   |  |                  |  
|Residential real estate  |  |                        | 2 |  |                  | $
|Commercial real estate   |  |                        | - |  |                  |  
|Total                    |  |                        | 2 |  |                  | $
|                         |  |                        |   |  |                  |  
|At June 30, 2014         |  |                        |   |  |                  |  
|Residential real estate  |  |                        | 4 |  |                  | $
|Commercial real estate   |  |                        | 2 |  |                  |  
|Total                    |  |                        | 6 |  |                  | $
|                         |  |                        |   |  |                  |  
|At June 30, 2013         |  |                        |   |  |                  |  
|Residential real estate  |  |                        | 3 |  |                  | $
|Commercial real estate   |  |                        | - |  |                  |  
|Total                    |  |                        | 3 |  |                  | $
|                         |  |                        |   |  |                  |  
|At June 30, 2012         |  |                        |   |  |                  |  
|Residential real estate  |  |                        | 2 |  |                  | $
|Commercial real estate   |  |                        | - |  |                  |  
|Residential construction |  |                        | - |  |                  |  
|Total                    |  |                        | 2 |  |                  | $



13







Classified Assets.
Applicable banking regulations and our internal policies require that management utilize an internal asset classification system
to monitor and evaluate the credit risk inherent in its loan portfolio. We currently classify problem and potential problem assets
as “substandard”, “doubtful”, “loss” or “special mention.” An asset is considered
“substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any. “Substandard” assets include those characterized by the distinct possibility that the institution
will sustain some loss if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses
inherent in those classified “substandard” with the added characteristic that the weaknesses present make collection
or liquidation in full, on the basis of currently existing facts, conditions, and values, questionable, and there is a high probability
of loss. Assets classified as “loss” are those considered uncollectible and of such little value that their continuance
as loans is not warranted. In addition, assets that do not currently expose us to sufficient risk to warrant classification in
one of the aforementioned categories but possess credit deficiencies or potential weaknesses are required to be designated “special
mention.”



An insured institution
is required to establish general allowances for loan losses in an amount deemed prudent by management for loans classified substandard
or doubtful, as well as for other potential problem loans. General allowances represent loss allowances which have been established
to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, have not been allocated
to particular problem assets. When an insured institution classifies problem assets as “loss”, it is required either
to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount.
Our determination as to the classification of its assets and the amount of its valuation allowances is subject to review by our
banking regulators, who can order the establishment of additional general or specific loss allowances.



On the basis of management’s
review of our assets, at June 30, 2016 we classified $9.2 million of our loans as substandard and $63,000 as doubtful. Of these
loans, $4.3 million were considered non-performing and included in the table of non-performing assets. At June 30, 2016, $1.1 million
of our loans were designated as special mention, and none of our assets were classified as loss.



The loan portfolio is reviewed
on a regular basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified
assets constitute non-performing assets.



Allowance for Loan Losses



Our allowance for loan
losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. Management, in
determining the allowance for loan losses, considers the losses inherent in our loan portfolio and changes in the nature and volume
of loan activities, along with the general economic and real estate market conditions. We identify and establish specific loss
allowances on impaired loans, establish general valuation allowances on the remainder of our loan portfolio and establish an unallocated
portion to reflect losses resulting from the inherent imprecision involved in the loss analysis process. Once a loan becomes delinquent
or otherwise identified as impaired, we may establish a specific loan loss allowance based on a review of among other things, expected
cash flows, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. General
loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition
of the loan portfolio, current economic conditions and delinquency trends. The allowance is increased through provisions charged
against current earnings and recoveries of previously charged-off loans. The portions of loans that are determined to be uncollectible
are charged against the allowance. While management uses available information to recognize probable and reasonably estimable loan
losses, future loss provisions may be necessary based on changing economic conditions. The allowance for loan losses as of June
30, 2016 was maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and
such losses were both probable and reasonably estimable.



In addition, the Federal
Reserve Board and the Connecticut Department of Banking, as an integral part of their examination process, periodically review
our allowance for loan losses. These agencies may require that we recognize additions to the allowance based on their judgment
of information available to them at the time of examination.



14







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





|                             |  | Year Ended June 30,    |      
|---------------------------- |  | ---------------------- | -----
|                             |  | 2016                   |      
|                             |  | (Dollars in thousands) |      
|                             |  |                        |      
|Balance at beginning of year |  | $                      | 2,175
|Provision for loan losses    |  |                        | 663  
|Charge-offs:                 |  |                        |      
|Residential real estate      |  |                        | (102 
|Commercial real estate       |  |                        | (625 
|Residential construction     |  |                        | -    
|Commercial                   |  |                        | -    
|Consumer and other           |  |                        | (45  
|Total charge-offs            |  |                        | (772 
|Recoveries:                  |  |                        |      
|Residential real estate      |  |                        | 44   
|Commercial real estate       |  |                        | 165  
|Residential construction     |  |                        | -    
|Commercial                   |  |                        | 12   
|Consumer and other           |  |                        | 16   
|Total recoveries             |  |                        | 237  
|Net charge-offs              |  |                        | (535 
|Balance at end of year       |  | $                      | 2,303



15









Allocation of Allowance
for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category, the percent of
the allowance for a category to the total allowance, and the percent of loans in each category to total loans at the dates indicated.
The allowance for loan losses allocated to each loan category is not necessarily indicative of future losses in any particular
category.





|                                |  | Amount                 |       |  | % of Allowance to Total Allowance |  |        | % of Loans in Category to Total Loans | 
|------------------------------- |  | ---------------------- | ----- |  | --------------------------------- |  | ------ | ------------------------------------- | 
|                                |  | (Dollars in thousands) |      
|                                |  |                        |       |  |                                   |  |        |                                       | 
|At June 30, 2016                |  |                        |       |  |                                   |  |        |                                       | 
|Residential real estate (1)     |  | $                      | 1,177 |  |                                   |  | 51.11  | %                                     | 
|Commercial loans (2)            |  |                        | 1,045 |  |                                   |  | 45.37  |                                       | 
|Consumer and other              |  |                        | 20    |  |                                   |  | 0.87   |                                       | 
|Unallocated                     |  |                        | 61    |  |                                   |  | 2.65   |                                       | 
|Total allowance for loan losses |  | $                      | 2,303 |  |                                   |  | 100.00 | %                                     | 
|                                |  |                        |       |  |                                   |  |        |                                       | 
|At June 30, 2015                |  |                        |       |  |                                   |  |        |                                       | 
|Residential real estate (1)     |  | $                      | 1,096 |  |                                   |  | 50.39  | %                                     | 
|Commercial loans (2)            |  |                        | 947   |  |                                   |  | 43.54  |                                       | 
|Consumer and other              |  |                        | 26    |  |                                   |  | 1.20   |                                       | 
|Unallocated                     |  |                        | 106   |  |                                   |  | 4.87   |                                       | 
|Total allowance for loan losses |  | $                      | 2,175 |  |                                   |  | 100.00 | %                                     | 
|                                |  |                        |       |  |                                   |  |        |                                       | 
|At June 30, 2014                |  |                        |       |  |                                   |  |        |                                       | 
|Residential real estate (1)     |  | $                      | 1,292 |  |                                   |  | 54.29  | %                                     | 
|Commercial loans (2)            |  |                        | 919   |  |                                   |  | 38.61  |                                       | 
|Consumer and other              |  |                        | 24    |  |                                   |  | 1.01   |                                       | 
|Unallocated                     |  |                        | 145   |  |                                   |  | 6.09   |                                       | 
|Total allowance for loan losses |  | $                      | 2,380 |  |                                   |  | 100.00 | %                                     | 
|                                |  |                        |       |  |                                   |  |        |                                       | 
|At June 30, 2013                |  |                        |       |  |                                   |  |        |                                       | 
|Residential real estate (1)     |  | $                      | 1,223 |  |                                   |  | 45.41  | %                                     | 
|Commercial loans (2)            |  |                        | 1,332 |  |                                   |  | 49.46  |                                       | 
|Consumer and other              |  |                        | 36    |  |                                   |  | 1.34   |                                       | 
|Unallocated                     |  |                        | 102   |  |                                   |  | 3.79   |                                       | 
|Total allowance for loan losses |  | $                      | 2,693 |  |                                   |  | 100.00 | %                                     | 
|                                |  |                        |       |  |                                   |  |        |                                       | 
|At June 30, 2012                |  |                        |       |  |                                   |  |        |                                       | 
|Residential real estate (1)     |  | $                      | 1,505 |  |                                   |  | 51.67  | %                                     | 
|Commercial loans (2)            |  |                        | 1,364 |  |                                   |  | 46.82  |                                       | 
|Consumer and other              |  |                        | 37    |  |                                   |  | 1.27   |                                       | 
|Unallocated                     |  |                        | 7     |  |                                   |  | 0.24   |                                       | 
|Total allowance for loan losses |  | $                      | 2,913 |  |                                   |  | 100.00 | %                                     | 










| | (1) | Residential real estate loans include one-to-four family mortgage loans, residential construction loans, second mortgages and
home equity lines of credit.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Commercial loans include commercial real estate loans and commercial loans.
| | --- | ---------------------------------------------------------------------------



16







Each quarter, management
evaluates the total balance of the allowance for loan losses based on several factors, some of which are not loan specific but
are reflective of the inherent losses in the loan portfolio. This process includes, but is not limited to, a periodic review of
loan collectability in light of historical experience, the nature and volume of loan activity, conditions that may affect the ability
of the borrower to repay, underlying value of collateral, if applicable, and economic conditions in our immediate market area.
First, we group loans by delinquency status. All loans 90 days or more delinquent are generally evaluated individually along with
other impaired loans, based primarily on the present value of expected future cash flows or the value of the collateral securing
the loan. Specific loss allowances are established as required by this analysis. All loans which are not individually evaluated
are segregated by type or loan grade and a loss allowance is established by using loss experience data and management’s judgment
concerning other matters it considers significant. The allowance is allocated to each category of loan based on the results of
the above analysis. Differences between the allocated balances and recorded allowances are reflected as unallocated to absorb losses
resulting from the inherent imprecision involved in the loss analysis process.



This analysis process is
inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available.
Although we believe that we have established the allowance at levels to absorb probable and estimable losses, future additions
may be necessary if economic or other conditions in the future differ from the current environment.



Investment Activities



Putnam Bank’s Executive
Committee is responsible for implementing Putnam Bank’s Investment Policy. The Investment Policy is reviewed annually and
any changes to the policy are recommended to, and subject to, the approval of our board of directors. The Executive Committee is
comprised of our Chairman, President, Executive Vice President and one rotating director. Authority to make investments under the
approved Investment Policy guidelines is delegated by the Executive Committee to appropriate officers. While general investment
strategies are developed and authorized by the Asset/Liability Committee, the execution of specific actions rests with the Chief
Executive Officer or Executive Vice President who may act jointly or severally as Putnam Bank’s Investment Officer. The Investment
Officer is responsible for ensuring that the guidelines and requirements included in the Investment Policy are followed and that
all securities are considered prudent for investment. The Investment Officer is authorized to execute investment transactions (purchases
and sales) up to $5 million per transaction without the prior approval of the Executive Committee and within the scope of the established
investment policy. Each transaction in excess of established limits must receive prior approval of the Executive Committee.



In addition, Putnam Bank
utilizes the services of an independent investment advisor to assist in managing the investment portfolio. The investment advisor
is responsible for maintaining current information regarding securities dealers with whom they are conducting business on our behalf.
A list of appropriate dealers is provided annually to the board of directors for approval and authorization prior to execution
of trades. The investment advisor, through its assigned portfolio manager, must contact our President or Treasurer to review all
investment recommendations and transactions and receive approval from the President or Treasurer prior to execution of any transaction
that might be transacted on our behalf. Upon receipt of approval, the investment advisor, or its assigned portfolio manager, is
authorized to conduct all investment business on our behalf.



Our Investment Policy requires
that all securities transactions be conducted in a safe and sound manner. Investment decisions must be based upon a thorough analysis
of each security instrument to determine its quality, inherent risks, fit within our overall asset/liability management objectives,
effect on our risk-based capital measurement and prospects for yield and/or appreciation.



The investment policy is
consistent with our overall business and asset/liability management strategy, which focuses on sustaining adequate levels of core
earnings. During the fiscal year ended June 30, 2016, we recognized other-than-temporary write-downs of $84,000 on non-agency mortgage-backed
securities.



17







U.S. Government and
government-sponsored securities. At June 30, 2016, our U.S. Government and government-sponsored securities portfolio
classified as available-for-sale totaled $5.3 million, or 2.5% of total securities. At June 30, 2016, our U.S. Government and government-sponsored
securities portfolio classified as held-to-maturity totaled $14.7 million, or 6.8% of total securities. While U.S. Government and
government-sponsored securities generally provide lower yields than other investments in our securities investment portfolio, we
maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and prepayment protection.



Corporate Bonds. At June 30, 2016, we had five investments in corporate single-issuer trust preferred securities (TRUPs) with a total book
value of $6.0 million and total fair value of $5.0 million, or 2.3% of total securities, all of which were classified as available-for-sale.
The single-issuer trust preferred investments are evaluated for other-than-temporary impairment by performing a present value of
cash flows each quarter. None of the issuers have deferred interest payments or announced the intention to defer interest payments.
We believe the decline in fair value is related to the spread over three-month LIBOR, on which the quarterly interest payments
are based, as the spread over LIBOR being received is significantly lower than current market spreads. Management concluded the
impairment of these investments was considered temporary and asserts that we do not have the intent to sell these investments and
that it is more likely than not it will not have to sell the investments before recovery of their cost basis which may be at maturity.



Although corporate bonds
may offer higher yields than U.S. Treasury or agency securities of comparable duration, corporate bonds also have a higher risk
of default due to possible adverse changes in the creditworthiness of the issuer. In order to mitigate this risk, our investment
policy requires that corporate debt obligations be rated investment grade or better by a nationally recognized rating agency. If
the bond rating goes below investment grade, then the investment is placed on an investment “watch report” and is monitored
by our Investment Officer. The investment is then reviewed quarterly by our board of directors where a determination is made to
hold or dispose of the investment.



Mortgage-Backed Securities.We purchase mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. We invest in mortgage-backed
securities to achieve positive interest rate spreads with minimal administrative expense, and lower our credit risk as a result
of the guarantees provided by Freddie Mac, Fannie Mae and Ginnie Mae. We also invest in collateralized mortgage obligations (CMOs
or non-agency mortgage-backed securities), also insured or issued by Freddie Mac, Fannie Mae and Ginnie Mae, or private issuers
such as Washington Mutual and Countrywide Home Loans. All private issuer CMOs were rated AAA at time of purchase.



Mortgage-backed securities
are created by the pooling of mortgages and the issuance of a security with an interest rate that is less than the interest rates
on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family
or multi-family mortgages, although we focus our investments on mortgage-backed securities backed by one-to-four family mortgages.
The issuers of such securities (generally U.S. government agencies and government-sponsored enterprises, including Fannie
Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in the form of securities to investors such as Putnam
Bank, and guarantee the payment of principal and interest to investors. Mortgage-backed securities generally yield less than the
loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed
securities are usually more liquid than individual mortgage loans and may be used to collateralize our specific liabilities and
obligations.



CMOs are a type of mortgage-backed
security issued by a special purpose entity that aggregates pools of mortgage-backed securities and creates different classes of
CMO securities with varying maturities and amortization schedules as well as a residual interest, with each class, or “tranche,”
possessing different risk characteristics. A particular tranche of CMOs may, therefore, carry prepayment risk that differs from
that of both the underlying collateral and other tranches. We purchase CMO tranches in an attempt to moderate reinvestment risk
associated with mortgage-backed securities resulting from unexpected prepayment activities.



18







At June 30, 2016, mortgage-backed
securities and CMOs classified as available-for-sale totaled $50.2 million, or 23.4% of total securities. At June 30, 2016, mortgage-backed
securities and CMOs classified as held-to-maturity totaled $129.2 million, or 60.2% of total securities. At June 30, 2016, 65.8%
of the mortgage-backed securities were backed by adjustable rate loans and 34.2% were backed by fixed rate mortgage loans. The
mortgage-backed securities portfolio had a weighted average yield of 2.53% at June 30, 2016. Investments in mortgage-backed securities
involve a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments
to the amortization of any premium or accretion of any discount relating to such instruments thereby changing the net yield on
such securities. There is also reinvestment risk associated with the cash flows from such securities or if such securities are
redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates.



State agency and
municipal obligations. At June 30, 2016, our State agency and municipal obligations portfolio classified as held-to-maturity
totaled $457,000, or 0.2% of total securities.



Marketable Equity
Securities. At June 30, 2016, our equity securities portfolio totaled $10.0 million, or 4.6% of total securities,
all of which were classified as available-for-sale. At June 30, 2016, the portfolio consisted of auction-rate trust preferred securities
(“ARP”). Auction-rate trust preferred securities are a floating rate preferred stock, on which the dividend rate generally
resets every 90 days based on an auction process to reflect the yield demand for the instruments by potential purchasers. At June
30, 2016, our investments in auction-rate trust preferred securities consisted of investments in three corporate issuers. We originally
purchased these securities because they represented highly liquid, tax-preferred investments secured, in most cases, by preferred
stock issued or guaranteed by high quality, investment grade companies, generally other financial institutions (“collateral
preferred shares”). The ARP shares, or certificates, we purchased are Class A certificates, which, among other rights, entitles
the holder to priority claim on dividends paid into the trust holding the preferred shares.



In most cases, the trusts
which issued the ARP certificates own various callable preferred shares of stock by a single entity. In addition to the call dates
for redemption established by the collateral preferred shares, each trust has a maturity date upon which the trust itself will
terminate. The value of the remaining collateral preferred shares is not guaranteed, and may be more or less than the stated par
value of the collateral preferred shares, and is dependent on the market value of those collateral preferred shares on the date
of the trust’s maturity.



The certificates issued
by the trusts previously traded in an active, open auction market, with each individual trust establishing the frequency of its
auctions, typically every 90 days (the “reset date”). The results of an auction would be the exchange of certificates,
at par, between participants entering or exiting the market, and resetting of the yield to be earned by holders of the Class A
certificates as well as the holders of other classes of trust certificates.



Beginning in February 2008,
auctions for these securities began to fail when investors declined to bid on the securities. Five of the largest investment banks
that made a market in these securities (Merrill Lynch, Citigroup, USB, AG and Morgan Stanley) declined to act as bidders of last
resort, as they had in the past. The auction failures did not result in the loss of any principal value to the certificate holders,
but prevented many sellers from exiting, or redeeming, their certificates at the reset date. These unsuccessful sellers were required
to continue to hold the certificates until the next scheduled reset date. To compensate these unsuccessful sellers, the failed
auctions triggered a penalty-rate feature which provided that owners of the Class A certificates were entitled to a higher portion
of the dividends, and thus a higher yield, on the Class A certificates.



During this time, we attempted
to divest the ARPs, but were prevented from doing so due to the continued failure of the auction market. We continued to carry
our investments at par value, despite the increased liquidity risk, because the credit strength of the issuers of the collateral
preferred shares remained high, and the yield remained above-market.



The turmoil in the financial
markets caused the value of the underlying collateral preferred shares to decline dramatically. Market values for the ARPs from
Merrill Lynch, our safekeeping agent, also declined, and we recorded a temporary impairment adjustment to the carrying value of
the ARPs, which are classified as available-for-sale. A temporary impairment reduces the carrying value of the investment security
with an offsetting reduction in our capital accounts.



19







We had difficulty identifying
market prices of comparable instruments for ARPs due to the inactive market. As a result, during the quarter ended June 30, 2009,
we modified our methodology for determining the fair value of the ARPs classified as Level 3, and used the quoted market values
of the underlying collateral preferred shares, adjusted for the higher yield we earned through the Class A certificates compared
with the nominal rate available to a direct owner of the collateral preferred shares. We continued to record a temporary impairment
adjustment on the ARPs, primarily due to the depressed market values of the underlying collateral preferred shares.



During 2009, we concluded
that the market value of the underlying collateral preferred shares did not represent orderly transactions and adopted the use
of a discounted cash flow model to determine if there was any other-than-temporary impairment of its investments in the ARPs. The
resulting discounted cash flow for each ARP classified as Level 3 showed no other-than-temporary impairment in the fair value of
the securities.



We have the ability and
intent to hold these securities for the time necessary to collect the expected cash flows.



The table below includes
information on the various issuers of Auction Rate Preferred securities we own as of June 30, 2016:





|Issuer                  |  | Goldman Sachs |           |   | Merrill Lynch |   |           | Bank of America | 
|----------------------- |  | ------------- | --------- | - | ------------- | - | --------- | --------------- | 
|Par amount              |  | $             | 3,000,000 |   |               | $ | 5,000,000 |                 | 
|Book Value              |  | $             | 3,000,000 |   |               | $ | 5,000,000 |                 | 
|Purchase Date           |  |               | 12-12-07  |   |               |   | 09-04-07  |                 | 
|Maturity Date           |  |               | 08-23-26  |   |               |   | 05-28-27  |                 | 
|Next Reset Date         |  |               | 08-20-16  |   |               |   | 08-26-16  |                 | 
|Reset Frequency         |  |               | Quarterly |   |               |   | Quarterly |                 | 
|Failed Auction          |  |               | Yes       |   |               |   | Yes       |                 | 
|Receiving Default Rates |  |               | Yes       |   |               |   | Yes       |                 | 
|Current Rate            |  |               | 4.64      | % |               |   | 4.55      | %               | 
|Dividends Current       |  |               | Yes       |   |               |   | Yes       |                 | 



Our entire auction rate
preferred securities holdings as of June 30, 2016 had failed auctions for the past fiscal year.



20







Securities Portfolio
Composition. The following tables set forth the composition of our securities portfolio, excluding Federal Home Loan Bank
stock, at the dates indicated,





|                                                                    |  | At June 30,            |        
|------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                    |  | 2016                   |        
|                                                                    |  | Carrying               |        
|                                                                    |  | Value                  |        
|                                                                    |  | (Dollars in thousands) |        
|Securities, available-for-sale:                                     |  |                        |        
|U.S. Government and government-sponsored securities                 |  | $                      | 5,285  
|Corporate bonds and other securities                                |  |                        | 4,975  
|U.S. Government-sponsored and guaranteed mortgage-backed securities |  |                        | 45,724 
|Non-agency mortgage-backed securities                               |  |                        | 4,452  
|Equity securities                                                   |  |                        | 10,000 
|Total securities, available-for-sale                                |  |                        | 70,436 
|Securities, held-to-maturity:                                       |  |                        |        
|U.S. Government and government-sponsored securities                 |  |                        | 14,689 
|State agency and municipal obligations                              |  |                        | 457    
|U.S. Government-sponsored and guaranteed mortgage-backed securities |  |                        | 129,197
|Total securities, held-to-maturity                                  |  |                        | 144,343
|                                                                    |  |                        |        
|Total securities                                                    |  | $                      | 214,779



At June 30, 2016, we had no investments in
a single company or entity (other than the U.S. Government or an agency of the U.S. Government) that had an aggregate book value
in excess of 10% or more of total stockholders’ equity.



The following table sets forth the amortized
cost and estimated fair value of securities of issuers (other than direct obligations of the U.S. Government) as of June 30, 2016,
that exceeded 10% of our total equity as of that date.





|            |  | At June 30, 2016 |       
|----------- |  | ---------------- | ------
|            |  | Amortized        |       
|            |  | Cost             |       
|            |  | (in thousands)   |       
|            |  |                  |       
|Fannie Mae  |  | $                | 72,207
|            |  |                  |       
|Freddie Mac |  | $                | 55,585





21







Portfolio Maturities
and Yields.The composition and maturities of the investment securities portfolio at June 30, 2016 are summarized in the
following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early
redemptions that may occur. State agency and municipal obligations as well as common and preferred stock yields have not been adjusted
to a tax-equivalent basis. Certain mortgage-backed securities have interest rates that are adjustable and will reprice annually
within the various maturity ranges. These repricing schedules are not reflected in the table below. At June 30, 2016, mortgage-backed
securities with adjustable rates totaled $118.0 million. At June 30, 2016, we held no securities that mature in one year or less.





|                                                                    |  | After One  Year  Through  Five Years |        |   | After Five  Years  Through  Ten Years |   |        | After Ten  Years |  |   | Total   |  
|------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ------------------------------------- | - | ------ | ---------------- |  | - | ------- | -
|                                                                    |  | (Dollars in thousands)               |       
|Securities available-for-sale:                                      |  |                                      |        |   |                                       |   |        |                  |  |   |         |  
|U.S. Government and government-sponsored securities                 |  | $                                    | 1,004  |   |                                       | $ | -      |                  |  | $ | 4,281   |  
|Corporate debt securities                                           |  |                                      | -      |   |                                       |   | -      |                  |  |   | 4,975   |  
|U.S. Government-sponsored and guaranteed mortgage-backed securities |  |                                      | 175    |   |                                       |   | 10,717 |                  |  |   | 34,832  |  
|Non-agency mortgage-backed securities                               |  |                                      | -      |   |                                       |   | -      |                  |  |   | 4,452   |  
|Total debt securities                                               |  |                                      | 1,179  |   |                                       |   | 10,717 |                  |  |   | 48,540  |  
|Equity securities                                                   |  |                                      | -      |   |                                       |   | -      |                  |  |   | 10,000  |  
|                                                                    |  |                                      |        |   |                                       |   |        |                  |  |   |         |  
|Total securities available-for-sale                                 |  |                                      | 1,179  |   |                                       |   | 10,717 |                  |  |   | 58,540  |  
|                                                                    |  |                                      |        |   |                                       |   |        |                  |  |   |         |  
|Securities held-to-maturity:                                        |  |                                      |        |   |                                       |   |        |                  |  |   |         |  
|U.S. Government and government-sponsored securities                 |  |                                      | 9,208  |   |                                       |   | -      |                  |  |   | 5,481   |  
|State agency and municipal obligations                              |  |                                      | -      |   |                                       |   | 457    |                  |  |   | -       |  
|U.S. Government-sponsored and guaranteed mortgage-backed securities |  |                                      | -      |   |                                       |   | 3,050  |                  |  |   | 126,147 |  
|Total securities held to maturity                                   |  |                                      | 9,208  |   |                                       |   | 3,507  |                  |  |   | 131,628 |  
|                                                                    |  |                                      |        |   |                                       |   |        |                  |  |   |         |  
|Total securities                                                    |  | $                                    | 10,387 |   |                                       | $ | 14,224 |                  |  | $ | 190,168 |  
|Weighted average yield                                              |  |                                      | 1.67   | % |                                       |   | 2.66   | %                |  |   | 2.61    | %










(1)       Equity securities consist
of ARPs with stated maturity dates.



Sources of Funds



General.
Deposits have traditionally been our primary source of funds for use in lending and investment activities. In addition to deposits,
funds are derived from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on earning
assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and
outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition. Borrowings
from the Federal Home Loan Bank of Boston and brokered certificates of deposit may be used to compensate for reductions in deposits
and to fund loan growth.



Deposits.
A majority of our depositors are persons who work or reside in Windham County and New London County, Connecticut. We offer a selection
of deposit instruments, including checking, savings, money market deposit accounts, negotiable order of withdrawal (NOW) accounts
and fixed-term certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required,
the amount of time the funds must remain on deposit and the interest rate.



22









Interest rates paid, maturity
terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on
current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. To attract and
retain deposits, we rely upon personalized customer service, long-standing relationships and competitive interest rates.



The flow of deposits is
influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition.
The variety of deposit accounts that we offer allows us to be competitive in obtaining funds and responding to changes in consumer
demand. Based on historical experience, management believes our deposits are relatively stable. However, the ability to attract
and maintain money market accounts and certificates of deposit, and the rates paid on these deposits, have been and will continue
to be significantly affected by market conditions. At June 30, 2016, $111.1 million, or 31.2%, of our deposit accounts were certificates
of deposit, of which $50.6 million had maturities of one year or less.



23







The following table sets forth the average distribution
of total deposit accounts, by account type, for the years indicated.





|                        |  | Years June 30,         |        
|----------------------- |  | ---------------------- | -------
|                        |  | 2016                   |        
|                        |  |                        |        
|                        |  | Average                |        
|                        |  | Balance                |        
|                        |  | (Dollars in thousands) |        
|                        |  |                        |        
|Demand deposits         |  | $                      | 69,029 
|NOW accounts            |  |                        | 86,574 
|Regular savings         |  |                        | 70,666 
|Money market accounts   |  |                        | 18,143 
|Club accounts           |  |                        | 209    
|                        |  |                        | 244,621
|Certificates of deposit |  |                        | 114,454
|Total                   |  | $                      | 359,075



As of June 30, 2016, the aggregate amount of
outstanding certificates of deposit in amounts greater than or equal to $250,000 was $12.6 million. The following table sets forth
the maturity of those certificates as of June 30, 2016, in thousands.



|Three months or less              |  | $ | 1,557  | 
|--------------------------------- |  | - | ------ | 
|Over three through six months     |  |   | 1,174  | 
|Over six months through one year  |  |   | 934    | 
|Over one year through three years |  |   | 6,287  | 
|Over three years                  |  |   | 2,652  | 
|Total                             |  | $ | 12,604 | 



24







Borrowings. Our borrowings consist of advances from,
and a line of credit with, the Federal Home Loan Bank of Boston (“FHLB”), and securities sold under agreements to repurchase.
At June 30, 2016, we had an available line of credit with the Federal Home Loan Bank of Boston in the amount of $2.4 million
and access to additional Federal Home Loan Bank advances of up to $53.2 million. We also have an available line of credit with
Bankers Bank Northeast in the amount of $4.0 million. There were no amounts advanced on these lines as of June 30, 2016. At June
30, 2016, retail securities sold under agreements to repurchase were $2.4 million. The following table sets forth information concerning
balances and interest rates on our borrowings at the dates and for the years indicated.





|                                                                         |  | At and For The Year Ended |       
|------------------------------------------------------------------------ |  | ------------------------- | ------
|                                                                         |  | June 30,                  |       
|                                                                         |  | 2016                      |       
|                                                                         |  | (Dollars in thousands)    |       
|                                                                         |  |                           |       
|Maximum amount of advances outstanding at any month end during the year: |  |                           |       
|FHLB advances                                                            |  | $                         | 56,980
|Securities sold under agreements to repurchase with customers            |  |                           | 9,579 
|                                                                         |  |                           |       
|Average advances outstanding during the year:                            |  |                           |       
|FHLB advances                                                            |  | $                         | 53,111
|Securities sold under agreements to repurchase with customers            |  |                           | 5,621 
|                                                                         |  |                           |       
|Balance outstanding at end of year:                                      |  |                           |       
|FHLB advances                                                            |  | $                         | 53,900
|Securities sold under agreements to repurchase with customers            |  |                           | 2,359 
|                                                                         |  |                           |       
|Weighted average interest rate during the year:                          |  |                           |       
|FHLB advances                                                            |  |                           | 2.59  
|Securities sold under agreements to repurchase with customers            |  |                           | 0.10  
|                                                                         |  |                           |       
|Weighted average interest rate at end of year:                           |  |                           |       
|FHLB advances                                                            |  |                           | 2.54  
|Securities sold under agreements to repurchase with customers            |  |                           | 0.10  



Subsidiary Activities



PB Bancorp, Inc.’s
only subsidiary is Putnam Bank. Putnam Bank has three subsidiaries, Windham North Properties, LLC, PSB Realty, LLC and Putnam Bank
Mortgage Servicing Company. Windham North Properties, LLC is used to acquire title to selected properties on which Putnam Bank
forecloses. As of June 30, 2016, Windham North Properties, LLC, owned seven such properties. PSB Realty, LLC owns a parcel of real
estate located immediately adjacent to Putnam Bank’s main office. This real estate is utilized as a loan center for Putnam
Bank and there are no outside tenants that occupy the premises. PSB Realty, LLC also owns the 40 High Street, Norwich branch building
and real estate. Putnam Bank Mortgage Servicing Company is a qualified “passive investment company” that is intended
to reduce Connecticut state taxes on interest earned on real estate loans.



Personnel



As of June 30, 2016,
we had 85 full-time employees and 39 part-time employees. Our employees are not represented by any collective bargaining
group. Management believes that we have good working relations with our employees.



FEDERAL AND STATE TAXATION



PB Bancorp, Inc. and Putnam
Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below.



The following discussion
of federal taxation is intended only to summarize certain pertinent federal and state income tax matters and is not a comprehensive
description of the tax rules applicable to PB Bancorp, Inc. or Putnam Bank.



25







The Company is currently
open to audit under statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended June
30, 2013 through June 30, 2016. The Federal return for the tax year ended 2009 was audited in 2010. The state tax returns have
not been audited for the last five years.



Federal Taxation



Method of Accounting.
For federal income tax purposes, PB Bancorp, Inc. and Putnam Bank currently report their income and expenses on the accrual method
of accounting and use a tax year ending June 30 for filing their federal income tax returns.



Bad Debt Reserves.
Prior to the Small Business Protection Act of 1996 (the “1996 Act”), Putnam Bank was permitted to establish a reserve
for bad debts and to make annual additions to the reserve. These additions could, within specified formula limits, be deducted
in arriving at our taxable income. As a result of the 1996 Act, Putnam Bank was required to use the specific charge off method
in computing its bad debt deduction beginning with its 1996 federal tax return. Savings institutions were required to recapture
any excess reserves over those established as of December 31, 1987 (base year reserve). At June 30, 2016, Putnam Bank had
no reserves subject to recapture in excess of its base year reserves.



Taxable Distributions
and Recapture. Prior to the 1996 Act, bad debt reserves created prior to January 1, 1988 were subject to recapture
into taxable income if Putnam Bank failed to meet certain thrift asset and definitional tests. Federal legislation has eliminated
these thrift-related recapture rules. At June 30, 2016, our total federal pre-1988 base year reserve was approximately $2.3 million.
However, under current law, pre-1988 base year reserves remain subject to recapture if Putnam Bank makes certain non-dividend distributions,
repurchases any of its stock, pays dividends in excess of tax earnings and profits, or ceases to maintain a bank charter.



Alternative
Minimum Tax. The Internal Revenue Code of 1986, as amended (the “Code”) imposes an alternative minimum
tax (AMT) at a rate of 20% on a base of regular taxable income plus certain tax preferences, which we refer to as “alternative
minimum taxable income.” The AMT is payable to the extent such alternative minimum taxable income is in excess of an exemption
amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of alternative minimum taxable
income. Certain AMT payments may be used as credits against regular tax liabilities in future years. At June 30, 2016, PB Bancorp,
Inc. had $1.3 million of AMT payments available to carry forward to future periods.



Net Operating
Loss Carryovers. A company may carry back net operating losses to the preceding two taxable years and forward to
the succeeding 20 taxable years. At June 30, 2016, PB Bancorp, Inc. had $2.0 million in net operating loss carry forwards for federal
income tax purposes.



Corporate Dividends-Received
Deduction. PB Bancorp, Inc. may exclude from its income 100% of dividends received from Putnam Bank as a member
of the same affiliated group of corporations. The corporate dividends-received deduction is 80% in the case of dividends received
from corporations with which a corporate recipient does not file a consolidated tax return, and corporations which own less than
20% of the stock of a corporation distributing a dividend may deduct only 70% of dividends received or accrued on their behalf.



State Taxation





Connecticut
State Taxation. PB Bancorp, Inc., Putnam Bank and its subsidiaries are subject to the Connecticut corporation business
tax. Both entities are required to pay the regular corporation business tax (income tax).



The Connecticut corporation
business tax is based on the federal taxable income before net operating loss and special deductions and makes certain modifications
to federal taxable income to arrive at Connecticut taxable income. Connecticut taxable income is multiplied by the state tax rate
of 7.5% to arrive at Connecticut income tax.



In 1998, the State of Connecticut
enacted legislation permitting the formation of passive investment companies by financial institutions. This legislation exempts
qualifying passive investment companies from the Connecticut corporation business tax and excludes dividends paid from a passive
investment company from the taxable income of the parent financial institution. Putnam Bank established a passive investment company,
Putnam Bank Mortgage Servicing Company, during 2007 and eliminated the state income tax expense of Putnam Bank effective July 1,
2006. If the State of Connecticut were to pass legislation in the future to eliminate the passive investment company exemption
Putnam Bank would be subject to state income taxes in Connecticut.



26







Maryland State Taxation.As
a Maryland business corporation, PB Bancorp is required to file an annual report with and pay franchise taxes to the state of Maryland.



SUPERVISION AND REGULATION



General



Putnam Bank is a stock
savings bank organized under the laws of the State of Connecticut. The lending, investment, and other business operations of Putnam
Bank are governed by Connecticut law and regulations, as well as applicable federal law and regulations, and Putnam Bank is prohibited
from engaging in any operations not authorized by such laws and regulations. Putnam Bank is subject to extensive regulation, supervision
and examination by the Connecticut Department of Banking and, as a member of the Federal Reserve System, by the Federal Reserve
Bank of Boston. This regulation and supervision establishes a comprehensive framework of activities in which an institution may
engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation’s deposit insurance fund
and depositors, and not for the protection of security holders. Putnam Bank also is a member of and owns stock in the Federal Home
Loan Bank of Boston, which is one of the 11 regional banks in the Federal Home Loan Bank System.



Under this system of regulation,
the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination
activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of
dividend payments; govern the classification of assets; determine the adequacy of loan loss reserves for regulatory purposes; and
establish the timing and amounts of assessments and fees. Moreover, as part of their examination authority, the banking regulators
assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings
and other factors. These ratings are inherently subjective and the receipt of a less than satisfactory rating in one or more categories
may result in enforcement action by the banking regulators against a financial institution. A less than satisfactory rating may
also prevent a financial institution, such as Putnam Bank or its holding company, from obtaining necessary regulatory approvals
to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.



In addition, we must comply
with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations,
and fair lending laws and regulations. Government agencies have the authority to impose monetary penalties and other sanctions
on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities,
including our ability to acquire other financial institutions or expand our branch network.



As a savings and loan holding
company, PB Bancorp is required to comply with the rules and regulations of the Federal Reserve Board.  It is required to
file certain reports with the Federal Reserve Board and is subject to examination by and the enforcement authority of the Federal
Reserve Board.  PB Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the
federal securities laws.



Any change in these laws
or regulations, whether by the Connecticut Department of Banking, Federal Reserve Board, Federal Deposit Insurance Corporation
or Congress, could have a material adverse impact on PB Bancorp, Inc. and Putnam Bank and their operations.



Set forth below is a brief
description of material regulatory requirements that are applicable to Putnam Bank and PB Bancorp. The description is limited to
certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes
and regulations and their effects on Putnam Bank and PB Bancorp.



Connecticut Bank Regulation



Connecticut Banking
Commissioner. The Connecticut Banking Commissioner regulates the deposit, lending and investment activities of state-chartered
savings banks, including Putnam Bank. The approval of the Connecticut Banking Commissioner is required for, among other things,
the establishment of branch offices and business combination transactions. The Commissioner conducts periodic examinations of Connecticut-chartered
banks, as does the Federal Reserve Board. The Federal Reserve Board also regulates many of the areas regulated by the Connecticut
Banking Commissioner, and federal law may limit some of the authority provided to Connecticut-chartered banks by Connecticut law.





27







Lending Activities.
Connecticut banking laws grant banks broad lending authority. With certain limited exceptions, secured and unsecured loans of any
one obligor under this statutory authority may not exceed 10.0% and 15.0%, respectively, of a bank’s equity capital and allowance
for loan losses.



Consumer Protection.We are also subject to a variety of Connecticut statutes and regulations that are intended to protect consumers and prohibit
discrimination in the granting of credit. These statutes and regulations provide for a range of sanctions for non-compliance with
their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution
of a civil action for actual and punitive damages and injunctive relief. Certain of these statutes authorize private individual
and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of
violations.



Dividends.
Putnam Bank may pay cash dividends out of its net profits. For purposes of this restriction, “net profits” represents
the remainder of all earnings from current operations. Further, the total amount of all dividends declared by a bank in any year
may not exceed the sum of a bank’s net profits for the year in question combined with its retained net profits from the preceding
two years without the specific approval of the Connecticut Banking Commissioner. Federal law also prevents an institution from
paying dividends or making other capital distributions that, if by doing so, would cause it to become “undercapitalized.”
Federal Reserve Board regulations establish limits on dividends, including requiring Federal Reserve Board approval for aggregate
dividends exceeding net income for the current year and the two prior calendar years. In addition, as a subsidiary of a savings
and loan holding company, Putnam Bank must provide prior notice to the Federal Reserve Board of any dividend. The Federal Reserve
Board has the authority to object to the dividend if deemed unsafe or unsound. No dividends may be paid to Putnam Bank’s
sole stockholder, PB Bancorp, Inc, if such dividends would reduce stockholders’ equity below the amount of the liquidation
account required by federal regulations.



Powers.
Connecticut law permits Connecticut banks to sell insurance and fixed and variable rate annuities if licensed to do so by the Connecticut
Insurance Commissioner. With the prior approval of the Connecticut Banking Commissioner, Connecticut banks are also authorized
to engage in a broad range of activities related to the business of banking, or that are financial in nature or that are permitted
under the Bank Holding Company Act or the Home Owners’ Loan Act, both federal statutes, or the regulations promulgated as
a result of these statutes.



Connecticut banks are
also authorized to engage in any activity permitted for a national bank or a federal savings association upon filing notice with
the Connecticut Banking Commissioner unless the Connecticut Banking Commissioner disapproves the activity.



Assessments.
Connecticut banks are required to pay annual assessments to the Connecticut Department of Banking to fund the Connecticut Department
of Banking’s operations. The general assessments are paid pro-rata based upon a bank’s asset size.



Enforcement.Under Connecticut law, the Connecticut Banking Commissioner has extensive enforcement authority over Connecticut banks
and, under certain circumstances, affiliated parties, insiders and agents. The Connecticut Banking Commissioner’s enforcement
authority includes cease and desist orders, fines, receivership, conservatorship, removal of officers and directors, emergency
closures, dissolution and liquidation.



Federal Bank Regulation



Capital Requirements.
Federal regulations require state banks to meet several minimum capital standards: a common equity Tier 1 capital to risk-based
assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio and a Tier 1 capital to total
assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of regulations implementing
recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.



28







The risk-based capital
standards for state banks require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to
risk-weighted assets of at least 4.5%, 6% and 8%, respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied
by a risk weight factor (from 0% to 1,250%) assigned by the regulations based on the risks believed inherent in the type of asset.
Higher levels of capital are required for asset categories believed to present greater risk. Common equity Tier 1 capital
is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common
equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock
and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital
(common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments
and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred
stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is
the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised
an opt-out election regarding the treatment of Accumulated Other Comprehensive Income, up to 45% of net unrealized gains on available-for-sale
equity securities with readily determinable fair market values. Calculation of all types of regulatory capital is subject to deductions
and adjustments specified in the regulations. In assessing an institution’s capital adequacy, the Federal Reserve takes into
consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital
requirements for individual associations where necessary.



In
addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary
bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of
common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements.
The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and
increasing each year until fully implemented at 2.5% on January 1, 2019.



The Federal Deposit
Insurance Corporation Improvement Act required each federal banking agency to revise its risk-based capital standards for insured
institutions to ensure that those standards take adequate account of interest-rate risk, concentration of credit risk, and the
risk of nontraditional activities, as well as to reflect the actual performance and expected risk of loss on multi-family residential
loans. The Federal Reserve Board, along with the other federal banking agencies, adopted a regulation providing that the agencies
will take into account the exposure of a bank’s capital and economic value to changes in interest rate risk in assessing
a bank’s capital adequacy. The Federal Reserve Board also has authority to establish individual minimum capital requirements
in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light
of the particular circumstances.



Standards for
Safety and Soundness.As required by statute, the federal banking agencies adopted final regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness to implement safety and soundness standards. The guidelines set forth the safety
and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. The guidelines address internal controls and information systems, internal audit system, credit
underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits.
The agencies have also established standards for safeguarding customer information. If the appropriate federal banking agency determines
that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to
the agency an acceptable plan to achieve compliance with the standard.



Investment Activities.All Federal Deposit Insurance Corporation insured banks, including savings banks, are generally limited in their investment
activities to principal and equity investments of the type and in the amount authorized for national banks, notwithstanding state
law, subject to certain exceptions. For example, state chartered banks may, with regulatory approval, continue to exercise state
authority to invest in common or preferred stocks listed on a national securities exchange or the NASDAQ Global Market and in the
shares of an investment company registered under the Investment Company Act of 1940, as amended. The maximum permissible investment
is 100% of Tier 1 Capital, as specified by the Federal Deposit Insurance Corporation’s regulations, or the maximum amount
permitted by Connecticut law, whichever is less.



In addition, a state
bank may engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary equity
investments) if it meets all applicable capital requirements and it is determined that such activities or investments do not pose
a significant risk to the Deposit Insurance Fund.



Interstate Banking
and Branching.Federal law permits well capitalized and well managed holding companies to acquire banks in any state, subject
to Federal Reserve Board approval, certain concentration limits and other specified conditions. Interstate mergers of banks are
also authorized, subject to regulatory approval and other specified conditions. In addition, among other things, recent amendments
made by the Dodd-Frank Act permit banks to establish de novo branches on an interstate basis provided that branching is authorized
by the law of the host state for the banks chartered by that state.



29







Prompt Corrective
Regulatory Action.Federal law requires, among other things, that federal bank regulatory authorities take “prompt
corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes
five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized.



The Federal Reserve
Board has adopted regulations to implement the prompt corrective action legislation. The regulations were amended to incorporate
the previously mentioned increased regulatory capital standards that were effective January 1, 2015. An institution is deemed to
be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio
of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is
“adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital
ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution
is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio
of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed
to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based
capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution
is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations)
to total assets that is equal to or less than 2.0%.



At each successive
lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions
on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions
on the acceptance of brokered deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized
categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company
must guarantee the performance of that plan. Based upon its capital levels, a bank that is classified as well-capitalized, adequately
capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound
practice, warrants such treatment. An undercapitalized bank’s compliance with a capital restoration plan is required to be
guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s
total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized”
bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly
undercapitalized” banks must comply with one or more of a number of additional restrictions including, but not limited to,
an order by the Federal Reserve Board to sell sufficient voting stock to become adequately capitalized, reduce total assets, cease
receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits,
compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized”
institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator
within 270 days after it obtains such status.



Transaction with
Affiliates and Regulation W of the Federal Reserve Regulations.Transactions between banks and their affiliates are governed
by federal law. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with
the bank. In a holding company context, the parent bank holding company and any companies which are controlled by such parent holding
company are affiliates of the bank (although subsidiaries of the bank itself, except financial subsidiaries, are generally not
considered affiliates). Generally, Section 23A of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit
the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an
amount equal to 10.0% of such institution’s capital stock and surplus, and with all such transactions with all affiliates
to an amount equal to 20.0% of such institution’s capital stock and surplus. Section 23B applies to “covered transactions”
as well as to certain other transactions and requires that all such transactions be on terms substantially the same, or at least
as favorable, to the institution or subsidiary as those provided to a non-affiliate. The term “covered transaction”
includes the making of loans to, purchase of assets from, and issuance of a guarantee on behalf of an affiliate, and similar transactions.
Section 23B transactions also include the provision of services and the sale of assets by a bank to an affiliate. In addition,
loans or other extensions of credit by the financial institution to the affiliate are required to be collateralized in accordance
with the requirements set forth in Section 23A of the Federal Reserve Act.



Sections 22(h) and
(g) of the Federal Reserve Act place restrictions on loans to a bank’s insiders, i.e., executive officers, directors
and principal shareholders. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and
a greater than 10.0% shareholder of a financial institution, and certain affiliated interests of these, together with all other
outstanding loans to such person and affiliated interests, may not exceed specified limits. Section 22(h) of the Federal Reserve
Act also requires that loans to directors, executive officers and principal shareholders be made on terms substantially the same
as offered in comparable transactions to other persons and also requires prior board approval for certain loans. In addition, the
aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired
capital and surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.



30







Enforcement.The Federal Reserve Board and, secondarily, the Federal Deposit Insurance Corporation, have extensive enforcement authority
over insured state savings banks, including Putnam Bank. The enforcement authority includes, among other things, the ability to
assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions
may be initiated in response to violations of laws and regulations, breaches of fiduciary duty and unsafe or unsound practices.



Federal Insurance
of Deposit Accounts.Putnam Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation. Deposit accounts in Putnam Bank are insured up to a maximum of $250,000 for each separately insured depositor.



The Federal Deposit
Insurance Corporation imposes an assessment for deposit insurance on all depository institutions. Under the Federal Deposit Insurance
Corporation’s risk-based assessment system, insured institutions are assessed based on perceived risk to the Deposit Insurance
Fund. Originally, each institution was assigned to a risk category based on supervisory evaluations, regulatory capital levels
and certain other factors. An institution’s assessment rate depended upon the category to which it is assigned and certain
adjustments specified by Federal Deposit Insurance Corporation regulations, with less risky institutions paying lower rates. Assessment
rates (inclusive of possible adjustments) ranged from 21/2 to 45 basis points of each institution’s
total assets less tangible capital. In conjunction with the Deposit Insurance Fund’s reserve ratio reaching 1.15%, the range
of assessments for banks of less than $10 billion in assets was reduced to 11/2 basis points to 30
basis points of total assets less tangible capital, effective July 1, 2016. In addition, the risk categories were eliminated in
favor of a combination of examination ratings and financial modeling designed to estimate the probability that are institution
fails over a three year period.



The Federal Deposit
Insurance Corporation has authority to increase insurance assessments. A significant increase in insurance premiums would likely
have an adverse effect on the operating expenses and results of operations of Putnam Bank. Future insurance assessment rates cannot
be predicted.



Insurance of deposits
may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule order
or regulatory condition imposed in writing. We do not know of any practice, condition or violation that might lead to termination
of deposit insurance.



In addition to the
Federal Deposit Insurance Corporation assessments, the Financing Corporation (“FICO”) is authorized to impose and collect,
with the approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial
fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds
issued by the FICO are due to mature in 2017 through 2019. For the quarter ended June 30, 2016, the annualized FICO assessment
was equal to 0.56 basis points of total assets less tangible capital.



Privacy Regulations.Federal regulations generally require that Putnam Bank disclose its privacy policy, including identifying with whom it
shares a customer’s “non-public personal information,” to customers at the time of establishing the customer
relationship and annually thereafter. In addition, Putnam Bank is required to provide its customers with the ability to “opt-out”
of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes
to non-affiliated third parties for marketing purposes. Putnam Bank currently has a privacy protection policy in place and believes
that such policy is in compliance with the regulations.



Community Reinvestment
Act.Under the Community Reinvestment Act, or CRA, as implemented by federal regulations, a state member bank has a continuing
and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes
are best suited to its particular community, consistent with the CRA. The CRA does require the Federal Reserve Board, in connection
with its examination of a state member bank, to assess the institution’s record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire
branches and other financial institutions. The CRA requires a written evaluation of an institution’s CRA performance utilizing
a four-tiered descriptive rating system. Putnam Bank’s latest federal CRA rating was “Satisfactory.”



31







Connecticut has its own statutory counterpart
to the CRA that is also applicable to Putnam Bank. Connecticut law requires the Connecticut Banking Commissioner to consider, but
not be limited to, a bank’s record of performance under Connecticut law in considering any application by a bank to establish
a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume
the liabilities of any other banking institution. Putnam Bank's most recent CRA rating under Connecticut law was "Satisfactory."



Consumer Protection
and Fair Lending Regulations.Connecticut savings banks are subject to a variety of federal statutes and regulations that
are intended to protect consumers and prohibit discrimination in the granting of credit. These statutes and regulations provide
for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders,
and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief. Certain
of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages
and attorneys’ fees for certain types of violations.



USA Patriot Act.Putnam Bank is subject to the USA PATRIOT Act, which gave federal agencies additional powers to address terrorist threats
through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money
laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act provided measures intended
to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title
III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit
unions, money transfer agents, and parties registered under the Commodity Exchange Act.



Other Regulations



Interest and other
charges collected or contracted for by Putnam Bank are subject to state usury laws and federal laws concerning interest rates.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the:



| | · | Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to
enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the
housing needs of the community it serves;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | · | Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting
agencies; and
| | - | -------------------------------------------------------------------------------------------------------------------



| | · | Rules and regulations of the various federal and state agencies charged with the responsibility
of implementing such federal and state laws.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



The deposit operations
of Putnam Bank also are subject to, among others, the:



| | · | Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial
records and prescribes procedures for complying with administrative subpoenas of financial records;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute
checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;
and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits
to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines
and other electronic banking services.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32







Federal Reserve System



The Federal Reserve
Board regulations require depository institutions to maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board regulations generally require that reserves be maintained
against aggregate transaction accounts as follows: for that portion of transaction accounts aggregating $110.2 million or less
(which may be adjusted by the Federal Reserve Board) the reserve requirement is 3.0% and the amounts greater than $110.2 million
require a 10.0% reserve (which may be adjusted annually by the Federal Reserve Board between 8.0% and 14.0%). The first $15.2 million
of otherwise reservable balances (which may be adjusted by the Federal Reserve Board) are exempted from the reserve requirements.
Putnam Bank is in compliance with these requirements.



Federal Home Loan Bank System



Putnam Bank is a member
of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank provides
a central credit facility primarily for member institutions. Members of the Federal Home Loan Bank are required to acquire and
hold shares of capital stock in the Federal Home Loan Bank. Putnam Bank was in compliance with this requirement at June 30, 2016.
Based on redemption provisions of the Federal Home Loan Bank of Boston, the stock has no quoted market value and is carried at
cost. At its discretion, the Federal Home Loan Bank of Boston may declare dividends on the stock. The Federal Home Loan Banks are
required to provide funds for certain purposes including the resolution of insolvent thrifts in the late 1980s and to contributing
funds for affordable housing programs. These requirements could reduce the amount of dividends that the Federal Home Loan Banks
pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members.
As a result of losses incurred, the Federal Home Loan Bank of Boston suspended and did not pay dividends in 2009 and 2010. However,
the Federal Home Loan Bank of Boston resumed payment of quarterly dividends in 2011, and for the fiscal year ended June 30, 2016
paid dividends equal to an annual yield of 3.41%. There can be no assurance that such dividends will continue in the future. Further,
there can be no assurance that the impact of recent or future legislation on the Federal Home Loan Banks also will not cause a
decrease in the value of the Federal Home Loan Bank of Boston stock held by Putnam Bank.



Sarbanes-Oxley Act



The Sarbanes-Oxley
Act of 2002 was enacted in response to public concerns regarding corporate accountability in connection with certain accounting
scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties
for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and
reliability of corporate disclosures pursuant to the securities laws.



We have existing policies,
procedures and systems designed to comply with these regulations, and we are further enhancing and documenting such policies, procedures
and systems to ensure continued compliance with these regulations.



Holding Company Regulation



PB Bancorp is a unitary
savings and loan holding company subject to regulation and supervision by the Federal Reserve Board. The Federal Reserve Board
has enforcement authority over PB Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits
the Federal Reserve Board to restrict or prohibit activities that are determined to be a risk to Putnam Bank.



As a savings and loan
holding company, PB Bancorp’s activities are limited to those activities permissible by law for financial holding companies
(if PB Bancorp makes an election to be treated as a financial holding company and meets the other requirements to be a financial
holding company) or multiple savings and loan holding companies. A financial holding company may engage in activities that are
financial in nature, incidental to financial activities or complementary to a financial activity. Such activities include lending
and other activities permitted for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, insurance and
underwriting equity securities. Multiple savings and loan holding companies are authorized to engage in activities specified by
federal regulation, including activities permitted for bank holding companies under Section 4(c)(8) of the Bank Holding Company
Act.



33







Federal law prohibits
a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of
another savings institution or savings and loan holding company without prior written approval of the Federal Reserve Board, and
from acquiring or retaining control of any depository institution not insured by the Federal Deposit Insurance Corporation. In
evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider such things
as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition
on and the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors. A savings
and loan holding company may not acquire a savings institution in another state and hold the target institution as a separate subsidiary
unless it is a supervisory acquisition under Section 13(k) of the Federal Deposit Insurance Act or the law of the state in which
the target is located authorizes such acquisitions by out-of-state companies.



Savings and loan holding
companies historically have not been subject to consolidated regulatory capital requirements. The Dodd-Frank Act requires the Federal
Reserve Board to establish minimum consolidated capital requirements for all depository institution holding companies that are
as stringent as those required for the insured depository subsidiaries. However, legislation was enacted in December 2014 that
required the Federal Reserve Board to amend its “Small Bank Holding Company” exemption from consolidated holding company
capital requirements to generally extend the applicability to bank and savings and loan holding companies of up to $1 billion in
assets. Regulations implementing this amendment were effective May 15, 2015. Consequently, savings and loan holding companies of
under $1 billion in consolidated assets remain exempt from consolidated regulatory capital requirements, unless the Federal Reserve
determines otherwise in particular cases.



The Dodd-Frank Act
extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has promulgated
regulations implementing the “source of strength” policy that require holding companies to act as a source of strength
to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.



The Federal Reserve
Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding
companies and savings and loan holding companies. In general, the policy provides that dividends should be paid only out of current
earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s
capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with
respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters,
net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate
of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a
holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also states
that a holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock
or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would
result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning
of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of PB Bancorp to
pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.



In order for PB Bancorp
to be regulated as savings and loan holding company by the Federal Reserve Board, rather than as a bank holding company, Putnam
Bank must qualify as a “qualified thrift lender” under federal regulations or satisfy the “domestic building
and loan association” test under the Internal Revenue Code. Under the qualified thrift lender test, a savings institution
is required to maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets
up to 20% of total assets; (ii) intangible assets, including goodwill; and (iii) the value of property used to conduct
business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including
certain mortgage-backed and related securities) in at least nine out of each 12 month period. At June 30, 2016, Putnam Bank maintained
92.2% of its portfolio assets in qualified thrift investments and was in compliance with the qualified thrift lender requirement.



Federal Securities Laws



Sarbanes-Oxley Act of 2002



The Sarbanes-Oxley
Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties
at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant
to the securities laws. We have policies, procedures and systems designed to comply with these regulations, and we review and document
such policies, procedures and systems to ensure continued compliance with these regulations.



34







Change in Control Regulations



Under the Change in
Bank Control Act, no person may acquire control of a savings and loan holding company such as PB Bancorp unless the Federal Reserve
Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking
into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects
of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing
more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors,
or a determination by the regulator that the acquiror has the power, directly or indirectly, to exercise a controlling influence
over the management or policies of the institution. Acquisition of more than 10% of any class of a savings and loan holding company’s
voting stock constitutes a rebuttable determination of control under the regulations under certain circumstances including where,
as will be the case with PB Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.



In addition, federal
regulations provide that no company may acquire control of a savings and loan holding company without the prior approval of the
Federal Reserve Board. Any company that acquires such control becomes a “savings and loan holding company” subject
to registration, examination and regulation by the Federal Reserve Board.



Reports to Security Holders



PB Bancorp, Inc. files
annual and quarterly reports with the SEC on Forms 10-K and 10-Q, respectively. PB Bancorp, Inc. also files current reports on
the Form 8-K with the SEC. In addition, PB Bancorp, Inc. files preliminary and definitive proxy materials with the SEC.



PB Bancorp, Inc. is
an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of the site is http://www.sec.gov.



35







PART III



| | ITEM 10. | Directors, Executive Officers and Corporate Governance
| | -------- | ------------------------------------------------------



The Company’s
Board of Directors consists of eight members, and is divided into three classes, with one class of directors elected each year.
The table below sets forth certain information as of October 14, 2016 regarding the current members of the Company’s Board
of Directors, including the terms of office of Board members.



|                                                        |  |     |    |  |           |                                        |           |  |      |              |         |  | Shares of    |  |  |  |         |  |            |  
|------------------------------------------------------- |  | --- | -- |  | --------- | -------------------------------------- | --------- |  | ---- | ------------ | ------- |  | ------------ |  |  |  | ------- |  | ---------- | -
|                                                        |  |     |    |  |           |                                        |           |  |      |              |         |  | Common Stock |  |  |  |         |  |            |  
|                                                        |  |     |    |  |           |                                        |           |  |      |              |         |  | Beneficially |  |  |  |         |  |            |  
|                                                        |  |     |    |  |           |                                        |           |  |      |              |         |  | Owned on     |  |  |  |         |  |            |  
|                                                        |  |     |    |  | Positions |                                        | Director  |  |      | Current Term |         |  | Record Date  |  |  |  |         |  | Percent of |  
|Name (1)                                                |  | Age |    |  | Held      |                                        | Since (2) |  |      | to Expire    |         |  | (3) (4)      |  |  |  |         |  | Class      |  
|Charles W. Bentley, Jr.                                 |  |     | 63 |  |           | Director                               |           |  | 2006 |              |         |  | 2016         |  |  |  | 115,722 |  |            |  
|Paul M. Kelly                                           |  |     | 65 |  |           | Director                               |           |  | 1993 |              |         |  | 2016         |  |  |  | 57,063  |  |            |  
|Charles H. Puffer                                       |  |     | 65 |  |           | Chairman of the Board                  |           |  | 1984 |              |         |  | 2016         |  |  |  | 100,853 |  |            |  
|Robert J. Halloran, Jr.                                 |  |     | 62 |  |           | Director, Executive Vice President and |           |  | 2006 |              |         |  | 2017         |  |  |  | 30,384  |  |            |  
|                                                        |  |     |    |  |           | Chief Financial Officer                |           |  |      |              |         |  |              |  |  |  |         |  |            |  
|Jitendra K. Sinha                                       |  |     | 67 |  |           | Director and Commercial Loan Officer   |           |  | 2007 |              |         |  | 2017         |  |  |  | 26,761  |  |            |  
|Thomas A. Borner                                        |  |     | 62 |  |           | Vice Chairman of the Board,            |           |  | 1987 |              |         |  | 2018         |  |  |  | 271,093 |  |            |  
|                                                        |  |     |    |  |           | President and Chief Executive Officer  |           |  |      |              |         |  |              |  |  |  |         |  |            |  
|Richard A. Loomis                                       |  |     | 58 |  |           | Director                               |           |  | 2002 |              |         |  | 2018         |  |  |  | 46,013  |  |            |  
|John P. Miller                                          |  |     | 58 |  |           | Director                               |           |  | 2006 |              |         |  | 2018         |  |  |  | 25,543  |  |            |  
|                                                        |  |     |    |  |           |                                        |           |  |      |              |         |  |              |  |  |  |         |  |            |  
|Directors and Executive Officers as a Group (8 Persons) |  |     |    |  |           |                                        |           |  |      |              | 673,432 |  |              |  |  |  |         |  | 8.55       | %



| | (1) | The mailing address for each person listed is 40 Main Street,
Putnam, Connecticut 06260.
| | --- | ----------------------------------------------------------------------------------------

| | (2) | Reflects initial appointment to the Board of Trustees of
the mutual predecessor to Putnam Bank, if applicable.
| | --- | --------------------------------------------------------------------------------------------------------------

| | (3) | Except as otherwise noted in these footnotes, the nature
of beneficial ownership for shares reported in this table is sole voting and investment power.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Included in the shares beneficially owned by the listed
individuals are options to purchase shares of Company stock, which are exercisable within 60 days of October 14, 2016, as follows:
Mr. Miller – 3,572; Mr. Bentley – 3,572.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Includes 26,957 shares held by Mr. Bentley’s spouse.
| | --- | ----------------------------------------------------

| | (6) | Includes 7,850 allocated shares held in the Putnam Bank
Employee Stock Ownership Plan (“ESOP”) and 2,500 shares held by Mr. Halloran’s spouse.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Includes 9,399 allocated shares held in the Putnam Bank
Employee Stock Ownership Plan (“ESOP”) and 240,478 shares owned jointly with Mr. Borner’s spouse.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



The business experience for the past five
years of each of our directors and executive officers is set forth below. Messrs. Borner and Halloran are our two executive officers.
The biographies of each of the board members below contain information regarding the person’s business experience and the
experiences, qualifications, attributes or skills that caused the Nominating Committee and the Board of Directors to determine
that the person should serve as a director. Each director is also a director of Putnam Bank. Unless otherwise indicated, directors
and executive officers have held their positions for the past five years.



All of the directors continuing in office
are long-time residents of the communities served by PB Bancorp, Inc. and its subsidiaries and many of such individuals have operated,
or currently operate, businesses located in such communities. As a result, each director continuing in office has significant knowledge
of the businesses that operate in PB Bancorp, Inc.’s market area, an understanding of the general real estate market, values
and trends in such communities and an understanding of the overall demographics of such communities. Additionally, as residents
of such communities, each director has direct knowledge of the trends and developments occurring in such communities. As the holding
company for a community banking institution, PB Bancorp, Inc. believes that the local knowledge and experience of its directors
assists PB Bancorp, Inc. in assessing the credit and banking needs of its customers, developing products and services to better
serve its customers and assessing the risks inherent in its lending operations, and provides PB Bancorp, Inc. with greater business
development opportunities. As local residents, our directors are also exposed to the advertising, product offerings and community
development efforts of competing institutions which, in turn, assists PB Bancorp, Inc. in structuring its marketing efforts and
community outreach programs.



36







Charles W. Bentley Jr. is
the President and CEO of Colt’s Plastics Co., Inc. a supplier of plastic packaging for the cosmetic, pharmaceutical, and
personal care industries.  Mr. Bentley has been involved in the Society of the Plastics Industry (SPI) as head of the New
England Molders Division, President of the New England Region, and as a Director on the National Board.  He has also been
involved locally in education and was involved in the creation of the Quinebaug Valley Community College Plastics Institute. 
Mr. Bentley attended Hanover College and earned a BA in Business Administration.  He was elected as a Board member of Putnam
Bank in 2006.  Mr. Bentley’s involvement in manufacturing, and particularly plastics, has enabled him to develop relations
within the local and surrounding industrial community.  These relations allow for insights into the commercial customers in
our market areas and also the economic developments affecting the industrial and manufacturing segments of the communities in which
we operate.



Thomas A. Borner is Vice Chairman
of the Board, President and Chief Executive Officer of the Company and of Putnam Bank. Mr. Borner has served as a Director and
Chairman of the Board of the Company since its formation in 2003, as a director of the Bank since 1987 and as Chairman of the Board
of the Bank from 1992 to 2012. In addition, Mr. Borner was Interim Chief Executive Officer of the Bank from 1999 to 2000. Since
October 2005, Mr. Borner has been Of Counsel to the law firm of Borner, Aleman and Davis, LLC in Putnam, Connecticut. As a past
owner of a number of successful businesses, combined with his decades of legal experience in representing a variety of businesses
and personal clients with profiles similar to those of the Bank’s customers along with his extensive community involvement
in a wide range or organizations, Mr. Borner has valuable insight into Putnam Bank’s challenges and opportunities in its
market.



Robert J. Halloran,
Jr. is Executive Vice President and Chief Financial Officer of Putnam Bank and the Company. He joined Putnam Bank and the
Company in 2004 and, until his appointment as President from 2006 to 2012, served as Senior Vice President and Chief Financial
Officer of Putnam Bank and President and Treasurer of the Company. Mr. Halloran’s direct experience in finance and treasury
functions and his position on the Board of Directors provides a clear and direct channel of communication from senior management
to the full Board and alignment on corporate strategy.



Paul M. Kelly is the Treasurer
of Kelly’s Tire, Inc., an automotive tire retail business, located in Putnam, Connecticut. He is a licensed real estate broker
and also serves as Finance Committee Chairman and Assistant Treasurer at Woodstock Academy in Woodstock, Connecticut. Mr. Kelly’s
experience gives him extensive insights into the customers who live in our market areas and economic developments affecting the
communities in which we operate. His work experience qualifies him to be a member of the Audit Committee as an “audit committee
financial expert” for purposes of the rules and regulations of the Securities and Exchange Commission.



Richard A. Loomis, a licensed
real estate broker since 1983, is a partner with The Loomis Team, LLC. The partnership is affiliated with RE/MAX BELL PARK REALTY
with concentrations in residential and commercial sales and leases. Mr. Loomis is also a controlling partner in TLC Group, LLC.
TLC Group concentrates in real estate development and investment. Mr. Loomis brings the Board a unique perspective in the community
in areas of economic development, residential housing challenges and commercial opportunities.



John P. Miller is the President
and Owner of the National Chromium Company, Inc., a metal finishing company that specializes in chromium and nickel coatings, servicing
accounts across the United States. Mr. Miller, an MBA, and an Adjunct Instructor of Business Management at Quinebaug Valley Community
College located in Danielson, Connecticut. Mr. Miller’s broad experiences in community development, healthcare, general business
and academics give him extensive insight into the communities we serve.



Charles H. Pufferis Chairman
of the Board of the Company. Mr. Puffer worked for and owned the Leschke-Puffer Insurance Agency in Putnam, Connecticut for over
35 years until the company was sold in 2010. He earned his Bachelor of Science degree in Business Management from Bradley University.
Mr. Puffer has been an active member of our community, which includes serving on the Board of Directors of Day Kimball Hospital
and as a member of the Putnam Rotary Club for over 33 years. Mr. Puffer’s experience gives him extensive insight into the
customers who live in our market areas and economic developments affecting the communities in which we operate.



Jitendra K. Sinha owned and
operated Putnam Supermarket, Inc., located in Putnam, Connecticut for over 28 years until the company was sold in 2012. Beginning
in February 2013, Mr. Sinha has been employed as a commercial loan officer for Putnam Bank. He has a Bachelor of Law degree from
Patna University in India and an MBA from Long Island University in New York. Mr. Sinha has an extensive list of social and community
service affiliations and has been recognized numerous times with civic achievement and community service awards. Mr. Sinha’s
experience gives him extensive insight into the customers who live in our market areas and economic developments affecting the
communities in which we operate.



37







Section 16(a) Beneficial Ownership Reporting
Compliance



The common stock of the Company is registered
with the SEC pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Officers
and directors of the Company and beneficial owners of greater than 10% of the Company’s common stock (“10% beneficial
owners”) are required to file reports on Forms 3, 4 and 5 with the SEC disclosing beneficial ownership and changes in beneficial
ownership of the common stock. SEC rules require disclosure in the Company’s Proxy Statement or Annual Report on Form 10-K
of the failure of an officer, director or 10% beneficial owner of the Company’s common stock to file a Form 3, 4, or 5 on
a timely basis. Based upon the Company’s review of the Forms 3, 4 and 5 filed with the SEC, the Company believes that Director
Paul Kelly and Director Richard Loomis each filed one late Form 4 to report the cancellation of shares that resulted from an amendment
to the Company’s director deferred compensation plan, which amendment eliminated the phantom stock component of the director
deferred compensation plan, and that no other officer, director or 10% beneficial owner failed to file such ownership reports on
a timely basis for the fiscal year ended June 30, 2016.



Code of Ethics



PB Bancorp, Inc. has adopted a Code of Ethics
that applies to PB Bancorp, Inc.’s principal executive officer, principal financial officer, principal accounting officer
or controller or persons performing similar functions. The Code of Ethics can be accessed on PB Bancorp, Inc.’s website at
www.putnambank.com. The Code of Ethics was filed as Exhibit 14 to the Annual Report on Form 10-K as filed with the Securities
and Exchange Commission on September 26, 2016.



The Audit Committee



The Audit Committee consists of directors
Paul M. Kelly, John P. Miller and Richard A. Loomis. Each member of the Audit Committee is considered “independent”
as defined in the NASDAQ corporate governance listing standards and under SEC Rule 10A-3. The Board of Directors has determined
that director Paul M. Kelly qualifies as an “audit committee financial expert” as that term is defined by the rules
and regulations of the SEC.



| | ITEM 11. | Executive Compensation
| | -------- | ----------------------



The following table sets forth for the years
ended June 30, 2016 and 2015 certain information as to the total remuneration paid by us to Mr. Borner, who serves as Chairman
and Chief Executive Officer, and the only other executive officer of the Company other than Mr. Borner (“Named Executive
Officers”).





SUMMARY COMPENSATION TABLE



|                                                     |  |  |      |  |  |  |            |       |  |  | Nonqualified |  |  |              |         |  |  | 
|---------------------------------------------------- |  |  | ---- |  |  |  | ---------- | ----- |  |  | ------------ |  |  | ------------ | ------- |  |  | 
|                                                     |  |  |      |  |  |  |            |       |  |  | deferred     |  |  |              |         |  |  | 
|                                                     |  |  |      |  |  |  |            |       |  |  | compensation |  |  | All other    |         |  |  | 
|Name and principal                                   |  |  |      |  |  |  |            | Bonus |  |  | earnings     |  |  | compensation |         |  |  | 
|position                                             |  |  | Year |  |  |  | Salary ($) |       |  |  | ($)          |  |  |              | ($) (1) |  |  | 
|Thomas A. Borner,                                    |  |  | 2016 |  |  |  | 344,884    |       |  |  | 10,000       |  |  |              | 1,304   |  |  | 
|Vice-Chairman, President and Chief Executive Officer |  |  | 2015 |  |  |  | 322,742    |       |  |  | 0            |  |  |              | 1,048   |  |  | 
|                                                     |  |  |      |  |  |  |            |       |  |  |              |  |  |              |         |  |  | 
|Robert J. Halloran, Jr.,                             |  |  | 2016 |  |  |  | 218,977    |       |  |  | 5,000        |  |  |              | 0       |  |  | 
|Executive Vice President and Chief Financial Officer |  |  | 2015 |  |  |  | 211,066    |       |  |  | 0            |  |  |              | 0       |  |  | 



| | (1) | The amounts reflected in this column represent the above market interest received on deferred compensation that is not tax-qualified.
The amount shown is only the portion that exceeds the market rate, as determined by Item 402 of Securities and Exchange Commission
Regulation S-K.                                    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The compensation represented by the amounts for 2016 set forth in the All Other Compensation column for the Named Executive
Officers is detailed in the table below. ESOP contributions are based upon allocations for the fiscal year ended June 30, 2016
of 1,280 shares for Mr. Borner and 1,080 shares for Mr. Halloran.



38







|                        |  |               |       |  |               |   |        | Life      |  |   | Profit        |  |  | Total all    |       
|----------------------- |  | ------------- | ----- |  | ------------- | - | ------ | --------- |  | - | ------------- |  |  | ------------ | ------
|                        |  | 401(k) plan   |       |  | ESOP          |   |        | insurance |  |   | sharing       |  |  | other        |       
|                        |  | contributions |       |  | contributions |   |        | premiums  |  |   | contributions |  |  | compensation |       
|Thomas A. Borner        |  | $             | 5,255 |  |               | $ | 10,777 |           |  | $ | 312           |  |  | $            | 10,600
|                        |  |               |       |  |               |   |        |           |  |   |               |  |  |              |       
|Robert J. Halloran, Jr. |  | $             | 4,480 |  |               | $ | 9,093  |           |  | $ | 312           |  |  | $            | 8,959 



Benefit Plans



Insurance Plan. Putnam Bank
provides its full-time officers and employees with health and life insurance.



Deferred Compensation Retirement Plan.Putnam Bank maintains a deferred compensation retirement plan for the benefit of directors designated by the board to participate
in the plan. The plan was frozen as of July 1, 2004, and no further contributions have been made to the plan since that date. As
of each valuation date, the participants’ accounts have been credited with an investment return equal to the New York prime
rate of interest, compounded monthly.



The participant’s account will be
distributed to the participant (or the participant’s beneficiary in the event of death) in periodic installments (at least
annually) as elected by the participant or the participant’s beneficiary. In the event the annual installment exceeds $10,000,
the maximum distribution period will be ten years. In the event the participant’s account is less than $10,000, distribution
will be made in a lump sum. Distribution will be made within 60 days of a participant’s normal or late retirement. In the
event of termination of service due to disability, distribution will be made within 60 days following the close of the plan year
in which termination of service occurs. In the event a participant terminates service for any reason other than normal retirement,
disability or death, distribution will commence within the later of 60 days following the close of the plan year in which the participant
terminates service or 60 days after the participant’s election to commence payment is delivered to the plan administrator.
In the event of a participant’s death prior to termination of service, the participant’s account will be distributed
to his or her beneficiary. If the participant dies after termination of service but prior to the complete distribution of his account
balance, the undistributed balance will be distributed to the participant’s beneficiary in annual installments over three
years unless the beneficiary elects otherwise.



Incentive Plan.On an annual
basis, Putnam Bank may establish a pool of money for a discretionary incentive compensation plan for the benefit of its employees,
including the Named Executive Officers. The Board of Directors is responsible for formulating an amount to be distributed, based
upon Putnam Bank’s performance. To be eligible for an award, a participant must be employed by April 1 of the plan year and
must remain employed through the date of disbursement. For the year ended June 30, 2016, the Named Executive Officers received
bonuses of approximately 2.7% of their respective base salaries.



Stock Benefit Plans



Employee Stock Ownership
Plan and Trust.  The Board of Directors of Putnam Bank has adopted an employee stock ownership plan.  Employees
who are at least 21 years old with at least one year of employment with Putnam Bank are eligible to participate. The employee stock
ownership plan trust has borrowed funds from the Company and previously borrowed funds from the Company’s predecessor, PSB
Holdings, Inc., and used those funds to purchase shares of common stock in the Company’s stock offering and in PSB Holdings,
Inc.’s 2004 stock offering.  As a result, the employee stock ownership plan now holds 458,038 shares of Company common
stock.  Collateral for the loan is the common stock purchased by the employee stock ownership plan. The loan is being repaid
principally from Putnam Bank discretionary contributions to the employee stock ownership plan over a period of up to 20 years. 
The loan documents provide that the loan may be repaid over a shorter period, without penalty for prepayments. The interest rate
for the loan is a floating rate equal to the prime rate.  Shares purchased by the employee stock ownership plan are held in
a suspense account for allocation among participants as the loan is repaid.

39







Contributions to the employee
stock ownership plan and shares released from the suspense account in an amount proportional to the repayment of the employee stock
ownership plan loan will be allocated among employee stock ownership plan participants on the basis of compensation in the year
of allocation. Benefits under the plan vest at the rate of 20% per year, starting upon completion of three years of credited service,
and will be fully vested upon completion of seven years of credited service, with credit given to participants for years of credited
service with Putnam Bank’s mutual predecessor prior to the adoption of the plan. A participant’s interest in his account
under the plan fully vests in the event of termination of service due to a participant’s early or normal retirement, death,
disability, or upon a change in control (as defined in the plan). Vested benefits are payable in the form of common stock and/or
cash. Putnam Bank’s contributions to the employee stock ownership plan are discretionary, subject to the loan terms and tax
law limits. Therefore, benefits payable under the employee stock ownership plan cannot be estimated. Pursuant to Financial Accounting
Standards Board Accounting Standards Codification 718-40, the Company records compensation expense each year in an amount equal
to the fair market value of the shares released from the suspense account. In the event of a change in control, the employee stock
ownership plan will terminate.



Stock-Based Incentive
Plan.The Company has adopted the PB Bancorp, Inc. 2005 Stock-Based Incentive Plan (the “Incentive Plan”),
to provide officers, employees and directors of the Company or the Bank with additional incentives to share in the growth and performance
of the Company. The Incentive Plan was approved by stockholders on October 21, 2005.



The Incentive Plan authorizes
the issuance of up to 476,298 shares of Company common stock pursuant to grants of incentive and non-statutory stock options, stock
appreciation rights, reload options, and restricted stock awards, provided that no more than 136,085 shares may be issued as restricted
stock awards, and no more than 340,213 shares may be issued pursuant to the exercise of stock options.



Set forth below is
information as of June 30, 2016 regarding equity compensation plans. Other than the ESOP, the Company does not have any equity
compensation plans that were not approved by its stockholders.





|                                                       |  | Number of Securities to be |        |     |                  |   |      |                          | 
|------------------------------------------------------ |  | -------------------------- | ------ | --- | ---------------- | - | ---- | ------------------------ | 
|                                                       |  | Issued upon Exercise of    |        |     |                  |   |      | Number of Securities     | 
|                                                       |  | Outstanding Options and    |        |     | Weighted Average |   |      | Remaining Available for  | 
|Plan                                                   |  | Rights                     |        |     | Exercise Price   |   |      | Issuance under the Plans | 
|Equity compensation plans approved by stockholders     |  |                            | 27,385 | (1) |                  | $ | 8.99 | (2)                      | 
|                                                       |  |                            |        |     |                  |   |      |                          | 
|Equity compensation plans not approved by stockholders |  |                            | —      |     |                  |   | —    |                          | 
|Total                                                  |  |                            | 27,385 | (1) |                  | $ | 8.99 | (2)                      | 



| | (1) | Reflects options to purchase shares of common stock awarded
under the Incentive Plan.
| | --- | -------------------------------------------------------------------------------------

| | (2) | Relates to 27,385 outstanding stock options.
| | --- | --------------------------------------------



Directors’ Compensation



The following table sets forth for the year
ended June 30, 2016 certain information as to the total remuneration paid to directors other than Mr. Borner and Mr. Halloran.



|DIRECTOR COMPENSATION TABLE FOR THE YEAR ENDED JUNE 30, 2016
|------------------------------------------------------------
|                                                            
|                                                            
|                                                            
|Name                                                        
|                                                            
|Charles W. Bentley, Jr.                                     
|Paul M. Kelly                                               
|Charles H. Puffer                                           
|Richard A. Loomis                                           
|John P. Miller                                              
|Jitendra K. Sinha                                           










| | (1) | As of June 30, 2016, Messrs. Bentley and Miller had 3,572 and 3,572 vested stock options outstanding, respectively.
| | --- | -------------------------------------------------------------------------------------------------------------------

| | (2) | Represents compensation paid to Mr. Sinha for his position as a commercial loan officer. Mr. Sinha stopped receiving fees for
service as a director when he became an employee of Putnam Bank.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



40







Putnam Bank pays the Chairman of the Board
an annual salary of $27,500 with no per meeting fee. During the fiscal year ended June 30, 2016, all other non-employee directors
received an annual retainer of $8,000 and $300 for each board meeting that he attended. All non-employee Board committee members,
except the Chairman of the Board, received a fee of $150 for each committee meeting attended except that committee chairpersons
received a fee of $200 for each committee meeting attended. All non-employee directors, except for the Chairman of the Board, receive
a fee of $500 for the annual Strategic Planning meeting. Putnam Bank paid fees totaling $113,650 to directors for the fiscal year
ended June 30, 2016.



ITEM 12.	Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



Information concerning security ownership
of management is included in Item 10, above. The following table provides information as of October 14, 2016, with respect to persons
known by the Company to be the beneficial owners of more than 5% of the Company’s outstanding common stock. A person may
be considered to own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investing
power. Percentages are based on 7,880,402 shares of Company common stock outstanding for voting purposes as of as of October 14,
2016.



|                                          |  | Amount of Shares |         |  |                   | 
|----------------------------------------- |  | ---------------- | ------- |  | ----------------- | 
|                                          |  | Owned and Nature |         |  | Percent of Shares | 
|                                          |  | of Beneficial    |         |  | of Common Stock   | 
|Name and Address of Beneficial Owners     |  | Ownership (1)    |         |  | Outstanding       | 
|Principal Stockholders:                   |  |                  |         |  |                   | 
|                                          |  |                  |         |  |                   | 
|Putnam Bank Employee Stock Ownership Plan |  |                  | 458,039 |  |                   | 
|40 Main Street                            |  |                  |         |  |                   | 
|Putnam, Connecticut 06260                 |  |                  |         |  |                   | 





Management of PB Bancorp,
Inc. knows of no arrangements, including any pledge by any person or securities of PB Bancorp, Inc., the operation of which may
at a subsequent date result in a change in control of the registrant.



Set forth below is
information as of June 30, 2016 regarding equity compensation plans. Other than the ESOP, the Company does not have any equity
compensation plans that were not approved by its stockholders.





|                                                       |  | Number of Securities to be |        |     |                  |   |      |                          | 
|------------------------------------------------------ |  | -------------------------- | ------ | --- | ---------------- | - | ---- | ------------------------ | 
|                                                       |  | Issued upon Exercise of    |        |     |                  |   |      | Number of Securities     | 
|                                                       |  | Outstanding Options and    |        |     | Weighted Average |   |      | Remaining Available for  | 
|Plan                                                   |  | Rights                     |        |     | Exercise Price   |   |      | Issuance under the Plans | 
|Equity compensation plans approved by stockholders     |  |                            | 27,385 | (1) |                  | $ | 8.99 | (2)                      | 
|                                                       |  |                            |        |     |                  |   |      |                          | 
|Equity compensation plans not approved by stockholders |  |                            | —      |     |                  |   | —    |                          | 
|Total                                                  |  |                            | 27,385 | (1) |                  | $ | 8.99 | (2)                      | 



| | (1) | Reflects options to purchase shares of common stock awarded
under the Incentive Plan.
| | --- | -------------------------------------------------------------------------------------

| | (2) | Relates to 27,385 outstanding stock options.
| | --- | --------------------------------------------

41







| | ITEM 13. | Certain Relationships and Related Transactions, and
Director Independence
| | -------- | -------------------------------------------------------------------------



Transactions with Certain Related Persons



All transactions between the Company and
its executive officers, directors, holders of 10% or more of the shares of its common stock and affiliates thereof, are on terms
no less favorable to the Company than could have been obtained by it in arm’s-length negotiations with unaffiliated persons.
Such transactions must be approved by a majority of the independent directors of the Company not having any interest in the transaction.
In the ordinary course of business, Putnam Bank makes loans available to its directors, officers and employees. These loans are
made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing
at the time for comparable loans with persons not related to Putnam Bank. Management believes that these loans neither involve
more than the normal risk of collectibility nor present other unfavorable features.



Section 402 of the Sarbanes-Oxley Act of
2002 generally prohibits an issuer from: (1) extending or maintaining credit; (2) arranging for the extension of credit; or (3)
renewing an extension of credit in the form of a personal loan for an officer or director. There are several exceptions to this
general prohibition, one of which is applicable to the Company. Sarbanes-Oxley does not apply to loans made by a depository institution
that is insured by the FDIC and is subject to the insider lending restrictions of the Federal Reserve Act. All loans to Putnam
Bank’s directors and officers are made in conformity with the Federal Reserve Act and applicable regulations.



In accordance with the listing standards
of the NASDAQ Stock Market, any transactions that would be required to be reported under this section of this Proxy Statement must
be reviewed by our audit committee or another independent body of the board of directors. In addition, any transaction with a director
is reviewed by and subject to approval of the members of the board of directors who are not directly involved in the proposed transaction
to confirm that the transaction is on terms that are no less favorable as those that would be available to us from an unrelated
party through an arms-length transaction.



Board Independence



The Board of Directors has determined that,
except for Messrs. Borner, Halloran and Sinha, each member of the Board is an “independent director” as defined in
the NASDAQ listing rules.  Messrs. Borner, Halloran are not considered independent because they serve as executive officers
of the Company and Mr. Sinha is an officer of Putnam Bank. In evaluating the independence of our independent directors, we
found no transactions between us and our independent directors that are not required to be reported under “—Transactions
With Certain Related Persons,” above, and that had an impact on our determination as to the independence of our directors.



| | ITEM 14. | Principal Accountant Fees and Services
| | -------- | --------------------------------------



Audit Fees



The following sets forth information with
respect to the fees paid by the Company for the fiscal years ended June 30, 2016 and 2015 to Wolf & Company, P.C.



Audit Fees. The
fees for professional services rendered by Wolf & Company, P.C. for the audit of the Company’s annual financial statements
and for the review of the consolidated financial statements included in the Company’s quarterly reports on Form 10-Q and
services performed in connection with the 2016 Form S-1 Registration Statement filed with the SEC were $213,500 for 2016 and $104,000
for 2015.



Audit-Related Fees. During
the past two fiscal years, there were no additional fees for professional services by Wolf & Company, P.C., that were reasonably
related to the performance of the audit.



Tax Fees.  There were
no fees for professional tax services such as tax advice, tax planning, tax compliance and the review of tax returns paid to Wolf
& Company, P.C. for 2016 or 2015.



All Other Fees. There were
fees $3,150 billed to the Company by Wolf & Company, P.C. during the fiscal year ended June 30, 2016 and $3,050 during the
fiscal year ended June 30, 2015, related to services provided to the Putnam Bank Foundation.



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Policy on Audit Committee Pre-Approval of Audit and Non-Audit
Services of Independent Auditor



The Audit Committee’s policy is to
pre-approve all audit and non-audit services provided by the Company’s independent registered public accounting firm. These
services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided
for up to one year and any pre-approval is detailed as to particular service or category of services and is generally subject to
a specific budget. The Audit Committee has delegated pre-approval authority to its Chairman when expedition of services is necessary.
The independent registered public accounting firm and management are required to periodically report to the full Audit Committee
regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval,
and the fees for the services performed to date. All other fees for the past two fiscal years were pre-approved by the Audit Committee.



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PART IV



| | ITEM 15. | Exhibits and Financial Statement Schedules
| | -------- | ------------------------------------------



(a)(3) Exhibits.



| | 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44







SIGNATURES



Pursuant to the requirements of Section 13
or 15(d) 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.





|                       | PB BANCORP, INC.
|---------------------- | ----------------
|                       |                 
|Date: October 25, 2016 | By:             
|                       |                 
|                       |                 



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