What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-02-11 compared with 2021-08-13 · 250 added, 470 removed, 227 unchanged (76% of the section changed)

10 unchanged sentences

rates, regulatory considerations, competition, technological developments, retention and recruitment of qualified personnel, and market

acceptance of the Company’s pricing, products and services, and with respect to the loans extended by the Bank and real estate owned,

the following:

risks related to the economic environment in the market areas in which the Bank operates, particularly with respect to

the real estate market in New Jersey;

acceptance of the Company’s pricing, products and services, and with respect to the loans extended by the Company and real estate

owned, the following:

risks related to the economic environment in the market areas in which the Bank operates, particularly with respect

to the real estate market in New Jersey;

the risk that the value of the real estate securing these loans may decline in value;

that significant expense may be incurred by the Company in connection with the resolution of these loans.

In addition, the COVID-19 pandemic

is having an adverse impact on the Company, its customers and the communities it serves.

The adverse effect of the COVID-19 pandemic on

the Company, its customers and the communities where it operates may adversely affect the Company’s business, results of operations

risk that significant expense may be incurred by the Company in connection with the resolution of these loans.

In addition, the COVID-19

pandemic is having an adverse impact on the Company, its customers and the communities it serves.

The adverse effect of the COVID-19 pandemic

on the Company, its customers and the communities where it operates may adversely affect the Company’s business, results of operations

and financial condition for an indefinite period of time.

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by this analysis.

The general component is determined by segregating the remaining loans by type of loan, risk weighting (if applicable)

and payment history.

We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry

concentrations.

However, the Bank’s Federal and State regulators generally require that the specific reserve against impaired

collateral-dependent loans be charged-off, reducing the carrying balance of the loan and allowance for loan loss.

The general component

is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history.

We analyze historical

loss experience, delinquency trends, general economic conditions and geographic and industry concentrations in establishing the general

portion of the reserve.

This analysis establishes factors that are applied to the loan groups to determine the amount of the general component

1 unchanged sentence

Actual loan losses may be significantly

greater than the allowances the Company has established, which could have a material negative effect on our financial results.

greater than the allowances we have established, which could have a material negative effect on our financial results.

Other Real Estate Owned.

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by a charge or credit to income tax expense, as changes in facts and circumstances warrant.

Coronavirus/COVID-19

The extraordinary impact of the

COVID-19 pandemic has created an unprecedented environment for consumers and businesses alike.

To protect our employees and customers

from potential exposure to the virus, all Magyar Bank lobbies continue to observe best practice protocols to limit exposure and/or spread

of the virus.

Impact of the Coronavirus/COVID-19 Pandemic.

During 2020 and continuing into

2021, the extraordinary impact of the COVID-19 pandemic has created an unprecedented environment for consumers and businesses alike.

protect our employees and customers from potential exposure to the virus, all Magyar Bank lobbies and operational areas continue to observe

best practice protocols to limit exposure and/or spread of the virus.

To assist our loan customers,

Magyar Bank has offered loan payment deferrals to borrowers unable to make their contractual payments due to COVID-19.

Deferral requests

are considered on a case-by-case basis and are initially approved for a three-month period for principal and interest payments or for

interest-only payments depending on the borrower’s circumstances.

An additional three-month period is available for businesses that

remain unable to operate and for consumers unable to make their mortgage or home equity payments due to COVID-19.

Additional deferrals

were considered for businesses experiencing a prolonged impact from the COVID-19 pandemic, such as the accommodation and food service

Magyar Bank’s loan portfolio does not have a significant exposure to the travel or entertainment industry.

Through June 30, 2021, The Company

Loan payments are

deferred until the contractual maturity of the loan.

Deferral requests are considered on a case-by-case basis and are initially approved

for a three-month period for principal and interest payments or for interest-only payments depending on the borrower’s circumstances.

An additional three-month period is available for businesses that remain unable to operate and for consumers unable to make their mortgage

or home equity payments due to COVID-19.

Additional deferrals were considered for businesses experiencing a prolonged impact from the

COVID-19 pandemic, such as the accommodation and food service industries.

Magyar Bank’s loan portfolio does not have a significant

exposure to the travel or entertainment industry.

Through December 31, 2021, we

had modified 284 loans aggregating $150.9 million for the deferral of principal and/or interest payments.

Of these loans, at June 30,

2021, 235 loans aggregating $120.4 million had resumed making their contractual loan payments, 45 loans totaling $22.3 million repaid

their deferred payments, two loans totaling $6.3 million were due to resume payments at June 30, 2021, and two loans totaling $1.9 million

were past their deferral period and delinquent.

Of the two delinquent deferred loans, one commercial business loan totaling $1.4 million

remained delinquent more than 90 days and in the process of foreclosure and one commercial real estate loan totaling $536,000 was delinquent

90 days at June 30, 2021.

Details with respect to loans with deferred payments as of June 30, 2021 are as follows:

June 30, 2021

Weighted Average

Interest Rate

(In thousands)

One-to-four family residential real estate

Commercial real estate

Home equity lines of credit

Commercial business

(1) Includes home equity loans.

Of these loans, 105 loans totaling

$52.6 million repaid their deferred payments in full and 178 loans aggregating $96.9 million have resumed making their contractual loan

One loan totaling $1.4 million was past its deferral period and delinquent at December 31, 2021.

The Company was not deferring

any additional loan payments due to the COVID-19 pandemic at December 31, 2021.

A total of $1.4 million in interest payments were deferred

as of December 31, 2021.

The Bank participated in the PPP

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weeks following the date the loan is made.

We originated 350 “First Draw” loans totaling $56.0 million through June 30, 2021

for which we received $2.0 million in origination fees from the SBA.

These fees are being amortized over the contractual term of the loans,

which is two years for loans originated prior to June 4, 2020 and five years for loans originated June 5, 2020 or later.

30, 2021, 276 loans totaling $46.1 million had been forgiven by the SBA.

On December 27, 2020 the Economic

Aid to Hard-Hit Small Businesses, Nonprofits, and Venues (“Economic Aid Act”) was signed into law, extending the SBA’s

authority to guarantee “Second Draw” PPP loans, under generally the same terms and conditions available under the First Draw

program, through March 31, 2021, subsequently extended by the Paycheck Protection Program Extension Act of 2021 to May 31, 2021.

to qualify for a Second Draw PPP loan, an applicant must have experienced a revenue reduction of at least 25% in 2020 relative to 2019.

As of June 30, 2021, the Company originated 212 PPP loans totaling $35.3 million under the Economic Aid Act to its eligible customers,

for which it received $1.5 million in origination fees from the SBA.

These fees are being amortized over the contractual term of the loans,

which is five years.

The Economic Aid Act also expanded the eligible expenditures for which a business could use PPP proceeds for and

provided for a simplified forgiveness application for PPP loans $150,000 or less.

At June 30, 2021, our PPP loans totaled $44.7 million.

The Board of Governors

of the Federal Reserve System created the Paycheck Protection Program Lending Facility (“PPPLF”) to facilitate lending by

eligible financial institutions to small businesses under the PPP.

Under the PPPLF, the Federal Reserve Bank of New York provided advances

with a fixed interest rate of 0.35% to Magyar Bank on a non-recourse basis, taking PPP loans as collateral.

In addition, the Federal Deposit

Insurance Corporation allows Magyar Bank to neutralize the effect of PPP loans financed under the PPPLF on Tier 1 leverage capital ratios.

The Bank funded its PPP loans with $36.9 million in PPPLF, $5.3 million of which was outstanding at June 30, 2021.

We originated 562 PPP loans totaling $91.3 million for which we received $3.5 million in origination

fees from the SBA.

These fees are being amortized over the five year contractual term of the loan unless repaid or forgiven sooner.

December 31, 2021, 510 loans totaling $76.5 million had been repaid, leaving 52 loans totaling $14.8 million at December 31, 2021.

Company expects most of these loans to be approved for full forgiveness by the SBA.

The health of the banking industry

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of our loan portfolio in future quarters is unknown, however all of these factors are likely to be affected by the COVID-19 pandemic.

Comparison of Financial Condition at June 30, 2021

Comparison of Financial Condition at December 31,

2021 and September 30, 2021

Total Assets.

assets increased $88.3 million, or 11.7%, to $842.3 million at June 30, 2021 compared to $754.0 million at September 30, 2020.

was attributable to higher balances of cash and interest-earning deposits, investment securities, and loans receivable, net of allowance

for loan loss.

Cash and Cash Equivalents.

Cash and interest-earning deposits with banks increased $67.5 million, or 109.3%, to $129.2 million at June 30, 2021 from $61.7

million at September 30, 2020.

The increase resulted primarily from subscription funds of $109.6 million received in the stock offering

at June 30, 2021 in connection with the Company’s second-step conversion.

loans receivable increased $3.9 million, or 0.6%, to $615.1 million during the nine months ended June 30, 2021 from $611.3 million at

September 30, 2020.

At June 30, 2021, our loans were comprised of $276.9 million (45.0%) in commercial real estate loans, $203.7 million

(33.1%) in one- to four- family residential mortgage loans, $88.2 million (14.4%) in commercial business loans, $24.7 million (4.0%) in

construction loans, $18.0 million (2.9%) in home equity lines of credit, and $3.6 million (0.6%) in other loans.

Included with the commercial

business loans were $44.7 million in PPP loans.

The increase in total loans receivable during the nine months ended June 30, 2021 occurred

in commercial real estate loans, which increased $28.8 million, or 11.6%.

Partially offsetting this increase were decreases in commercial

business loans, which decreased $12.8 million (PPP loans decreased $11.2 million), one- to four- family residential real estate loans

(including home equity lines of credit), which decreased $8.0 million, construction loans, which decreased $3.6 million, and other loans,

which decreased $557,000.

assets increased $6.7 million, or 0.9%, to $780.7 million during the three months ended December 31, 2021 from $774.0 million at September

The increase was primarily attributable to increases in cash, interest-earning deposits and investment securities, partially

offset by lower balances of loans receivable, net of allowance for loan loss.

Cash and Interest-Earning

Deposits with Banks.

Cash and interest-earning deposits with banks increased $7.1 million, or 9.4%, to $82.3 million at December

31, 2021 from $75.2 million at September 30, 2021 from net loan repayments and deposit inflows during the three months ended December

Total Loans Receivable.

Total loans receivable decreased $11.3 million, or 1.9%, to $583.4 million at December 31, 2021 from $594.6 million at September 30, 2021.

The loans receivable were comprised of $279.0 million (47.8%) in commercial real estate loans, $200.8 million (34.4%) in one-to four-family

residential mortgage loans, $58.3 million (10.0%) in commercial business loans, $24.3 million (4.2%) in construction loans, $17.7 million

(3.0%) in home equity lines of credit, and $3.3 million (0.6%) in other loans.

Included with the commercial business loans were $14.8

million in PPP loans.

The decrease in total loans receivable during the quarter occurred in commercial business loans, which decreased

$10.4 million (PPP loans decreased $10.3 million), one-to four-family residential real estate loans (including home equity lines of credit),

which decreased $2.5 million, commercial real estate loans, which decreased $1.9 million, and other loans, which decreased $462,000.

offsetting these decreases were construction loans, which increased $3.9 million during the quarter.

Total Non-Performing Loans.

decreased $301,000, or 3.1%, to $9.4 million at June 30, 2021 from $9.7 million at September 30, 2020.

The decrease was attributable to

repayments of non-performing loans totaling $1.6 million, the transfer of two foreclosed loans totaling $572,000 to OREO, and the restructure

of one loan totaling $218,000 during the nine months ended June 30, 2021.

Offsetting these decreases was the addition of four loans totaling

$2.1 million.

Due to the COVID-19 pandemic, foreclosures of collateral securing one- to four-family residential mortgage loans have been

temporarily suspended while the foreclosure proceedings of commercial real estate have slowed significantly as court hearings were postponed

during the pandemic.

The ratio of non-performing

loans to total loans decreased to 1.53% at June 30, 2021 from 1.59% at September 30, 2020.

At June 30, 2021, included in the non-performing

loan totals were seven commercial real estate loans totaling $2.5 million, two construction loans totaling $4.6 million, two commercial

business loans totaling $1.4 million and two residential mortgage loans totaling $910,000.

During the nine months ended June 30, 2021,

there was one charge-off totaling $50,000 and there were $97,000 in recoveries of previously charged-off non-performing loans.

The allowance for loan

loss increased $1.4 million to $7.8 million at June 30, 2021 from $6.4 million at September 30, 2020.

The increase was attributable

to the provision for loan loss during the nine months ended June 30, 2021.

The allowance for loan losses as a percentage of non-performing

loans increased to 82.7% at June 30, 2021 compared to 65.8% at September 30, 2020.

At June 30, 2021, our allowance for loan losses as

a percentage of total loans was 1.27% compared with 1.05% at September 30, 2020.

Future increases in the

allowance for loan losses may be necessary based on the growth of the loan portfolio, the change in composition of the loan portfolio,

possible future increases in non-performing loans and charge-offs, and the possible deterioration of the current economic environment

due to the COVID-19 pandemic.

Total non-performing loans decreased $2.0 million, or 23.9%, to $6.2 million at December 31, 2021 from $8.2 million at September 30, 2021.

Five loans totaling $1.5 million were brought current by payments from the borrowers.

In addition, one non-performing residential mortgage

loan totaling $473,000 was paid in full.

There were no additions to the non-performing loans during the three months ended December 31,

Included in the non-performing

loan totals were two construction loans totaling $4.6 million, one commercial business loan totaling $1.3 million, three commercial real

estate loans totaling $254,000, and one residential mortgage loan totaling $30,000.

The ratio of non-performing loans to total loans decreased

to 1.1% at December 31, 2021 from 1.4% at September 30, 2021.

During the three months ended

December 31, 2021, the allowance for loan losses increased $153,000 to $8.2 million from $8.1 million at September 30, 2021.

was attributable to provisions for loan losses totaling $101,000 and a $52,000 recovery from a loan previously charged off.

The allowance

for loan losses as a percentage of non-performing loans increased to 132.4% at December 31, 2021 from 99.0% at September 30, 2021.

allowance for loan losses as a percentage of total loans was 1.41% at December 31, 2021 compared with 1.36% at September 30, 2021.

Future increases in the allowance

for loan losses may be necessary based on possible future increases in non-performing loans and charge-offs, the possible deterioration

of collateral values, and the possible deterioration of the current economic environment.

Investment Securities.

Investment securities increased $17.0 million, or 37.8%, to $62.0 million at June 30, 2021 from $45.0 million at September 30, 2020.

increase resulted primarily from the purchase of 13 mortgage-backed securities totaling $27.7 million, five callable U.S.

government-sponsored

enterprise bonds totaling $10.0 million and two municipal bonds totaling $1.0 million during the nine months ended June 30, 2021.

of mortgage-backed securities and bond calls totaled $21.4 million.

There were no sales of investment securities during the period.

Investment securities at

June 30, 2021 consisted of $45.2 million in mortgage-backed securities issued by U.S.

At December 31, 2021, investment securities totaled $78.6 million, reflecting an increase of $8.1 million, or 11.4%, from September 30,

The Company purchased three mortgage-backed securities totaling $7.5 million, one callable U.S.

government-sponsored enterprise

bond totaling $2.0 million, and one municipal bond totaling $600,000 during the three months ended December 31, 2021.

During the quarter,

the Company received payments from mortgage-backed securities totaling $2.0 million.

There were no sales of investment securities during

Investment securities at December

31, 2021 consisted of $58.2 million in mortgage-backed securities issued by U.S.

government agencies and U.S.

government-sponsored

enterprises, $12.5 million in U.S.

government-sponsored enterprise debt securities, $3.0 million in corporate notes, $1.0 million in municipal

bonds and $247,000 in “private-label” mortgage-backed securities.

There were no other-than-temporary-impairment charges for

the Company’s investment securities for the nine months ended June 30, 2021.

Bank-Owned Life Insurance.

The cash surrender value of life insurance held for directors and officers of Magyar Bank was $14.2 million at June 30, 2021 compared

with $14.0 million at September 30, 2020.

During the nine months ended June 30, 2021, the Company did not purchase any new bank-owned

life insurance policies.

Other Real Estate

Other real estate owned decreased $1.3 million, or 49.7%, to $1.3 million at June 30, 2021 from $2.6 million at September

During the nine months ended June 30, 2021, the Company sold two properties totaling $1.7 million for a $79,000 gain, established

valuation allowances totaling $215,000, and added two properties totaling $547,000 from the foreclosure of collateral securing non-performing

The Company is determining the proper course of action for its remaining other real estate owned, which may include holding the

properties until the real estate market further improves, leasing properties to offset carrying costs and selling the properties.

Total deposits increased $117.6 million, or 19.0%, to $736.0 million at June 30, 2021 from $618.3 million at September 30, 2020.

in deposits occurred in savings accounts, which increased $116.0 million, or 154.9%, to $191.0 million, in non-interest bearing checking

accounts, which increased $10.4 million, or 6.3%, to $173.9 million, and in interest-bearing checking accounts (NOW), which increased

$4.9 million, or 7.5%, to $70.4 million.

These increases were partially offset by certificates of deposit (including individual retirement

accounts), which decreased $13.5 million, or 10.7%, to $112.8 million and by money market accounts, which decreased $159,000 to $187.9

In connection with the Company’s second-step conversion and related stock offering, subscription funds of $109.6 million

were received and included as savings deposits as of June 30, 2021.

Brokered certificates of

deposit decreased $7.4 million to $2.0 million at June 30, 2021 from $9.4 million at September 30, 2020.

Matured brokered certificate

of deposit totaling $7.4 million were repaid from interest-earning deposits with banks during the nine months ended June 30, 2021.

Borrowings decreased $36.1 million, or 53.6%, to $31.3 million at June 30, 2021 from $67.4 million at September 30, 2020.

resulted from the repayment of $36.1 million in Paycheck Protection Program Liquidity Facility advances from the Federal Reserve Bank

during the nine month period as the PPP loans securing the advances were forgiven by the SBA.

Borrowings from the Federal Home Loan Bank

of New York decreased $4.5 million to $26.0 million from a matured term advance that was repaid from interest-earning deposits with banks

during the nine months ended June 30, 2021.

Stockholders’

Stockholders’ equity increased $4.4 million, or 7.8%, to $61.3 million at June 30, 2021 from $56.9 million at September

The increase in stockholders’ equity resulted primarily from net income of $4.5 million for the nine months ended June

The Company’s book value per share of our common stock increased to $10.54 at June 30, 2021 from $9.78 at September 30,

government-sponsored enterprises,

$14.5 million in U.S.

government-sponsored enterprise debt securities, $3.0 million in corporate notes, $2.7 million in municipal bonds,

and $238,000 in “private-label” mortgage-backed securities.

There were no other-than-temporary-impairment charges for the

Company’s investment securities for the three months ended December 31, 2021.

Other Real Estate Owned.

Other real estate owned increased $13,000, or 2.0%, to $649,000 at December 31, 2021 from $636,000 at September 30, 2021.

was due to capital improvements to one property in order to market it for sale.

At December 31, 2021, of the two properties that remain

in the OREO portfolio, one was under contract of sale and the other was listed for sale.

The Company is determining the proper course

of action for its remaining other real estate owned, which may include holding the properties until the real estate market further improves,

leasing properties to offset carrying costs and selling the properties.

Total Deposits.

Total deposits increased $7.9 million, or 1.2%, to $647.7 million at December 31, 2021 from $639.8 million at September 30, 2021.

inflow in deposits occurred in interest-bearing checking accounts (NOW), which increased $12.4 million, or 17.4%, to $83.7 million, in

money market accounts, which increased $9.9 million, or 5.3%, to $197.8 million, in savings accounts, which increased $5.0 million, or

6.1%, to $86.7 million, and in non-interest bearing checking accounts, which increased $436,000, or 0.2%, to $182.4 million.

offsetting these increases were certificates of deposit (including individual retirement accounts), which decreased $19.9 million, or

17.0%, to $97.0 million.

The Company held $6.0 million in brokered certificates of deposit at December 31, 2021 and September 30, 2021.

decreased $2.0 million, or 8.6%, to $21.4 million at December 31, 2021 from $23.4 million at September 30, 2021.

The Company repaid a

matured $2.0 million term borrowings from the Federal Home Loan Bank of New York during the quarter.

Stockholders’ Equity.

Stockholders’ equity increased $802,000, or 0.8%, to $98.4 million at December 31, 2021 from $97.6 million at September 30, 2021.

The Company’s book value per share increased to $13.87 at December 31, 2021 from $13.76 at September 30, 2021.

The increase in stockholders’

equity was attributable to the Company’s results from operations, partially offset by the special dividends paid during the quarter.

The Company did not repurchase

shares of our common stock during the nine months ended June 30, 2021.

Through June 30, 2021, the Company has repurchased 91,000 shares

of our common stock at an average price of $8.41 pursuant to the second stock repurchase plan, which has reduced outstanding shares to

Average Balance Sheet for the Three and Nine Months

Ended June 30, 2021 and 2020

The following tables present certain

information regarding the Company’s financial condition and net interest income for the three and nine months ended June 30, 2021

The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing

The Company derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning

assets and interest-bearing liabilities, respectively, for the periods shown.

The Company derived average balances from daily balances

over the period indicated.

Interest income includes fees that we consider adjustments to yields.

the Three Months Ended June 30,

(Dollars In Thousands)

Interest-earning assets:

Interest-earning deposits

Loans receivable, net

Tax-exempt (1)

FHLB of NY stock

Total interest-earning assets

Noninterest-earning assets

Interest-bearing liabilities:

Savings accounts (2)

NOW accounts (3)

Time deposits (4)

Total interest-bearing deposits

Total interest-bearing liabilities

Noninterest-bearing liabilities

Total liabilities

Retained earnings

Total liabilities and retained earnings

Tax-equivalent basis adjustment

Net interest and dividend income

Interest rate spread

Net interest-earning assets

Net interest margin (5)

Average interest-earning assets to

average interest-bearing liabilities

Calculated using 21% tax rate.

Includes passbook savings, money market passbook and club accounts.

interest-bearing checking and money market accounts.

certificates of deposits and individual retirement accounts.

(5) Calculated

as annualized net interest income divided by average total interest-earning assets.

the Nine Months Ended June 30,

shares of its common stock during the three months ended December 31, 2021.

Through December 31, 2021, the Company had repurchased 91,000

shares at an average price of $8.41 pursuant to the second stock repurchase plan.

Average Balance Sheet for the Three Months Ended

December 31, 2021 and 2020

The following table presents certain

information regarding the Company’s financial condition and net interest income for the three months ended December 31, 2021 and

The table presents the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities.

We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing

liabilities, respectively, for the periods shown.

We derived average balances from daily balances over the period indicated.

income includes fees that we consider adjustments to yields.

the Three Months Ended December 31,

(Dollars In Thousands)

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Tax-exempt (1)

FHLB of NY stock

Total interest-earning assets

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average interest-bearing liabilities

Calculated using 21% tax rate.

Calculated using the Company's 21% federal tax rate.

Includes passbook savings, money market passbook and club accounts.

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Comparison of Operating Results for the Three Months

Ended June 30, 2021 and 2020

income increased $1.2 million, or 227.7%, to $1.7 million for the three months ended June 30, 2021 compared to net income of $509,000

for the three months ended June 30, 2020.

The increase resulted from higher net interest and dividend income, lower provisions for loan

loss, higher other income, and lower other expenses.

Net Interest and Dividend

Net interest and dividend income increased $888,000, or 15.9%, to $6.5 million for the three months ended June 30, 2021

from $5.6 million for the three months ended June 30, 2020.

The increase was attributable

to a $46.4 million increase in average total interest-earning assets as well as a 28 basis point increase in the Company’s net interest

margin to 3.54% for the three months ended June 30, 2021 compared to 3.26% for the three months ended June 30, 2020.

The yield on the Company’s

average interest-earning assets decreased eight basis points to 3.89% for the three months ended June 30, 2021 from 3.97% for the three

months ended June 30, 2020 due to lower market interest rates.

The yield on average investment securities and interest-earning deposits

decreased 44 basis points to 0.70% for the three months ended June 30, 2021 from 1.14% for the three months ended June 30, 2020.

this decrease was a nine basis point increase in the yield on loans receivable to 4.49% for the three months ended June 30, 2021 from

4.40% for the three months ended June 30, 2020.

Included in the yield on loans receivable is the recognition of PPP loan fees, which have

been accelerated with the repayment of PPP loans through forgiveness by the SBA.

The Company recorded $386,000 in PPP fees during the

three months ended June 30, 2021 compared with $133,000 during the three months ended June 30, 2020.

The cost of the Company’s

interest-bearing liabilities decreased 45 basis points to 0.52% for the three months ended June 30, 2021 from 0.97% for the three months

ended June 30, 2020 due to lower market interest rates.

The cost of interest-bearing deposits decreased 49 basis points to 0.43% for the

three months ended June 30, 2021 from 0.92% for the three months ended June 30, 2020 while the cost of borrowings increased three basis

points to 1.48% for the three months ended June 30, 2021 from 1.45% for the three months ended June 30, 2020.

In addition, the average

balance of non-interest bearing liabilities increased $28.1 million to $204.0 million for the three months ended June 30, 2021 from $175.9

million for the three months ended June 30, 2020.

Interest and Dividend Income.

Interest and dividend income increased $308,000, or 4.5%, to $7.1 million for the three months ended June 30, 2021 compared to $6.8 million

for the three months ended June 30, 2020.

The increase was attributable to higher average balances of interest-earning assets, which increased

$46.4 million to $686.2 million between periods, and higher PPP loan fees recognized.

The increase in average balances of interest-earning

assets occurred in loans receivable, which increased $22.7 million, or 3.8%, in investment securities, which increased $15.7 million,

or 37.4%, and in interest-earning deposits, which increased $8.1 million, or 16.1%.

Interest earned on investment

securities decreased $62,000, or 23.6%, to $201,000 for the three months ended June 30, 2021 from $263,000 for the three months ended

June 30, 2020.

The decrease resulted primarily from a 44 basis point decrease in the average yield on investment securities and interest-earning

deposits, to 0.70% for the three months ended June 30, 2021 from 1.14% for the three months ended June 30, 2020.

The decrease in average

yield was offset by a $23.8 million, or 25.8%, increase in average balance on investment securities and interest-earning deposits to $116.2

million for the three months ended June 30, 2021 from $92.4 million for the same period last year.

The decrease in average yield reflected

the lower interest rates paid on reserves by the Federal Reserve Bank as well as lower market interest rates on investment securities

between the comparable periods.

Interest Expense.

Interest expense decreased $580,000, or 47.5%, to $640,000 for the three months ended June 30, 2021 compared with $1.2 million for the

three months ended June 30, 2020.

The average balance of interest-bearing liabilities decreased $5.7 million, or 1.1%, to $496.3 million

from $502.0 million between the two periods, while the cost of such liabilities decreased 45 basis points to 0.52% for the three months

ended June 30, 2021 compared with 0.97% for the prior year period.

Lower market interest rates accounted for the decrease in the cost

of interest-bearing liabilities.

The average balance of interest-bearing

deposits increased $3.0 million to $454.7 million for the quarter ended June 30, 2021 from $451.7 million for the quarter ended June 30,

2020, while the average cost of such deposits decreased 49 basis points to 0.43% from 0.92% between the two periods.

As a result, interest

paid on interest-bearing deposits decreased $551,000, or 53.1%, to $487,000 for the three months ended June 30, 2021 compared with $1.0

million for the three months ended June 30, 2020.

Interest paid on borrowings decreased

$29,000 or 15.9%, to $153,000 for the three months ended June 30, 2021 from $182,000 for the prior year period.

The decrease resulted

from a $8.7 million decrease of in the average balance of such borrowings to $41.5 million for the three months ended June 30, 2021 from

$50.3 million for the three months ended June 30, 2020, offset by a 3 basis point increase of in the average cost of borrowings to 1.48%

for the three months ended June 30, 2021 from 1.45% for the three months ended June 30, 2020.

The increase in the cost of borrowings reflects

repayments of the Company’s lowest cost borrowings during the periods presented.

Provision for Loan Losses.

The Company has established provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent

losses that are both probable and reasonably estimable at the date of the financial statements.

In evaluating the level of the allowance

for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse

situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information

and prevailing economic conditions.

This evaluation is inherently subjective as it requires estimates that are susceptible to significant

revision as more information becomes available or as future events occur.

After an evaluation of these factors,

management recorded a provision of $246,000 for the three months ended June 30, 2021 compared to $438,000 for the three months ended June

The decreased provision for loan losses resulted from lower adjustments to our historical loan losses related to the economic

impact of the COVID-19 pandemic on our consumer and business loan portfolios.

The Company did not record any charge-offs during the three

months ended June 30, 2021 compared with $37,000 in net recoveries during the three months ended June 30, 2020.

Determining the amount of the

allowance for loan losses necessarily involves a high degree of judgment.

Management reviews the level of the allowance on a quarterly

basis, and establishes the provision for loan losses based on the factors set forth “Summary of Significant Accounting Policies

− Allowance for Loan Losses.” As management evaluates the allowance for loan losses, the increased risk associated with larger

non-homogenous construction, commercial real estate and commercial business loans may result in larger additions to the allowance for

loan losses in future periods.

In addition, the ongoing effects of the COVID-19 pandemic on our borrowers may also result in larger additions

to the allowance for loan losses in future periods.

Other Income.

income increased $347,000, or 92.8%, to $721,000 during the three months ended June 30, 2021 compared to $374,000 for the three months

ended June 30, 2020.

The Company recorded higher gains

from the sales of SBA loans, which increased $325,000, or 590.9%, to $380,000 for the three months ended June 30, 2021 compared with $55,000

gains for the three months ended June 30, 2020.

Other Expenses.

expenses decreased $194,000, or 4.1%, to $4.6 million during the three months ended June 30, 2021 from $4.8 million during the three months

ended June 30, 2020.

The decrease in other expenses

was primarily attributable to lower OREO expenses, which decreased $311,000, or 92.8%, to $24,000 due to lower valuation allowances and

fewer properties held at June 30, 2021 than the prior year period.

Partially offsetting the lower OREO expenses were higher compensation

and benefit expenses, which increased $83,000, or 3.3%, due to higher incentive plan accruals, partially offset by lower compensation

from lower full-time equivalent employees between periods.

In addition, other expenses increased $81,000, or 24.5%, to $412,000 from higher

marketing, business development and charitable contributions, all of which were lower for the three months ended June 30, 2020 due to

the outbreak of the COVID-19 pandemic

Income Tax Expense.

The Company recorded tax expense of $676,000 on pre-tax income of $2.3 million for the three months ended June 30, 2021, compared to $214,000

on pre-tax income of $723,000 for the three months ended June 30, 2020.

The Company’s effective tax rate for the three months ended

June 30, 2021 was 28.8% compared with 29.6% for the three months ended June 30, 2020.

Comparison of Operating Results for the Nine Months

Ended June 30, 2021 and 2020

income increased $3.1 million, or 229.9%, to $4.5 million during the nine month period ended June 30, 2021 compared with $1.4 million

for the nine month period ended June 30, 2020 due to higher net interest and dividend income and non-interest income, partially offset

by higher provisions for loan loss and other expenses.

Ended December 31, 2021 and 2020

income increased $356,000, or 26.6% to $1.7 million for the three-month period ended December 31, 2021 compared with net income of $1.3

million for the three-month period ended December 31, 2020.

The increase was due to higher net interest and dividend income, lower provisions

for loan loss and lower other expenses, partially offset by lower non-interest income.

Net Interest and Dividend

Net interest and dividend income increased $3.2 million, or 20.0%, to $18.9 million for the nine months ended June 30,

2021 from $15.7 million for the nine months ended June 30, 2020.

The increase was attributable to a $90.3 million increase in total average

interest-earning assets as well as an 18 basis point increase in the Company’s net interest margin to 3.52% for the nine months

ended June 30, 2021 compared to 3.34% for the nine months ended June 30, 2020.

The yield on the Company’s

average interest-earning assets decreased 33 basis points to 3.95% for the nine months ended June 30, 2021 from 4.28% for the nine months

ended June 30, 2020 due to lower market interest rates.

The yield on average investment securities and interest-earning deposits decreased

83 basis points to 0.80% for the nine months ended June 30, 2021 from 1.63% for the nine months ended June 30, 2020 while the yield on

loans receivable decreased 14 basis points to 4.50% for the nine months ended June 30, 2021 from 4.64% for the nine months ended June

Net interest and dividend income increased $394,000, or 6.5%, to $6.4 million for the three months ended December 31,

2021 from $6.0 million for the three months ended December 31, 2020.

An eight basis point increase

in the Company’s net interest margin to 3.46% for the three months ended December 31, 2021 from 3.38% for the three months ended

December 31, 2020 as well as a $28.9 million increase in average-interest-earning assets to $739.0 million for the 2021 quarter from $710.1

million for the 2020 quarter resulted in higher net interest and dividend income.

The cost of the Company’s

interest-bearing liabilities decreased 62 basis points to 0.62% for the nine months ended June 30, 2021 from 1.24% for the nine months

ended June 30, 2020 due to lower market interest rates.

The cost of interest-bearing deposits decreased 64 basis points to 0.54% for the

nine months ended June 30, 2021 from 1.18% for the nine months ended June 30, 2020 while the cost of borrowings decreased 62 basis points

to 1.28% for the nine months ended June 30, 2021 from 1.90% for the nine months ended June 30, 2020.

interest-bearing liabilities decreased 26 basis points to 0.47% for the three months ended December 31, 2021 from 0.73% for the three

months ended December 31, 2020 due to lower market interest rates.

The cost of interest-bearing deposits decreased 28 basis points to

0.39% for the three months ended December 31, 2021 from 0.67% for the three months ended December 31, 2020.

In addition, the average balance

of non-interest bearing liabilities increased $44.8 million to $185.9 million for the nine months ended June 30, 2021 from $141.1 million

for the nine months ended June 30, 2020.

of non-interest bearing liabilities increased $28.1 million to $204.0 million for the three months ended December 31, 2021 from $175.9

million for the three months ended December 31, 2020.

The increase in non-interest bearing liabilities was due to higher business checking

account balances resulting from supply chain issues and a preference for liquidity during the COVID-19 pandemic.

Interest and Dividend Income.

Interest and dividend income increased $1.1 million, or 5.3%, to $21.2 million for the nine months ended June 30, 2021 from $20.2 million

for the nine months ended June 30, 2020.

The increase was attributable to higher average balances of interest-earning assets, which increased

$90.4 million between periods, and higher PPP loan fees.

The increase in average balances of interest-earning assets occurred in loans

receivable, which increased $60.6 million, or 11.1%, to $609.1 million from $548.5 million, in interest-earning deposits, which increased

$22.1 million, or 69.2%, to $54.0 million from $31.9 million, and in investment securities, which increased $7.7 million, or 17.2%, to

$52.6 million from $42.9 million.

Growth in loans receivable was partially attributable to the origination of $91.3 million in PPP loans

from April 2020, of which $44.7 million were outstanding at June 30, 2021.

Included in the interest income on loans receivable is the

recognition of PPP loan fees, which have been accelerated with the repayment of PPP loans through forgiveness by the SBA.

recorded $1.4 million in PPP fees during the nine months ended June 30, 2021 compared with $133,000 during the nine months ended June

Interest and dividend income was unchanged at $7.0 million for the three months ended December 31, 2021 and December 31, 2020.

million, or 4.1%, increase in the average balance of interest-earning assets to $739.0 million was entirely offset by a 15 basis point

decrease in the yield on such assets to 3.76% for the three months ended December 31, 2021 compared with 3.91% the prior year period.

The yield on average investment

securities and interest-earning deposits decreased 19 basis points to 0.68% for the three months ended December 31, 2021 from 0.87% for

the three months ended December 31, 2020 due to lower market interest rates.

Offsetting this decrease was an 18 basis point increase in

the yield on loans receivable to 4.60% for the three months ended December 31, 2021 from 4.42% for the three months ended December 31,

Lower interest income from lower average balances of loans receivable was offset by the receipt of $173,000 in interest payments

received during the current quarter on previously non-performing loans.

Also included in the yield on loans receivable is the recognition

of PPP loan fees, which have been accelerated with the repayment of PPP loans through forgiveness by the SBA.

The Company recorded $407,000

in PPP fees during the three months ended December 31, 2021 compared with $417,000 during the three months ended December 31, 2020.

Interest earned on investment

securities decreased $308,000, or 32.7%, to $634,000 for the nine months ended June 30, 2021 from $942,000 for the nine months ended June

The decrease resulted primarily from an 83 basis points decrease in average yield on investment securities and interest-earning

deposits to 0.80% for the nine months ended June 30, 2021 from 1.63% for the nine months ended June 30, 2020.

The decrease in average

yield was offset by a $29.8 million, or 38.8%, increase in average balance on investment securities and interest-earning deposits to $

106.6 million for the nine months ended June 30, 2021 from $76.8 million for the same period last year.

The decrease in average yield

reflected the lower interest rates paid on reserves by the Federal Reserve Bank as well as lower market interest rates on investment securities

between the comparable periods.

securities, including interest-earning deposits and excluding FHLB stock, increased $43,000, or 19.1%, to $268,000 for the quarter ended

December 31, 2021 from $225,000 for the prior year quarter.

A $56.1 million, or 55.0%, increase in the average balance of investment securities

and interest-earning deposits to $158.2 million for the quarter ended December 31, 2021 more than offset the 19 basis point decrease in

their average yield.

Interest Expense.

Interest expense decreased $2.1 million, or 47.2%, to $2.3 million for the nine months ended June 30, 2021 compared with $4.4 million

the nine months ended June 30, 2020.

The average balance of interest-bearing liabilities increased $31.1 million, or 6.5%, to $508.1 million

for the nine months ended June 30, 2021 from $477.0 million for the same period last year, while the cost of such liabilities decreased

62 basis points to 0.62% for the nine months ended June 30, 2021 compared with 1.24% the prior year period.

Lower market interest rates

accounted for the decrease in the cost of interest-bearing liabilities.

Interest expense decreased $386,000, or 40.4%, to $570,000 for the three months ended December 31, 2021 from $956,000 for the three months

ended December 31, 2020.

A 26 basis point decrease in the cost of interest-bearing liabilities to 0.47% for the three months ended December

31, 2021 as well as a lower average balance of interest-bearing liabilities, which decreased $36.7 million, or 7.1%, to $482.0 million,

accounted for the lower interest expense between periods.

The average balance of interest-bearing

deposits increased $15.5 million to $454.1 million for the nine months ended June 30, 2021 from $438.6 million for the nine months ended

June 30, 2020, while the average cost of such deposits decreased 64 basis points to 0.54% from 1.18% between the two periods.

interest paid on interest-bearing deposits decreased $2.1 million to $1.8 million for the nine months ended June 30, 2021 compared with

$3.9 million for the nine months ended June 30, 2020.

deposits increased $6.8 million, or 1.5%, to $460.0 million for the quarter ended December 31, 2021 from $453.2 million for the same quarter

ended December 31, 2020, while the average cost of such deposits decreased 28 basis points to 0.39% from 0.67% between the two periods.

As a result, interest paid on interest-bearing deposits decreased $314,000 to $451,000 for the three months ended December 31, 2021 compared

with $765,000 for the three months ended December 31, 2020.

Interest paid on borrowings decreased

$28,000, or 5.1%, to $519,000 for the nine months ended June 30, 2021 from $547,000 for the prior year period.

The average balance of

such borrowings increased $15.6 million to $54.1 million for the nine months ended June 30, 2021 from $38.4 million for the nine months

ended June 30, 2020, offset by a 62 basis point decrease in the average cost of borrowings to 1.28% for the nine months ended June 30,

2021 from 1.90% for the nine months ended June 30, 2020.

Lower market interest rates contributed to the lower average cost of interest-bearing

deposits while PPPLF advances contributed to the lower average cost of borrowings.

$72,000, or 37.7%, to $119,000 for the three months ended December 31, 2021 from $191,000 for the prior year period.

A $43.5 million decrease

in the average balance of such borrowings to $21.9 million for the quarter ended December 31, 2021 from $65.4 million for the quarter

ended December 31, 2020 more than offset a 100 basis point increase in the cost of borrowings to 2.16% for the three months ended December

31, 2021 from 1.16% for the three months ended December 31, 2020.

The reduction in average balances and corresponding increase in cost

of borrowings between periods resulted from the repayment of $29.8 million in PPP Liquidity Facility borrowings costing 0.35% from the

Federal Reserve Bank of New York.

Provision for Loan Losses.

The Company has establish provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent

losses that are both probable and reasonably estimable at the date of the financial statements.

In evaluating the level of the allowance

for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse

situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information

and prevailing economic conditions.

This evaluation is inherently subjective as it requires estimates that are susceptible to significant

revision as more information becomes available or as future events occur.

We establish provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent losses that

are both probable and reasonably estimable at the date of the financial statements.

In evaluating the level of the allowance for loan

losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations

that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing

economic conditions.

This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as

more information becomes available or as future events occur.

After an evaluation of these factors,

management recorded a provision of $1.4 million for the nine months ended June 30, 2021 compared to $1.1 million for the nine months ended

June 30, 2020.

The increased provisions for loss resulted from higher adjustments to the Company’s historical loan losses related

to the anticipated economic impact of the COVID-19 pandemic on the consumer and business loan portfolios.

The Company recorded $47,000

in net recoveries during the nine months ended June 30, 2021 compared with $43,000 in net recoveries during the nine months ended June

management recorded a provision of $101,000 for the three months ended December 31, 2021 compared to $640,000 for the three months ended

December 31, 2020.

The decreased provision for loan losses resulted from contraction in the Company’s loan portfolio and a decrease

in non-performing loans between periods.

In addition, the Company recorded higher provisions during the three months ended December 31,

2020 related to COVID-19 pandemic adjustments to the historical loss rates used in its calculation.

The Company recorded $52,000 in net

recoveries for the three months ended December 31, 2021 compared with $90,000 in net recoveries during the three months ended December

Determining the amount of the

1 unchanged sentence

Management reviews the level of the allowance on a quarterly

basis, and establishes the provision for loan losses based on the factors set forth “Summary of Significant Accounting Policies

− Allowance for Loan Losses.” As management evaluates the allowance for loan losses, the increased risk associated with larger

non-homogenous construction, commercial real estate and commercial business loans may result in larger additions to the allowance for

loan losses in future periods.

In addition, the ongoing effects of the COVID-19 pandemic on our borrowers may also result in larger additions

to the allowance for loan losses in future periods.

basis, and establishes the provision for loan losses based on the factors set forth in the preceding paragraph.

As management evaluates

the allowance for loan losses, the increased risk associated with larger non-homogenous construction, commercial real estate and commercial

business loans may result in larger additions to the allowance for loan losses in future periods.

In addition, the ongoing effects of

the COVID-19 pandemic on the Company’s loan portfolio may also result in larger additions to the allowance for loan losses in future

Other Income.

income increased $1.7 million, or 150.6%, to $2.9 million during the nine months ended June 30, 2021 compared to $1.2 million for the

nine months ended June 30, 2020.

income decreased $575,000, or 46.9%, to $650,000 during the three months ended December 31, 2021 compared to $1.2 million for the three

months ended December 31, 2020.

Fees for other customer services

increased $777,000 for the nine months ended June 30, 2021 resulting largely from our participation in the Middlesex County Small Business

Relief Grant Program.

The Company received a fee of 3.0% percent of the grants assisted Middlesex County with processing.

There were no

such fees recorded during the nine months ended June 30, 2020.

The Company also recorded higher

gains from the sales of loans, which were $749,000 for the nine months ended June 30, 2021 compared with $81,000 for the nine months ended

June 30, 2020.

Sales of guaranteed portions of SBA 7(a) loans were $6.4 million during the nine months ended June 30, 2021 compared with

$806,000 for the nine months ended June 30, 2020.

Finally, interest rate swap fees

increased $208,000 for the nine months ended June 30, 2021.

The interest rate swap fees reflect the present value of mark-up fees received

on back-to-back loan swap transactions.

There were no such fees recorded during the nine months ended June 30, 2020.

were $0 for the three months ended December 31, 2021 compared with $464,000 for the three months ended December 31, 2020.

the 2020 quarter were earned from the a local Small Business Relief Grant program offered in 2020 in response to the COVID-19 pandemic

for which the Company received a fee of 3.0% of the grants it assisted with processing.

In addition, the Company did not receive any interest

rate swap fees during the three months ended December 31, 2021, compared with $102,000 during the three months ended December 31, 2020.

Other Expenses.

expenses increased $131,000, or 0.9%, to $14.0 million during the nine months ended June 30, 2021 from $13.9 million during the nine months

ended June 30, 2020.

The increase in other expenses

was primarily attributable to professional fees, which increased $192,000, or 16.1%, to $1.4 million for the nine months ended June 30,

2021 from $1.2 million for the nine months ended June 30, 2020, due to higher legal and consulting fees related to the collection and

foreclosure of non-performing loans.

Higher compensation and benefit expenses accounted for an $82,000, or 1.1%, increase to $7.8 million

during the nine months ended June 30, 2021 due to higher incentive plan accruals while loan servicing expenses increased $82,000, or 38.7%,

to $294,000 due to higher loan origination and repayment activities.

These increases were offset, in

part, by lower OREO expenses, which decreased $244,000, or 52.2%, to $223,000 for the nine months ended June 30, 2021 from $467,000 for

the nine months ended June 30, 2020 due to lower valuation allowances recorded and fewer properties held during the nine months ended

June 30, 2021.

expenses decreased $103,000, or 2.2%, to $4.6 million during the three months ended December 31, 2021 from $4.7 million during the three

months ended December 31, 2020.

The decrease in other expenses

was primarily attributable to decreases in professional fees, which decreased $141,000 to $387,000, due to lower legal and consulting

fees related to the collection and foreclosure of non-performing loans, and in OREO expenses, which decreased $146,000 to $34,000, due

to lower valuation allowances and fewer OREO properties between periods.

Partially offsetting the decrease

in professional fees and OREO expenses were increases in compensation and benefit expenses as well as marketing and business development

Compensation and benefit expense increased $155,000, or 6.1%, to $2.7 million for the three months ended December 31, 2021 from

$2.5 million for the three months ended December 31, 2020 from the addition of one commercial lending position as well as annual merit

increases for employees and higher education and training expenses.

Marketing and business development expense increased $81,000, or 184.1%,

to $125,000 for the three months ended December 31, 2021 from $44,000 for the three months ended December 31, 2020 due to COVID-19 pandemic

restrictions suppressing the 2020 spend and reflecting a higher spend in the current year as the Company celebrates its 100 th

year anniversary in 2022.

Income Tax Expense.

The Company recorded tax expense of $1.9 million on pre-tax income of $6.4 million for the nine months ended June 30, 2021, compared to

$572,000 on pre-tax income of $1.9 million for the nine months ended June 30, 2020.

The Company’s effective tax rate for the nine

months ended June 30, 2021 was 29.6% compared with 29.5% for the nine months ended June 30, 2020.

The Company recorded tax expense of $674,000 on pre-tax income of $2.4 million for the three months ended December 31, 2021, compared

to $569,000 on pre-tax income of $1.9 million for the three months ended December 31, 2020.

The Company’s effective tax rate for

the three months ended December 31, 2021 was 28.5% compared with 29.9% for the three months ended December 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

Company’s liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient,

cost-effective manner.

The Company’s short-term sources of liquidity include maturity, repayment and sales of assets, excess

cash and cash equivalents, new deposits, other borrowings, and new advances from the Federal Home Loan Bank.

There has been no material

adverse change during the nine months ended June 30 , 2021 in the ability of the Company and its subsidiaries

to fund their operations.

The Company’s liquidity

is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner.

Company’s short-term sources of liquidity include maturity, repayment and sales of assets, excess cash and cash equivalents, new

deposits, other borrowings, and new advances from the Federal Home Loan Bank.

There has been no material adverse change during the three

months ended December 31, 2021 in the ability of the Company and its subsidiaries to fund their operations.

Whether through significant deposit

1 unchanged sentence

COVID-19 pandemic will have a negative effect on the liquidity and capital resources of the Company.

Under the PPPLF, the Federal Reserve

Bank of New York provides advances to Magyar Bank on a non-recourse basis, taking PPP loans as collateral.

At June 30, 2021, the Bank

had borrowed $5.3 million in PPPLF advances from the Federal Reserve, pledging an equal amount of PPP loans as collateral.

At June 30, 2021, the Company

At December 31, 2021, the Company

had commitments outstanding under letters of credit of $2.8 million, commitments to originate loans of $28.5 million, and commitments

1 unchanged sentence

There has been no material change during

the nine months ended June 30, 2021 in any of the Company’s other contractual obligations or commitments to make future payments.

the three months ended December 31, 2021 in any of the Company’s other contractual obligations or commitments to make future payments.

Capital Requirements

At June 30, 2021, the Bank’s

At December 31, 2021, the Bank’s

Tier 1 capital as a percentage of the Bank's total assets was 10.50%, and total qualifying capital as a percentage of risk-weighted assets

2 unchanged sentences

9, 2020, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued

an interim final rule to allow banking organizations to neutralize the effect of PPP loans financed under the PPPLF on Tier 1 leverage

capital ratios.

At June 30, 2021, the Company used PPPLF borrowings to neutralize $5.3 million of the balance sheet growth impact on the

calculation of the Bank’s Tier 1 leverage capital ratio.

an interim final rule to allow banking organizations to neutralize the effect of PPP loans financed under the PPP Liquidity Facility on

Tier 1 leverage capital ratios.

3- Quantitative and Qualitative Disclosures about Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis