What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-12 · 223 added, 238 removed, 381 unchanged (55% of the section changed)

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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.

In addition, the long-term

impact of the COVID-19 pandemic could have an adverse impact on the Company, its customers and the communities it serves.

The Company wishes to caution

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exposure to the travel or entertainment industry.

Through March 31, 2022, we had

Through June 30, 2022, we had

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

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$56.9 million repaid their deferred payments in full and 171 loans aggregating $94.0 million have resumed making their contractual loan

One loan totaling $1.4 million was past its deferral period and delinquent at March 31, 2022.

The Company was not deferring

any additional loan payments due to the COVID-19 pandemic at March 31, 2022.

A total of $1.4 million in interest payments were deferred

as of March 31, 2022.

At June 30, 2022, the Company was not deferring any additional loan payments due to the COVID-19 pandemic and there were no

delinquent loans with COVID-19 deferrals.

A total of $1.3 million in interest payments were deferred as of June 30, 2022.

The Bank participated in the PPP

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

March 31, 2022, 543 loans totaling $86.1 million had been repaid, leaving 19 loans totaling $5.2 million at March 31, 2022.

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

The health of the banking industry

is highly correlated with that of the economy.

The temporary and/or partial closures of non-essential businesses in our local and national

economies increases the likelihood of recession, which typically results in an increased level of credit losses.

Accordingly, our provisions

for loan losses have increased and will be closely monitored throughout the pandemic.

In addition to utilizing quantitative loss factors,

the Company considers qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics,

the adequacy of the underlying collateral, and the financial strength of the borrower.

The impact of the COVID-19 pandemic on the performance

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 March 31, 2022

June 30, 2022, 560 loans totaling $91.0 million had been repaid, leaving two loans totaling $370,000 at June 30, 2022.

The Company expects

all but $3,000 of these loans to be approved for full forgiveness by the SBA.

Comparison of Financial Condition at June 30, 2022

and September 30, 2021

Total Assets.

assets increased $32.7 million, or 4.2%, to $806.7 million at March 31, 2022 from $774.0 million at September 30, 2021.

assets increased $16.7 million, or 2.2%, to $790.7 million at June 30, 2022 from $774.0 million at September 30, 2021.

The increase was

attributable to higher balances of investment securities and loans receivable, net of allowance for loan loss, partially offset by lower

balances of cash and interest-earning deposits with banks.

attributable to higher balances of loans receivable, net of allowance for loan losses, and investment securities, partially offset by

lower balances of interest-earning deposits with banks.

Cash and Interest-Earning

Deposits with Banks.

Cash and interest-earning deposits with banks decreased $19.9 million, or 26.5%, to $55.3 million at March

31, 2022 from $75.2 million at September 30, 2021 as funds were used for loan originations and investment securities purchases during

the six months ended March 31, 2022.

Cash and interest-earning deposits with banks decreased $48.9 million, or 65.0%, to $26.3 million at June

30, 2022 from $75.2 million at September 30, 2021.

Interest-earning deposits with banks were used to fund loan originations and investment

security purchases during the nine months ended June 30, 2022.

Investment Securities.

At March 31, 2022, investment securities totaled $95.3 million, reflecting an increase of $24.7 million, or 35.0%, from $70.6 million

At June 30, 2022, investment securities totaled $101.3 million, reflecting an increase of $30.7 million, or 43.5%, from $70.6 million

at September 30, 2021.

The Company purchased seven mortgage-backed securities totaling $16.4 million, seven callable U.S.

The Company purchased nine mortgage-backed securities totaling $20.7 million, seven callable U.S.

government-sponsored

enterprise bond totaling $12.3 million, and one municipal bond totaling $600,000 during the six months ended March 31, 2022.

the purchases were payments from mortgage-backed securities totaling $3.7 million and unrealized losses on securities available-for-sale

totaling $795,000 during the six months ended March 31, 2022.

Investment securities at March

enterprise bonds totaling $12.3 million, three municipal bonds totaling $1.5 million, and one corporate note totaling $5.0 million during

the nine months ended June 30, 2022.

Repayments of mortgage-backed securities and bond calls totaled $7.4 million.

There were no sales

of investment securities during the period.

Investment securities at June

30, 2022 consisted of $64.7 million in mortgage-backed securities issued by U.S.

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and $229,000 in “private-label” mortgage-backed securities.

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

Company’s investment securities for the six months ended March 31, 2022.

Available-for-sale investment securities had a cost of $11.5 million

and a market value of $10.1 million reflecting an unrealized loss of $1.4 million at June 30, 2022.

The unrealized loss on securities

available-for-sale reflects higher market interest rates, which adversely affects the market price of the securities.

There were no other-than-temporary-impairment

charges for the Company’s investment securities for the nine months ended June 30, 2022.

Total Loans Receivable.

Total loans receivable increased $23.8 million, or 4.0%, to $618.5 million at March 31, 2022 from $594.6 million at September 30, 2021.

Total loans receivable were comprised of $317.7 million (51.4%) in commercial real estate loans, $206.1 million (33.3%) in one- to four-

family residential mortgage loans, $48.9 million (7.9%) in commercial business loans, $26.9 million (4.4%) in construction loans, $15.6

million (2.5%) in home equity lines of credit, and $3.3 million (0.5%) in other loans.

Included with the commercial business loans were

$5.2 million in PPP loans.

Total loans receivable increased $31.2 million, or 5.2%, during the nine months ended June 30, 2022 to $625.8 million at June 30, 2022

and were comprised of $335.4 million (53.6%) in commercial real estate loans, $208.0 million (33.2%) in one- to four- family residential

mortgage loans, $40.6 million (6.5%) in commercial business loans, $23.1 million (3.7%) in construction loans, $15.6 million (2.5%) in

home equity lines of credit, and $3.1 million (0.5%) in other loans.

The increase in total loans receivable

at March 31, 2022 occurred in commercial real estate loans, which increased $36.8 million, or 13.1%, in construction loans, which increased

$6.5 million, or 31.9%, and in one- to four- family residential real estate loans (including home equity lines of credit), which increased

$757,000, or 0.3%.

Partially offsetting these increases were decreases in commercial business loans, which decreased $19.8 million (PPP

loans decreased $19.9 million), and other loans, which decreased $459,000.

during the nine months ended June 30, 2022 occurred in commercial real estate loans, which increased $54.5 million, or 19.4%, in one-

to four- family residential mortgage loans, which increased $5.0 million, or 2.5%, and in construction loans, which increased $2.8 million,

Partially offsetting these increases were decreases in commercial business loans, which decreased $28.1 million (PPP loans decreased

$24.8 million), or 41.0%, home equity lines of credit, which decreased $2.4 million, or 13.2% and other loans, which decreased $653,000,

Total Non-Performing Loans.

Total non-performing loans decreased $2.3 million, or 27.3%, to $5.9 million at March 31, 2022 from $8.2 million at September 30, 2021.

During the six months ended March 31, 2022, five loans totaling $1.0 million were repaid in full and three loans totaling $1.3 million

were paid current by the borrowers.

There were no additions to the non-performing loans during the six months ended March 31, 2022.

ratio of non-performing loans to total loans decreased to 0.96% at March 31, 2022 from 1.37% at September 30, 2021.

During the six months ended March

Total non-performing loans decreased $3.6 million, or 43.9%, to $4.6 million at June 30, 2022 from $8.2 million at September 30, 2021.

The decrease was attributable to four loans totaling $1.5 million paid current by the borrowers and the full repayment of three loans

totaling $2.1 million during the nine months ended June 30, 2022.

The ratio of non-performing loans to total loans decreased to 0.73%

at June 30, 2022 from 1.37% at September 30, 2021.

During the nine months ended June

30, 2022, the allowance for loan losses increased $430,000 to $8.5 million from $8.1 million at September 30, 2021.

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The allowance for loan

losses as a percentage of non-performing loans increased to 140.0% at March 31, 2022 from 99.0% at September 30, 2021.

losses as a percentage of non-performing loans increased to 185.7% at June 30, 2022 from 99.0% at September 30, 2021.

Our allowance for

loan losses as a percentage of total loans was 1.34% at March 31, 2022 compared with 1.36% at September 30, 2021.

loan losses as a percentage of total loans was 1.36% at June 30 2022 and September 30, 2021.

Future increases in the allowance

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Other Real Estate Owned.

Other real estate owned increased $13,000, or 2.0%, to $649,000 at March 31, 2022 from $636,000 at September 30, 2021.

The increase was

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

At March 31, 2022, of the two properties that remain in the

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

Other real estate owned decreased $355,000, or 55.8%, to $281,000 at June 30, 2022 from $636,000 at September 30, 2021.

The decrease was

due to sale of one property totaling $368,000 for a $67,000 gain.

At June 30, 2022, one property remained in the OREO portfolio and was

under contract of sale.

Total Deposits.

Total deposits increased $35.4 million, or 5.5%, to $675.2 million at March 31, 2022 from $639.8 million at September 30, 2021.

inflow in deposits occurred in money market accounts, which increased $19.8 million, or 10.5%, to $207.7 million, in non-interest bearing

checking accounts, which increased $16.4 million, or 9.0%, to $198.4 million, in interest-bearing checking accounts (NOW), which increased

$16.3 million, or 22.9%, to $87.6 million, and in savings accounts, which increased $5.5 million, or 6.7%, to $87.2 million.

These increases

were partially offset by a decrease in certificates of deposit (including individual retirement accounts), of $22.6 million, or 19.4%,

Total deposits increased $20.0 million, or 3.1%, to $659.8 million at June 30, 2022 from $639.8 million at September 30, 2021.

inflow in deposits occurred in interest-bearing checking accounts (NOW), which increased $26.9 million, or 37.7%, to $98.2 million, money

market accounts, which increased $18.9 million, or 10.0%, to $206.8 million and savings accounts, which increased $5.4 million, or 6.6%,

to $87.1 million.

These increases were partially offset by certificates of deposit (including individual retirement accounts), which decreased

$29.0 million, or 24.8%, to $87.9 million and non-interest bearing checking accounts, which decreased $2.2 million, or 1.1%, to $179.8

We believe that deposit inflows were the result of a combination of supply chain issues negatively affecting depositors’

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The Company held

$6.0 million in brokered certificates of deposit at March 31, 2022 and September 30, 2021.

decreased $4.2 million, or 18.0%, to $19.2 million at March 31, 2022 from $23.4 million at September 30, 2021.

The Company repaid matured

term borrowings from the Federal Home Loan Bank of New York during the six months ended March 31, 2022.

$6.0 million in brokered certificates of deposit at June 30, 2022 and September 30, 2021.

decreased $8.1 million, or 34.6%, to $15.3 million at June 30, 2022 from $23.4 million at September 30, 2021.

The Company repaid four

matured term borrowings from the Federal Home Loan Bank of New York with its interest-earning deposits with banks during the nine months

ended June 30, 2022.

Stockholders’ Equity.

Stockholders’ equity increased $1.8 million, or 1.8%, to $99.4 million at March 31, 2022 from $97.6 million at September 30, 2021.

The Company’s book value per share increased to $14.00 at March 31, 2022 from $13.76 at September 30, 2021.

Stockholders’ equity increased $3.3 million, or 3.4%, to $101.0 million at June 30, 2022 from $97.6 million at September 30, 2021.

The Company’s book value per share increased to $14.23 at June 30, 2022 from $13.76 at September 30, 2021.

The increase was due

to the Company’s net income during the six months ended March 31, 2022, partially offset by dividends totaling $0.15 per share paid

during the six months ended March 31, 2022.

The Company did not repurchase

shares of its common stock during the three months ended March 31, 2022.

Under current federal regulations, subject to limited exceptions,

the Company may not repurchase shares of its common stock during the first year following the completion of its second-step conversion

offering, which was completed on July 14, 2021.

Through March 31, 2022, 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 and Six Months

Ended March 31, 2022 and 2021

to the Company’s net income partially offset by dividends totaling $0.18 per share paid during the nine months ended June 30, 2022.

Company did not repurchase any shares of its common stock during the three and nine months ended June 30, 2022 and 2021.

The Company held

112,996 shares of its common stock as treasury shares at June 30, 2022, repurchased at an average cost of $10.99 through March 2020.

current federal regulations, subject to limited exceptions, the Company was not permitted to repurchase shares of our common stock during

the first year following the completion of its second-step conversion offering, which was completed on July 14, 2021.

On July 21, 2022,

the Company announced a stock repurchase program of up to 5% of its publicly-held outstanding shares of common stock, or 354,891 shares.

Average Balance Sheet for the Three and Nine Months

Ended June 30, 2022 and 2021

The following tables present certain

information regarding the Company’s financial condition and net interest income for the three and six months ended March 31, 2022

information regarding the Company’s financial condition and net interest income for the three and nine months ended June 30, 2022

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

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Interest income includes fees that we consider adjustments to yields.

For the Three Months Ended

the Three Months Ended June 30,

(Dollars in thousands)

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

For the Six Months Ended

the Nine Months Ended June 30,

(Dollars In Thousands)

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Comparison of Operating Results for the Three Months

Ended March 31, 2022 and 2021

Company’s net income increased $173,000, or 11.5% to $1.7 million for the three-month period ended March 31, 2022 compared with

net income of $1.5 million for the three-month period ended March 31, 2021.

The increase was due to lower provisions for loan loss and

other expenses, partially offset by lower non-interest income.

Ended June 30, 2022 and 2021

Company’s net income increased $449,000, or 24.9%, to $2.1 million for the three-month period ended June 30, 2022 compared with

net income of $1.7 million for the three-month period ended June 30, 2021.

The increase was due to higher net interest and dividend income

as well as lower non-interest expenses, partially offset by lower non-interest income.

Net Interest and Dividend

Net interest and dividend income was unchanged at $6.4 million for the three months ended March 31, 2022 and 2021.

million increase in the average balance of net interest-earning assets between periods was offset by a 27 basis point decrease in the

Company’s net interest margin to 3.37% for the three months ended March 31, 2022 from 3.64% for the three months ended March 31,

Net interest and dividend income increased $506,000, or 7.8%, to $7.0 million for the three months ended June 30, 2022

from $6.5 million for the three months ended June 30, 2021.

The increase was attributable to a $28.4 million increase in our average net

interest-earning assets as well as an 18 basis point increase in the Company’s net interest margin to 3.72% for the three months

ended June 30, 2022 compared to 3.54% for the three months ended June 30, 2021.

Interest and Dividend Income.

Interest and dividend income decreased $219,000, or 3.1%, to $6.9 million for the three months ended March 31, 2022 from $7.1 million

for the three months ended March 31, 2021.

The decrease was attributable to a 41 basis point decline in yield on interest-earning assets,

partially offset by higher average balances of interest-earning assets, which increased $39.3 million between periods.

The lower yield

on interest-earning assets was attributable to lower yields on loans receivable, which decreased 16 basis points to 4.44% for the three

months ended March 31, 2022 compared with 4.60% for the three months ended March 31, 2021 as well as higher average balances of lower

yielding interest-earnings deposits, which increased $23.1 million, or 47.2%, between periods.

Interest and dividend income increased $378,000, or 5.3%, to $7.5 million for the three months ended June 30, 2022 from $7.1 million for

the three months ended June 30, 2021.

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

$18.4 million, as well as a 10 basis point increase in the yield on interest-earning assets.

Interest earned on investment

securities, including interest-earning deposits and excluding FHLB stock, increased $238,000, or 118.4%, to $439,000 for the three months

ended March 31, 2022 from $207,000 for the three months ended March 31, 2021.

The increase resulted primarily from a $62.1 million, or

61.3%, increase in the average balance of investment securities and interest-earning deposits to $163.5 million for the three months ended

March 31, 2022 from $101.4 million for the three months ended March 31, 2021.

ended June 30, 2022 from $201,000 for the three months ended June 30, 2021.

The increase resulted from a $17.7 million, or 15.2%, increase

in the average balance of investment securities and interest-earning deposits as well as a 62 basis point increase in yield on such instruments

between periods.

Higher market interest rates resulted in higher yields on both interest-earning deposits and investment securities.

While the average balances of

loans receivable were relatively flat between periods, the yield on loans receivable increased by eight basis points to 4.57% for the

three months ended June 30, 2022 from 4.49% for the three months ended June 30, 2021.

The higher loan yield for the current period resulted

from the reinvestment of repaid Paycheck Protection Program (“PPP”) loans (earning 1.0%) into higher-yielding commercial real

estate loans as well as the receipt of $211,000 in interest income recorded with the payoff of a non-performing loan.

Interest Expense.

Interest expense decreased $218,000, or 29.3%, to $526,000 for the three months ended March 31, 2022 from $744,000 for the three months

ended March 31, 2021.

The cost of the Company’s interest-bearing liabilities decreased 17 basis points to 0.42% for the three months

ended March 31, 2022 from 0.59% for the three months ended March 31, 2021 due to lower market interest rates between periods.

The cost of interest-bearing deposits

decreased 16 basis points to 0.35% for the three months ended March 31, 2022 from 0.51% for the three months ended March 31, 2021.

addition, the average balance of non-interest bearing liabilities increased $18.4 million, or 9.8%, to $205.2 million for the three months

ended March 31, 2022 from $186.8 million for the three months ended March 31, 2021.

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

As a result, interest paid on interest-bearing deposits decreased $154,000 to $415,000 for the three months ended March 31,

2022 compared with $569,000 for the three months ended March 31, 2021.

Interest expense decreased $128,000, or 20.0%, to $512,000 for the three months ended June 30, 2022 from $640,000 for the three months

ended June 30, 2021 The cost of interest-bearing liabilities decreased 10 basis points to 0.42% for the three months ended June 30, 2022

compared with 0.52% for the three months ended June 30, 2021 resulting from lower interest-bearing liability costs between periods.

addition, the average balance of interest-bearing liabilities decreased $10.0 million, or 2.0%, to $486.3 million for the three months

ended June 30, 2022 from $496.3 million for the three months ended June 30, 2021.

Interest paid on interest-bearing

deposits decreased $67,000, or 13.8%, to $415,000 for the three months ended June 30, 2022 compared with $487,000 for the three months

ended June 30, 2021.

The cost of interest-bearing deposits decreased seven basis points to 0.36% for the three months ended June 30, 2022

from 0.43% for the three months ended June 30, 2021.

In addition, the average balance of non-interest bearing liabilities increased $10.1

million, or 4.9%, to $214.1 million for the three months ended June 30, 2022 from $204.0 million for the three months ended June 30, 2021.

Interest paid on borrowings decreased

$64,000, or 36.6%, to $111,000 for the three months ended March 31, 2022 from $175,000 for the prior year period.

$61,000, or 39.9%, to $92,000 for the three months ended June 30, 2022 from $153,000 for the prior year period.

A $25.4 million decrease

in the average balance of such borrowings to $20.3 million for the quarter ended March 31, 2022 from $55.2 million for the quarter ended

March 31, 2021 more than offset a 89 basis point increase in the cost of borrowings to 2.17% for the three months ended March 31, 2022

from 1.28% for the three months ended March 31, 2021.

in the average balance of such borrowings to $16.1 million for the quarter ended June 30, 2022 from $41.5 million for the quarter ended

June 30, 2021 more than offset an 82 basis point increase in the cost of borrowings to 2.30% for the three months ended June 30, 2022

from 1.48% for the three months ended June 30, 2021.

The reduction in average balances and corresponding increase in cost of borrowings

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After an evaluation of these factors,

management recorded a provision of $71,000 for the three months ended March 31, 2022 compared to $467,000 for the three months ended March

The lower provisions for loss resulted from lower adjustments to the Company’s historical loan losses related to the COVID-19

pandemic’s anticipated impact on the Company’s consumer and business loan portfolios.

In addition, the Company recorded $1,000

in net recoveries during the three months ended March 31, 2022 compared with $43,000 in net charge-offs during the three months ended

March 31, 2021.

management recorded a provision of $205,000 for the three months ended June 30, 2022 compared to $246,000 for the three months ended June

The lower provisions for loss resulted from lower specific reserves for non-performing loans, partially offset by higher balances

of (non-PPP) loans receivable outstanding between periods.

There were no charge-offs or recoveries during the three months ended June

30, 2022 and 2021.

Determining the amount of the

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Other Income.

income decreased $365,000, or 39.0%, to $572,000 during the three months ended March 31, 2022 compared to $937,000 for the three months

ended March 31, 2021.

Fees for other customer services

were $0 for the three months ended March 31, 2022 compared with $303,000 for the three months ended March 31, 2021.

The fees in the 2021

quarter were earned from the Small Business Relief Grant program offered in response to the COVID 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 March 31, 2022 compared with $107,000 during the three months ended March 31, 2021.

However, the Company recorded higher

gains from the sales of loans, which were $139,000 for the three months ended March 31, 2022 compared with $106,000 for the three months

ended March 31, 2021.

income decreased $45,000, or 6.2%, to $676,000 during the three months ended June 30, 2022 compared to $721,000 for the three months ended

June 30, 2021.

The Company recorded lower gains from the sales of SBA loans, which were $134,000 for the three months ended June 30, 2022

compared with $380,000 for the three months ended June 30, 2021.

Partially offsetting this decrease were higher interest rate swap fees,

which increased $76,000, higher service charges, which increased $55,000, and a $67,000 gain recorded on the sale of an OREO property.

Other Expenses.

expenses decreased $181,000, or 3.9%, to $4.5 million during the three months ended March 31, 2022 from $4.7 million during the three

months ended March 31, 2021.

The decrease in other expenses

was primarily attributable to lower professional fees, which decreased $205,000, or 43.2%, due to lower legal and consulting fees related

to the collection and foreclosure of non-performing loans.

FDIC deposit insurance assessment premiums and loan servicing expenses decreased

$78,000 and $76,000, respectively, from the Company’s higher capital levels and lower levels of non-performing loans.

offsetting these decreases were higher compensation and other expenses.

Compensation and benefit expense increased $71,000, or 2.7%, due

to annual merit increases as well as expenses for the employee stock ownership plan resulting from the Company’s stock offering

in July 2021.

Other expenses increased $69,000, or 17.8%, from higher expenses related to being a fully public company as well as annual

increases in vendor contracts.

expenses decreased $157,000, or 3.4%, to $4.4 million during the three months ended June 30, 2022 from $4.6 million during the three months

ended June 30, 2021.

The decrease was primarily attributable to professional fees, which decreased $181,000, or 47.8%, due to lower legal

and consulting fees related to the collection and foreclosure of non-performing loans.

Loan servicing expenses and FDIC

deposit insurance premiums decreased $94,000 and $59,000, respectively, from lower levels of non-performing loans and the Company’s

higher capital levels.

Partially offsetting these decreases were higher compensation and marketing and business development expenses.

Compensation and benefit expense increased $80,000, or 3.1%, due to annual merit increases, fewer open positions within the Bank, and

expenses for the employee stock ownership plan resulting from the Company’s stock offering in July 2021.

Marketing and business

development expenses increased $77,000, or 116.7%, as the Bank is celebrating its 100 year anniversary with increased events and advertising,

while business development opportunities increased as the COVID pandemic restrictions were lifted.

Income Tax Expense.

The Company recorded tax expense of $690,000 on pre-tax income of $2.4 million for the three months ended March 31, 2022, compared to

$652,000 on pre-tax income of $2.2 million for the three months ended March 31, 2021.

The Company’s effective tax rate for the three

months ended March 31, 2022 was 29.1% compared with 30.2% for the three months ended March 31, 2021.

Comparison of Operating Results for the Six Months

Ended March 31, 2022 and 2021

income increased $529,000, or 18.6%, to $3.4 million during the six-month period ended March 31, 2022 compared with $2.8 million for the

six-month period ended March 31, 2021 due to higher net interest and dividend income and non-interest income, lower provisions for loan

loss and lower other expenses, partially offset by lower other income.

The Company recorded tax expense of $886,000 on pre-tax income of $3.0 million for the three months ended June 30, 2022, compared to $676,000

on pre-tax income of $2.3 million for the three months ended June 30, 2021.

The Company’s effective tax rate for the three months

ended June 30, 2022 was 29.5% compared with 28.8% for the three months ended June 30, 2021.

Comparison of Operating Results for the Nine Months

Ended June 30, 2022 and 2021

income increased $978,000, or 21.7%, to $5.5 million during the nine month period ended June 30, 2022 compared with $4.5 million for the

nine month period ended June 30, 2021 due to higher net interest and dividend income, lower provisions for loan losses and lower non-interest

expenses, partially offset by lower non-interest income.

Net Interest and Dividend

Net interest and dividend income increased $391,000, or 3.1%, to $12.8 million for the six months ended March 31, 2022

from $12.4 million for the six months ended March 31, 2021.

The increase was attributable to a $61.0 million increase in the average balance

of net interest-earning assets, partially offset by a six basis point decrease in the Company’s net interest margin to 3.45% for

the six months ended March 31, 2022 compared to 3.51% for the six months ended March 31, 2021.

Net interest and dividend income increased $898,000, or 4.8%, to $19.8 million for the nine months ended June 30, 2022

from $18.9 million for the nine months ended June 30, 2021.

The increase was attributable to a $50.2 million increase in average net interest-earning

assets as well as a two basis point increase in the Company’s net interest margin to 3.54% for the nine months ended June 30, 2022

compared to 3.52% for the nine months ended June 30, 2021.

Interest and Dividend Income.

Interest and dividend income decreased $212,000, or 1.5%, to $13.9 million for the six months ended March 31, 2022 from $14.1 million

for the six months ended March 31, 2021.

The decrease was attributable to a 24 basis point decline in yield on interest-earning assets,

partially offset by higher average balances of interest-earning assets, which increased $34.1 million between periods.

Interest and dividend income increased $167,000, or 0.8%, to $21.4 million for the nine months ended June 30, 2022 from $21.2 million

for the nine months ended June 30, 2021.

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

$29.0 million, partially offset by a 12 basis point decrease in the yield on interest-earning assets to 3.83% for the nine months ended

June 30, 2022.

Interest earned on investment

securities, including interest-earning deposits, and excluding FHLB stock, increased $177,000, or 40.9%, to $610,000 for the six months

ended March 31, 2022 from $433,000 the prior year period.

The increase resulted primarily from a $59.1 million, or 58.1%, increase in

the average balance of investment securities and interest-earning deposits to $160.8 million for the six months ended March 31, 2022 from

$101.7 million for the six months ended March 31, 2021.

Offsetting the higher interest from higher average balances was a 28 basis point

decline in yield on investment securities to 1.32% for the six months ended March 31, 2022 compared with 1.60% for the six months ended

March 31, 2021.

securities, including interest-earning deposits, and excluding FHLB stock, increased $416,000, or 65.6%, to $1.0 million for the nine

months ended June 30, 2022 from $634,000 the prior year period.

The increase resulted from a $45.3 million, or 42.5%, increase in the

average balance of investment securities and interest-earning deposits as well as a 13 basis point increase in yield on such instruments

between periods.

Higher market interest rates resulted in higher yields on both interest-earning deposits and investment securities.

Interest earned on loans receivable,

net, decreased $378,000, or 2.8%, to $13.3 million for the six months ended March 31, 2022 from $13.6 million the prior year period.

net, decreased $234,000, or 1.1%, to $20.3 million for the nine months ended June 30, 2022 from $20.5 million the prior year period.

decrease resulted from a $15.9 million, or 2.6%, decline in the average balance of loans receivable and lower PPP fees recognized, partially

offset by a six basis point increase in the yield on such assets to 4.57% for the six months ended March 31, 2022 from 4.51% for the six

months ended March 31, 2021.

offset by a seven basis point increase in the yield on such assets to 4.57% for the nine months ended June 30, 2022 from 4.50% for the

nine months ended June 30, 2021.

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 $730,000 in PPP fees during the six months ended

March 31, 2022 compared with $1.0 million during the six months ended March 31, 2021.

The Company recorded $828,000 in PPP fees during the nine months ended

June 30, 2022 compared with $1.4 million during the nine months ended June 30, 2021.

Partially offsetting the lower PPP fees was $356,000

in interest income received during the nine months ended June 30, 2022 from non-performing loans.

Interest Expense.

Interest expense decreased $603,000, or 35.5%, to $1.1 million for the six months ended March 31, 2022 compared with $1.7 million for

the six months ended March 31, 2021.

Interest expense decreased $731,000, or 31.2%, to $1.6 million for the nine months ended June 30, 2022 compared with $2.3 million for

the nine months ended June 30, 2021.

The average balance of interest-bearing liabilities decreased $21.2 million, or 4.2%, to $486.9 million

compared with $514.0 million between the two periods while the cost of such liabilities decreased 21 basis points to 0.45% for the six

months ended March 31, 2022 compared with 0.66% for the prior year period.

while the cost of such liabilities decreased 18 basis points to 0.44% for the nine months ended June 30, 2022 compared with 0.62% for

the prior year period.

The average balance of interest-bearing

deposits increased $12.4 million, or 2.7%, to $466.1 million for the six months ended March 31, 2022 from $453.7 million for the six months

ended March 31, 2021, while the average cost of such deposits decreased 22 basis points to 0.37% from 0.59% between the two periods.

a result, interest paid on interest-bearing deposits decreased $467,000, or 36.0%, to $867,000 for the six months ended March 31, 2022

compared with $1.3 million for the six months ended March 31, 2021.

Lower market interest rates accounted for the decrease in the cost

of interest-bearing deposits.

deposits increased $13.4 million, or 3.0%, to $467.5 million for the nine months ended June 30, 2022 from $454.1 million for the nine

months ended June 30, 2021, while the average cost of such deposits decreased 17 basis points to 0.37% from 0.54% between the two periods.

As a result, interest paid on interest-bearing deposits decreased $535,000, or 29.4%, to $1.3 million for the nine months ended June 30,

2022 compared with $1.8 million for the nine months ended June 30, 2021.

Lower market interest rates accounted for the decrease in the

cost of interest-bearing deposits.

Interest paid on borrowings decreased

$136,000, or 37.2%, to $230,000 for the six months ended March 31, 2022 from $366,000 for the prior year period.

$196,000, or 37.8%, to $323,000 for the nine months ended June 30, 2022 from $519,000 for the prior year period.

The average balance of

such borrowings decreased $39.2 million to $21.1 million for the six months ended March 31, 2022 from $60.3 million for the six months

ended March 31, 2021 while the average cost of such borrowings increased 98 basis points to 2.19% for the six months ended March 31, 2022

from 1.21% for the six months ended March 31, 2021.

such borrowings decreased $34.6 million to $19.4 million for the nine months ended June 30, 2022 from $54.1 million for the nine months

ended June 30, 2021 while the average cost of such borrowings increased 94 basis points to 2.22% for the nine months ended June 30, 2022

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

Lower average balances of PPPLF advances (costing 0.35%) contributed to the lower

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After an evaluation of these factors,

management recorded a provision of $171,000 for the six months ended March 31, 2022 compared to $1.1 million for the six months ended

March 31, 2021.

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

to the COVID-19 pandemic’s anticipated impact on the Company’s consumer and business loan portfolios.

In addition, the Company

recorded $54,000 in net recoveries during the six months ended March 31, 2022 compared with $47,000 in net recoveries during the six months

ended March 31, 2021.

management recorded a provision of $376,000 for the nine months ended June 30, 2022 compared to a $1.4 million provision for the nine

months ended June 30, 2021.

The lower provisions for loan loss resulted from lower adjustments to the Company’s historical loan

losses related to the COVID-19 pandemic’s anticipated impact on the Company’s consumer and business loan portfolios.

the Company recorded $54,000 in net recoveries during the nine months ended June 30, 2022 compared with $47,000 in net recoveries during

the nine months ended June 30, 2021.

Determining the amount of the

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Other Income.

income decreased $941,000, or 43.5%, to $1.2 million during the six months ended March 31, 2022 compared to $2.2 million for the six months

ended March 31, 2021.

income decreased $986,000, or 34.2%, to $1.9 million during the nine months ended June 30, 2022 compared to $2.9 million for the nine

months ended June 30, 2021.

Fees for other customer services

were $0 for the six months ended March 31, 2022 compared with $768,000 for the six months ended March 31, 2021.

were $0 for the nine months ended June 30, 2022 compared with $777,000 for the nine months ended June 30, 2021.

The fees during the 2021

1 unchanged sentence

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 six months ended March 31, 2022 compared with $208,000 during the six months ended March 31, 2021.

However, the Company recorded

higher gains from the sales of loans, which were $420,000 for the six months ended March 31, 2022 compared with $369,000 for the six months

ended March 31, 2021.

In addition, interest rate swap fees and gains on the sales of assets

decreased $132,000 and $129,000, respectively.

Lower swap fees were the result of significantly higher market interest rates while the

lower gains resulted from lower SBA loan sale gains, which declined by $196,000, partially offset by higher OREO gains totaling $67,000.

Other Expenses.

expenses decreased $286,000, or 3.0%, to $9.1 million during the six months ended March 31, 2022 from $9.4 million during the six months

ended March 31, 2021.

Lower other expenses were primarily

attributable to professional fees, which decreased $345,000, or 34.4%, due to lower legal and consulting fees related to the collection

and foreclosure of non-performing loans.

OREO, FDIC deposit insurance assessment premiums and loan servicing expenses decreased $151,000,

$150,000 and $115,000, respectively, from lower OREO valuation allowances, higher capital levels and lower levels of non-performing loans.

Partially offsetting these decreases were higher compensation and other expenses.

Compensation and benefit expense increased $225,000,

or 4.4%, due to annual merit increases and higher professional development expenses as well as higher expenses for the employee stock

ownership plan resulting from the Company’s stock offering in July 2021.

Other expenses increased $112,000, or 15.1%, from higher

expenses related to being a fully public company as well as annual increases in vendor contracts.

expenses decreased $442,000, or 3.2%, to $13.6 million during the nine months ended June 30, 2022 from $14.0 million during the nine months

ended June 30, 2021.

The decrease was primarily attributable to professional fees, which decreased $526,000, or 38.1%, due to lower legal

and consulting fees related to the collection and foreclosure of non-performing loans.

Loan servicing expenses and FDIC

deposit insurance premiums decreased $208,000 and $209,000, respectively, from lower levels of non-performing loans and the Company’s

higher capital levels.

Partially offsetting these decreases were higher compensation and marketing and business development expenses.

Compensation and benefit expense increased $305,000, or 3.9%, due to annual merit increases, fewer open positions within the Bank, and

expenses for the employee stock ownership plan resulting from the Company’s stock offering in July 2021.

Marketing and business

development expenses increased $182,000, or 106.4%, as the Bank is celebrating its 100 year anniversary with increased events and advertising,

while business development opportunities increased as the COVID pandemic restrictions were lifted.

Income Tax Expense.

The Company recorded tax expense of $1.4 million on pre-tax income of $4.7 million for the six months ended March 31, 2022, compared to

$1.2 million on pre-tax income of $4.1 million for the six months ended March 31, 2021.

The Company recorded tax expense of $2.2 million on pre-tax income of $7.7 million for the nine months ended June 30, 2022, compared to

$1.9 million on pre-tax income of $6.4 million for the nine months ended June 30, 2021.

The Company’s effective tax rate for the

six months ended March 31, 2022 was 28.8% compared with 30.0% for the six months ended March 31, 2021.

nine months ended June 30, 2022 was 29.1% compared with 29.6% for the nine months ended June 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

3 unchanged sentences

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

There has been no material adverse change during the six

months ended March 31, 2022 in the ability of the Company and its subsidiaries to fund their operations.

There has been no material adverse change during the nine

months ended June 30, 2022 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.

At March 31, 2022, the Company

At June 30, 2022, the Company

had commitments outstanding under letters of credit of $750,000, commitments to originate loans of $36.1 million, and commitments to fund

undisbursed balances of closed loans and unused lines of credit of $69.0 million.

There has been no material change during the six

months ended March 31, 2022 in any of the Company’s other contractual obligations or commitments to make future payments.

There has been no material change during the nine

months ended June 30, 2022 in any of the Company’s other contractual obligations or commitments to make future payments.

Capital Requirements

At March 31, 2022, the Bank’s

At June 30, 2022, the Bank’s

Tier 1 capital as a percentage of the Bank's total assets was 10.80%, and total qualifying capital as a percentage of risk-weighted assets

7 unchanged sentences

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