Quarterly Report (10-q)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40612

(Exact name of registrant as specified in its charter)

Maryland

86-3947794

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

185 E Lincoln Highway

Coatesville, PA 19320

(Address of Principal Executive Offices)

(610) 384-8282

(Registrant’s telephone number)

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


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common Shares, par value $0.01 per share	PBBK	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer ☐


Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As Common Stock, $0.01 par value - 2,777,250 shares outstanding as of August 11, 2022.

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TABLE OF CONTENTS

		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021	3

	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2022 and 2021 (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49

Item 4.	Controls and Procedures	49

Part II	Other Information

Item 1.	Legal Proceedings	49

Item 1A.	Risk Factors	49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	50

Exhibit Index

Signatures

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

PB BANKSHARES, INC.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share data)


	June 30,		December 31,
	2022		2021
Assets
Cash and due from banks	$	40,404	$	15,508
Federal funds sold		4,933		11,256
Interest bearing deposits with banks		100		100

Cash and cash equivalents		45,437		26,864

Debt securities available-for-sale, at fair value		43,049		25,649
Equity securities, at fair value		787		849
Restricted stocks, at cost		1,979		884
Loans receivable, net of allowance for loan losses of $3,439 at June 30, 2022 and $3,145 at December 31, 2021		291,680		249,196
Premises and equipment, net		1,858		1,949
Deferred income taxes, net		1,335		945
Accrued interest receivable		1,129		852
Bank owned life insurance		7,400		7,313
Other assets		1,413		428

Total Assets	$	396,067	$	314,929

Liabilities and Stockholders' Equity

Liabilities
Deposits	$	309,013	$	251,130
Long-term borrowings		40,220		16,681
Accrued expenses and other liabilities		1,673		1,284

Total Liabilities		350,906		269,095

Commitments and contingencies - see note 8

Stockholders' Equity
Preferred Stock, $0.01 par value, 10,000,000 shares authorized; -0- issued and outstanding at June 30, 2022 and December 31, 2021		—		—
Common Stock, $0.01 par value, 40,000,000 shares authorized; 2,777,250 issued and outstanding at June 30, 2022 and December 31, 2021		28		28
Additional paid-in capital		26,176		26,176
Retained earnings		23,257		22,665
Unearned ESOP shares, 211,071 shares at June 30, 2022 and December 31, 2021		(2,753)		(2,753)
Accumulated other comprehensive loss		(1,547)		(282)

Total Stockholders' Equity		45,161		45,834

Total Liabilities and Stockholders' Equity	$	396,067	$	314,929

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Income

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest and Dividend Income
Loans, including fees	$	2,950	$	2,385	$	5,653	$	4,529
Securities		112		85		181		178
Other		89		5		101		11
Total Interest and Dividend Income		3,151		2,475		5,935		4,718

Interest Expense
Deposits		474		447		909		914
Borrowings		184		104		333		213
Total Interest Expense		658		551		1,242		1,127

Net interest income		2,493		1,924		4,693		3,591

Provision for Loan Losses		203		69		293		138

Net interest income after provision for loan losses		2,290		1,855		4,400		3,453

Noninterest Income
Service charges on deposit accounts		54		47		96		91
(Loss) gain on equity investments		(27)		1		(67)		(14)
Bank owned life insurance income		43		44		87		85
Debit card income		50		63		98		114
Other service charges		19		28		36		47
Other income		8		15		19		28
Total Noninterest Income		147		198		269		351

Noninterest Expenses
Salaries and employee benefits		1,059		897		2,040		1,814
Occupancy and equipment		168		135		318		288
Data and item processing		251		244		493		487
Advertising and marketing		25		17		47		28
Professional fees		150		84		317		170
Directors’ fees		61		61		122		122
FDIC insurance premiums		16		57		38		104
Pennsylvania shares tax		83		—		163		—
Debit card expenses		35		36		69		73
Other		161		180		334		321
Total Noninterest Expenses		2,009		1,711		3,941		3,407

Income before income tax expense		428		342		728		397

Income Tax Expense		81		63		136		67

Net Income	$	347	$	279	$	592	$	330
Earnings per common share - basic and diluted	$	0.14		N/A	$	0.23		N/A

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Income	$	347	$	279	$	592	$	330

Other Comprehensive Loss
Unrealized losses on debt securities available-for-sale:
Unrealized holding losses arising during period		(519)		(82)		(1,601)		(347)
Tax effect		109		18		336		72

Other comprehensive loss		(410)		(64)		(1,265)		(275)

Total Comprehensive (Loss) Income	$	(63)	$	215	$	(673)	$	55

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


									Accumulated
			Additional					Unearned	Other
	Common		Paid-In		Retained		ESOP		Comprehensive
	Stock		Capital		Earnings		Shares		Income (Loss)		Total
Balance, April 1, 2021	$	—	$	—	$	21,931	$	—	$	(122)	$	21,809

Net income		—		—		279		—		—		279
Other comprehensive loss		—		—		—		—		(64)		(64)

Balance, June 30, 2021	$	—	$	—	$	22,210	$	—	$	(186)	$	22,024

Balance, April 1, 2022	$	28	$	26,176		22,910	$	(2,753)	$	(1,137)	$	45,224

Net income		—		—		347		—		—		347
Other comprehensive loss		—		—		—		—		(410)		(410)

Balance, June 30, 2022	$	28	$	26,176	$	23,257	$	(2,753)	$	(1,547)	$	45,161

Balance, January 1, 2021	$	—	$	—	$	21,880	$	—	$	89	$	21,969

Net income		—		—		330		—		—		330
Other comprehensive loss		—		—		—		—		(275)		(275)

Balance, June 30, 2021	$	—	$	—	$	22,210	$	—	$	(186)	$	22,024

Balance, January 1, 2022	$	28	$	26,176	$	22,665	$	(2,753)	$	(282)	$	45,834

Net income		—		—		592		—		—		592
Other comprehensive loss		—		—		—		—		(1,265)		(1,265)

Balance, June 30, 2022	$	28	$	26,176	$	23,257	$	(2,753)	$	(1,547)	$	45,161

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended
		June 30,
		2022		2021
Cash Flows from Operating Activities

Net income	$	592	$	330
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		293		138
Depreciation and amortization		147		116
Gain on disposal of premises and equipment		—		(4)
Net accretion of securities premiums and discounts		(40)		(18)
Deferred income tax benefit		(54)		(152)
Loss on equity securities		67		14
Deferred loan fees, net		33		287
Earnings on bank owned life insurance		(87)		(85)
Increase in accrued interest receivable and other assets		(1,047)		(615)
Increase (decrease) in accrued expenses and other liabilities		142		(40)

Net Cash Provided by (Used in) Operating Activities		46		(29)

Cash Flows from Investing Activities
Activity in debt securities available-for-sale:
Purchases		(19,853)		(4,998)
Maturities, calls, and principal repayments		892		2,745
Dividends on equity securities reinvested		(5)		(6)
(Purchase) redemption of restricted stocks		(1,095)		157
Purchase of additional Bank owned life insurance		—		(500)
Net increase in loans receivable		(42,810)		(35,783)
Purchases of premises and equipment		(24)		(19)

Net Cash Used in Investing Activities		(62,895)		(38,404)

Cash Flows from Financing Activities
Net increase in deposits		57,883		15,221
Stock subscription proceeds		—		60,234
Advances of borrowings		24,000		1,633
Repayments of borrowings		(461)		(3,803)

Net Cash Provided by Financing Activities		81,422		73,285

Increase in cash and cash equivalents		18,573		34,852

Cash and Cash Equivalents, Beginning of Period		26,864		50,591

Cash and Cash Equivalents, End of Period	$	45,437	$	85,443

Supplementary Cash Flows Information
Interest paid	$	1,226	$	1,178
Right-to-use lease assets and liability	$	247	$	—
Income taxes paid	$	79	$	—

Supplementary Non-Cash Flows Information
Unrealized loss on securities available-for-sale	$	(1,601)	$	(347)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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1. Basis of Presentation

Organization and Nature of Operations

PB Bankshares, Inc., a Maryland Corporation (the “Company”) is the holding company of Presence Bank formerly Prosper Bank (the “Bank”) and was formed in connection with the conversion of the Bank from the mutual to the stock form of organization. On July 14, 2021, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. Shares of the Company began trading on the Nasdaq Capital Market on July 15, 2021. The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Bank”).

The Bank is a state-chartered savings bank established in 1919. The main office is located in Coatesville, Pennsylvania with three other branches located in New Holland, Oxford, and Georgetown, Pennsylvania. The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to make loans primarily secured by real estate and, to a lesser extent, consumer loans. The Bank competes with other banking and financial institutions in its primary market communities encompassing Chester, Cumberland, Dauphin, Lancaster, and Lebanon Counties in Pennsylvania. The Bank is regulated by the Federal Deposit Insurance Corporation (the “FDIC”) and the Pennsylvania Department of Banking and Securities (the “PADOB”).

Principles of Consolidation

The consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, the Bank. The Bank also includes the accounts of CSB Investments, Inc. (“CSB”), a wholly-owned subsidiary of the Bank located in Wilmington, Delaware. The sole purpose of CSB is to maintain and manage the Bank’s investment portfolio. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Conversion and Our Organizational Structure

On July 14, 2021, the Company completed its initial public offering and the mutual-to-stock conversion of the Bank. The Bank is now a wholly owned subsidiary of the Company. The shares of the Company’s common stock began trading on the Nasdaq Capital Market on July 15, 2021, under the ticker symbol “PBBK.”

The Company sold 2,777,250 shares of common stock at $10.00 per share for gross offering proceeds of $27,773,000. The Company’s Employee Stock Ownership Plan (the “ESOP”) purchased 8% or 222,180 shares of the Company’s common stock in the open market.

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022 or any other interim periods. For further information, refer to the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 as filed in the annual report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2022 and annual report on Form 10-K/A filed with the Securities and Exchange Commission on April 29, 2022.

The Company has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein.

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Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets, and estimation of fair values.

While management uses available information to recognize estimated losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions and underlying collateral values, if any. In addition, the FDIC and PADOB, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. These agencies may require the Bank to recognize additions to the allowance based on their judgments of information available to them at the time of their examinations.

2. Recent Accounting Pronouncements

This section provides a summary description of recent ASUs issued by the FASB to the ASC that had or that management expects may have an impact on the financial statements issued upon adoption. The Company is classified as an emerging growth company and has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Effective dates reflect this election.

Recently Issued, But Not Yet Effective Accounting Pronouncements

During June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU’s 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application is permitted. Due to the Company’s extended transition period election, the amendments are effective for fiscal years beginning after December 15, 2022. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements. An internal team has been formed and the Company hired a vendor to assist with expected credit loss projections. The internal team has begun training with the vendor, preparing to run parallel calculations.

During May 2019, the FASB issued ASU 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief.” The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments, upon the adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently measure those instruments at fair value with changes in fair value flowing through earnings. The effective date and transition methodology for the amendments in ASU 2019-05 are the same as in ASU 2016-13. The Company is currently assessing the impact that ASU 2019-05 will have on its consolidated financial statements.

During November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This ASU addresses issues raised by stakeholders during the implementation of ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Among other narrow-scope improvements, the new ASU clarifies guidance around how to report expected recoveries. “Expected recoveries” describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be

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recovered. While applying the credit losses standard, stakeholders questioned whether expected recoveries were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets). In response to this question, the ASU permits organizations to record expected recoveries on PCD assets. In addition to other narrow technical improvements, the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities. The effective date and transition methodology for the amendments in ASU 2019-11 are the same as in ASU 2016-13. The Company is currently assessing the impact that ASU 2019-11 will have on its consolidated financial statements.

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. Subsequently, in January 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2021-01 “Reference Rate Reform (Topic 848): Scope.” This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU No. 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU No. 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company does not have any loans or other financial instruments that are directly or indirectly influenced by LIBOR.

In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-02, “Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. The amendments in this ASU should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. For entities that have adopted ASU 2016-13, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted ASU 2016-13, the effective dates for ASU 2022-02 are the same as the effective dates in ASU 2016-13. Early adoption is permitted if an entity has adopted ASU 2016-13. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is currently assessing the impact that ASU 2022-02 will have on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

During February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The ASU was initially effective for non-

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public business entities’ financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. In June 2020, the FASB issued ASU 2020-05. Under ASU 2020-05, private companies may apply the new leases standard for fiscal years beginning after December 15, 2021, and to interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted. Due to the Company’s extended transition period election, the amendments are effective for fiscal years beginning after December 15, 2021. The Company has adopted ASU 2016-02 and the impact was not material to the consolidated financial statements. The implementation of ASU 2016-02 resulted in recognition of right-of-use assets and lease liabilities totaling $247,000 at the date of adoption, January 1, 2022, which are related to the Company’s lease of premises and equipment used in operations.

3. Debt and Equity Securities

The amortized cost, gross unrealized gains and losses, and fair value of securities available-for-sale and equity securities are as follows (in thousands):

Gross Unrealized

June 30, 2022

Amortized Cost

Gains

Losses

Fair Value

Debt securities:

Agency bonds

21,242

—

(1,701)

19,541

Treasury securities

19,886

—

(66)

19,820

Mortgage-backed securities

116

—

121

Collateralized mortgage obligations

3,764

—

(197)

3,567

Total available-for-sale debt securities

45,008

(1,964)

43,049

Equity securities:

Mutual funds (fixed income)

787


			Gross Unrealized		Gross Unrealized
December 31, 2021	Amortized Cost		Gains		Losses		Fair Value
Debt securities:
Agency bonds	$	21,241	$	—	$	(421)	$	20,820
Mortgage-backed securities		129		15		—		144
Collateralized mortgage obligations		4,637		54		(6)		4,685
Total available-for-sale debt securities	$	26,007	$	69	$	(427)		25,649
Equity securities:
Mutual funds (fixed income)							$	849

The table below indicates the length of time individual available-for-sale securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

Less than 12 Months

12 Months or More

Total

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Agency bonds

449

(38)

19,092

(1,663)

19,541

(1,701)

Treasury securities

19,820

(66)

—

19,820

(66)

Collateralized mortgage obligations

3,567

(197)

—

3,567

(197)

23,836

(301)

19,092

(1,663)

42,928

(1,964)

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December 31, 2021	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Agency bonds	$	19,113	$	(379)	$	1,707	$	(42)	$	20,820	$	(421)
Collateralized mortgage obligations		879		(6)		—		—		879		(6)

	$	19,992	$	(385)	$	1,707	$	(42)	$	21,699	$	(427)

As of June 30, 2022 and December 31, 2021, the mortgage-backed securities and collateralized mortgage obligations included in the securities portfolio consist of securities issued by U.S. government sponsored agencies. There were no private label mortgage-backed securities or collateralized mortgage obligations held in the securities portfolio as of June 30, 2022 and December 31, 2021.

At June 30, 2022, 47 agency bonds, three treasury securities and 37 collateralized mortgage obligations were in an unrealized loss position. At December 31, 2021, 47 agency bonds and five collateralized mortgage obligations were in an unrealized loss position. In analyzing an issuer’s financial condition, management considers whether downgrades by bond rating agencies have occurred and industry analysts’ reports.

As of June 30, 2022, management believes that the estimated fair value of securities disclosed above is primarily dependent upon the movement in market interest rates particularly given the negligible inherent credit risk associated with these securities. Although the fair value will fluctuate as the market interest rates move, management believes that these fair values will recover as the underlying portfolios mature and are reinvested in market yielding investments.

As the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired as of June 30, 2022.

There were no securities sold during the three or six months ended June 30, 2022 or June 30, 2021. The amortized cost and fair value of debt securities available-for-sale at June 30, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).


	Available-for-Sale
	Amortized Cost		Fair Value		Yield
Due less than one year	$	19,886	$	19,820	1.47	%
Due one year through five years		21,242		19,541	0.62
Due after five years through ten years		—		—	—
Mortgage-backed securities		116		121	4.37
Collateralized mortgage obligations		3,764		3,567	1.96

	$	45,008	$	43,049	1.12	%

At June 30, 2022 and December 31, 2021, the Company had securities totaling $1,848,000 and $1,965,000, respectively, pledged to secure borrowings.

At June 30, 2022 and December 31, 2021, the Company had securities totaling $25,202,000 and $13,028,000, respectively, pledged primarily for public fund depositors.

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4. Loans Receivable and Allowance for Loan Losses

Major classifications of net loans receivable at June 30, 2022 and December 31, 2021 are as follows (in thousands):


	June 30,		December 31,
	2022		2021
Real estate:
One-to four-family residential	$	109,618	$	106,024
Commercial		149,594		118,266
Construction		22,303		13,751
Commercial and industrial		11,228		11,880
Consumer and other		3,033		3,038

		295,776		252,959
Deferred loan fees, net		(657)		(618)
Allowance for loan losses		(3,439)		(3,145)

	$	291,680	$	249,196

The following table summarizes the activity in the allowance for loan losses by loan class for the three months ended June 30, 2022 (in thousands):


	Allowance for Loan Losses




	Beginning						Provisions		Ending
	Balance		Charge-offs		Recoveries		(Recovery)		Balance
Real Estate:
One- to four-family residential	$	1,093	$	—	$	—	$	(81)	$	1,012
Commercial		1,706		—		—		227		1,933
Construction		183		—		—		29		212
Commercial and industrial		115		—		—		(6)		109
Consumer		29		—		—		(1)		28
Unallocated		110		—		—		35		145

	$	3,236	$	—	$	—	$	203	$	3,439

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The following tables summarize the activity in the allowance for loan losses by loan class for the six months ended June 30, 2022 and information in regard to the allowance for loan losses and the recorded investment in loans receivable by loan class as of June 30, 2022 (in thousands):


	Allowance for Loan Losses
											Ending		Ending
											Balance:		Balance:
											Individually		Collectively
											Evaluated		Evaluated
	Beginning						Provisions		Ending		for		for
	Balance		Charge-offs		Recoveries		(Recovery)		Balance		Impairment		Impairment
Real Estate:
One- to four-family residential	$	1,217	$	—	$	—	$	(205)	$	1,012	$	—	$	1,012
Commercial		1,357		—		—		576		1,933		61		1,872
Construction		194		—		—		18		212		3		209
Commercial and industrial		191		—		1		(83)		109		—		109
Consumer and other		33		—		—		(5)		28		—		28
Unallocated		153		—		—		(8)		145		—		145

	$	3,145	$	—	$	1	$	293	$	3,439	$	64	$	3,375


	Loans Receivable
			Ending		Ending
			Balance:		Balance:
			Individually		Collectively
			Evaluated		Evaluated
	Ending		for		for
	Balance		Impairment		Impairment
Real estate:
One- to four-family residential	$	109,618	$	471	$	109,147
Commercial		149,594		4,147		145,447
Construction		22,303		716		21,587
Commercial and industrial		11,228		—		11,228
Consumer		3,033		—		3,033

	$	295,776	$	5,334	$	290,442

The following table summarizes the activity in the allowance for loan losses by loan class for the three months ended June 30, 2021 (in thousands):


	Allowance for Loan Losses




	Beginning						Provisions		Ending
	Balance		Charge-offs		Recoveries		(Recovery)		Balance
Real Estate:
One- to four-family residential	$	1,304	$	—	$	—	$	11	$	1,315
Commercial		969		—		—		22		991
Construction		107		—		—		94		201
Commercial and industrial		222		—		—		(3)		219
Consumer		37		—		—		—		37
Unallocated		285		—		—		(55)		230

	$	2,924	$	—	$	—	$	69	$	2,993

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The following tables summarize the activity in the allowance for loan losses by loan class for the six months ended June 30, 2021 and information in regard to the allowance for loan losses and the recorded investment in loans receivable by loan class as of December 31, 2021 (in thousands):


	Allowance for Loan Losses
											Ending		Ending
											Balance:		Balance:
											Individually		Collectively
											Evaluated		Evaluated
	Beginning						Provisions		Ending		for		for
	Balance		Charge-offs		Recoveries		(Recovery)		Balance		Impairment		Impairment
Real Estate:
One- to four-family residential	$	1,339	$	—	$	—	$	(24)	$	1,315	$	—	$	1,315
Commercial		1,033		—		—		(42)		991		—		991
Construction		121		—		—		80		201		50		151
Commercial and industrial		136		—		1		82		219		—		219
Consumer and other		37		—		—		—		37		—		37
Unallocated		188		—		—		42		230		—		230

	$	2,854	$	—	$	1	$	138	$	2,993	$	50	$	2,943


	Loans Receivable
			Ending		Ending
			Balance:		Balance:
			Individually		Collectively
			Evaluated		Evaluated
	Ending		for		for
	Balance		Impairment		Impairment
Real estate:
One- to four-family residential	$	106,024	$	647	$	105,377
Commercial		118,266		1,589		116,677
Construction		13,751		541		13,210
Commercial and industrial		11,880		—		11,880
Consumer		3,038		—		3,038

	$	252,959	$	2,777	$	250,182

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The following table summarizes information in regard to impaired loans by loan portfolio class as of June 30, 2022 (in thousands):


			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Real estate:
One- to four-family residential	$	471	$	485	$	—
Commercial		3,711		3,711		—
Construction		341		375		—
With an allowance recorded:
Real estate:
One- to four-family residential	$	—	$	—	$	—
Commercial		435		544		61
Construction		376		419		3
Total:
Real estate:
One- to four-family residential	$	471	$	485	$	—
Commercial		4,146		4,255		61
Construction		717		794		3

The following table summarizes information in regard to impaired loans by loan portfolio class as of December 31, 2021 (in thousands):


			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Real estate:
One- to four-family residential	$	647	$	651	$	—
Commercial		1,589		1,675		—
Construction		352		361		—
With an allowance recorded:
Real estate:
One- to four-family residential	$	—	$	—	$	—
Commercial		—		—		—
Construction		189		225		50
Total:
Real estate:
One- to four-family residential	$	647	$	651	$	—
Commercial		1,589		1,675		—
Construction		541		586		50

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The following table summarizes information in regard to impaired loans by loan portfolio class for the three and six months ended June 30, 2022 and 2021 (in thousands):


		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Real estate:
One- to four-family residential	$	479		5	$	1,140	$	12	$	487		11	$	1,115	$	25
Commercial		3,736		46		1,641		15		3,760		90		1,651		30
Construction		343		—		367		—		346		—		370		—
With an allowance recorded:
Real estate:
One- to four-family residential	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial		440		—		—		—		444		—		—		—
Construction		266		—		214		—		282		—		238		—
Total:
Real estate:
One- to four-family residential	$	479	$	5	$	1,140	$	12	$	487	$	11	$	1,115	$	25
Commercial		4,176		46		1,641		15		4,204		90		1,651		30
Construction		609		—		581		—		628		—		608		—

The following table presents nonaccrual loans by classes of the loan portfolio as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30,		December 31,
	2022		2021
Real estate:
One- to four-family residential	$	471	$	659
Commercial		435		453
Construction		717		541

	$	1,623	$	1,653

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of June 30, 2022 (in thousands):

Pass

Special Mention

Substandard

Doubtful

Total

Real estate:

One- to four-family residential

108,179

616

823

—

109,618

Commercial

145,979

—

3,615

—

149,594

Construction

21,586

—

717

—

22,303

Commercial and industrial

11,228

—

11,228

Consumer and other

3,033

—

3,033

290,005

616

5,155

—

295,776

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	Pass		Special Mention		Substandard		Doubtful		Total
Real estate:
One- to four-family residential	$	104,368	$	625	$	1,031	$	—	$	106,024
Commercial		117,220		—		1,046		—		118,266
Construction		13,210		—		541		—		13,751
Commercial and industrial		11,880		—		—		—		11,880
Consumer and other		3,038		—		—		—		3,038

	$	249,716	$	625	$	2,618	$	—	$	252,959

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of June 30, 2022 (in thousands):


													Loans
													Receivable
					Greater						Total		>90 Days
	30‑59 Days		60‑89 Days		Than 90		Total Past				Loans		and
	Past Due		Past Due		Days		Due		Current		Receivables		Accruing
Real estate:
One- to four-family residential	$	—	$	83	$	192	$	275	$	109,343	$	109,618	$	—
Commercial		138		—		435		573		149,021		149,594		—
Construction		—		—		491		491		21,812		22,303		—
Commercial and industrial		—		—		—		—		11,228		11,228		—
Consumer and other		—		—		—		—		3,033		3,033		—

	$	138	$	83	$	1,118	$	1,339	$	294,437	$	295,776	$	—


													Loans
													Receivable
					Greater						Total		>90 Days
	30‑59 Days		60‑89 Days		Than 90		Total Past				Loans		and
	Past Due		Past Due		Days		Due		Current		Receivables		Accruing
Real estate:
One- to four-family residential	$	142	$	46	$	308	$	496	$	105,528	$	106,024	$	—
Commercial		—		—		453		453		117,813		118,266		—
Construction		—		—		541		541		13,210		13,751		—
Commercial and industrial		—		—		—		—		11,880		11,880		—
Consumer and other		—		—		—		—		3,038		3,038		—

	$	142	$	46	$	1,302	$	1,490	$	251,469	$	252,959	$	—

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash

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flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

The Company identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

No loans were modified during the three and six months ended June 30, 2022 and 2021 which met the definition of a troubled debt restructuring. After a loan is determined to be a troubled debt restructuring, we continue to track its performance under the most recent restructured terms. One commercial loan troubled debt restructuring and one construction loan troubled debt restructuring completed in prior years are in default for the three and six months ended June 30, 2022 and 2021, had an aggregate balance of $340,000 and $415,000 as of June 30, 2022 and June 30, 2021, respectively. Total troubled debt restructurings were $886,000 and $949,000 as of June 30, 2022 and December 31, 2021, respectively.

At June 30, 2022 and December 31, 2021, there was no other real estate owned. There was no real estate in process of foreclosure as of June 30, 2022 and December 31, 2021.

5. Leases

On January 1, 2022, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. The implementation of the new standard resulted in recognition of right-of-use assets and lease liabilities totaling $247,000 at the date of adoption, which are related to the Company’s lease of premises and equipment used in operations.

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

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The following tables present information about the Company’s leases as of and for the three and six month periods ended June 30, 2022 (dollars in thousands):


Right-to-use assets			$	215
Lease liability				216
Weighted average remaining lease term				3.4	years
Weighted average discount rate				1.50%


		Three Months		Six Months
		Ended		Ended
		June 30,		June 30,
		2022		2022
Operating lease cost	$	15	$	31
Short-term lease cost		0		0
Total lease costs	$	15	$	31

Cash paid for amounts included in the measurement of lease liabilities	$	16	$	32

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows:


	As of
	June 30,
Lease payments due (in thousands)	2022

Six months ending December 31, 2022	$	32
Twelve months ending December 31, 2023		66
Twelve months ending December 31, 2024		64
Twelve months ending December 31, 2025		56
Twelve months ending December 31, 2026		4
Total undiscounted cash flows	$	222
Discount		6
Lease Liability		216

6. Long-Term Borrowings

The Company has an unsecured line of credit with Atlantic Community Bankers Bank (“ACBB”) of up to $3,000,000, which expired on June 30, 2022 and was renewed for one year expiring on June 30, 2023. Interest on the line of credit is charged at fed funds rate plus 0.25%. The Company had no outstanding borrowings under this line of credit at June 30, 2022 and December 31, 2021. In addition to the unsecured line of credit with ACBB, the Company also has the ability to borrow up to $2,000,000 through the Federal Reserve Bank’s discount window. Funds obtained through the discount window are secured by the Company’s U.S. Government and agency obligations. There were no borrowings outstanding through the discount window at June 30, 2022 and December 31, 2021.

The Company has an open-ended line of credit (short-term borrowing) of $45,630,000 to obtain advances from the Federal Home Loan Bank (“FHLB”). Interest on the line of credit is charged at the FHLB’s overnight rate of 1.75% and 0.28% at June 30, 2022 and December 31, 2021 respectively. The Company had no outstanding borrowings under this line of credit at June 30, 2022 and December 31, 2021.

Maximum borrowing capacity with the FHLB was approximately $147,108,000 and $107,520,000 at June 30, 2022 and December 31, 2021, respectively. The Company has three unfunded letters of credit with FHLB for $19,200,000 at June 30, 2022 and one letter of credit with FHLB for $2,500,000 at December 31, 2021 that is pledged to secure public funds.

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Borrowings from the FHLB at June 30, 2022 and December 31, 2021 consist of the following (dollars in thousands):


	June 30,				December 31,
	2022				2021
			Weighted				Weighted
Maturity	Amount		Rate		Amount		Rate
2022		8,124	2.11			8,124	2.11
2023		8,557	2.78			8,557	2.78
2024		4,000	1.84			—	—
2026		2,965	1.32			—	—
2027		13,400	2.07			—	—
2032		3,174	1.83			—	—

	$	40,220	2.13	%	$	16,681	2.45	%

7. Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The Company had the following off-balance sheet financial instruments whose contract amounts represent credit risk at June 30, 2022 and December 31, 2021 (in thousands):


	June 30,		December 31,
	2022		2021
Commitments to grant loans	$	36,683	$	24,756
Unfunded commitments under lines of credit		10,748		9,214
Standby letters of credit		2,414		3,213

Outstanding loan commitments represent the unused portion of loan commitments available to individuals and companies as long as there is no violation of any condition established in the contract. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based upon management’s credit evaluation of the customer. Various types of collateral may be held, including property and marketable securities. The credit risk involved in these financial instruments is essentially the same as that involved in extending loan facilities to customers.

8. Contingencies

In the normal course of business, the Company is subject to various lawsuits involving matters generally incidental to its business. As of June 30, 2022 management is of the opinion that the ultimate liability, if any, resulting from any pending actions or proceedings will not have a material effect on the consolidated statement of financial condition or of operations of the Company.

9. Regulatory Matters

Bank and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative

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measures of assets, liabilities, and certain off balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of June 30, 2022, the Bank meets all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications; well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2022, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

In 2019, the federal banking agencies jointly issued a final rule that provides for an optional, simplified measure of capital adequacy, the community bank leverage ratio framework (“CBLR framework”), for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule became effective on January 1, 2020 and was elected by the Bank as of December 31, 2021 and June 30, 2022. In April 2020, the federal banking agencies issued an interim final rule that made temporary changes to the CBLR framework, pursuant to section 4012 of the CARES Act, and a second interim final rule that provided a graduated increase in the community bank leverage ratio requirement after the expiration of the temporary changes implemented pursuant to section 4012 of the CARES Act.

The community bank leverage ratio removes the requirement for qualifying banking organizations to calculate and report risk-based capital but rather only requires a Tier 1 to average assets (leverage) ratio. Qualifying banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than the required minimum will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. Under the final rules the community bank leverage ratio minimum requirement is 8.5% for calendar year 2021 and 9% for calendar year 2022 and beyond. The final rule allows for a two-quarter grace period to improve a ratio that falls below the required level, provided that the bank maintains a leverage ratio of 7.5% for calendar year 2021 and 8% for calendar year 2022 and beyond.

Under the final rule, an eligible banking organization can opt out of the CBLR framework and revert back to the risk-weighting framework without restriction. As of June 30, 2022, the Bank was a qualifying community banking organization as defined by the federal banking agencies and elected to measure capital adequacy under the CBLR framework.

Actual and required capital amounts (in thousands) and ratios are presented below at quarter-end.

To be Well Capitalized under

Prompt Corrective Action

June 30, 2022

Actual

Provisions

Amount

Ratio

Amount

Ratio

Tier 1 capital (to average assets)

36,326

9.74

33,549

9.00


					To be Well Capitalized under
					Prompt Corrective Action
December 31, 2021	Actual					Provisions
	Amount		Ratio			Amount		Ratio
Tier 1 capital (to average assets)		35,679	11.65	%		$	26,769	8.50	%

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10. Earnings Per Share

The factors used in the earning per share computation follow (dollars in thousands, except per share data):


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2022		2022
Net income	$	347	$	592

Weighted average common shares outstanding		2,777,250		2,777,250
Less: Average unearned ESOP shares		(211,071)		(211,071)

Average shares		2,566,179		2,566,179

Basic and diluted earnings per share	$	0.14	$	0.23

There were no shares outstanding for the three and six months ended June 30, 2021. There were no dilutive shares outstanding for the three and six months ended June 30, 2022.

11. Fair Value of Financial Instruments

The Company groups its assets and liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is determined at a reasonable point within the range that is most representative of fair value under current market conditions.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective quarter ends, and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each quarter end.

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An asset’s or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used by the Company in estimating fair value disclosures for its financial assets and liabilities:

Debt and Equity Securities (Carried at Fair Value)

The fair value of debt and equity securities (carried at fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt and equity securities without relying exclusively on quoted market prices for the specific debt and equity securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Impaired Loans (Generally Carried at Fair Value)

Impaired loans are those that are accounted for under FASB ASC 310, Accounting by Creditors for Impairment of a Loan (“FASB ASC 310”), in which the Company has measured impairment generally based on the net fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. At June 30, 2022, the fair value consists of the recorded investment in the loans of $811,000, net of a valuation allowance of $64,000. At December 31, 2021, the fair value consists of the recorded investment in the loans of $139,000, net of a valuation allowance of $50,000. Impaired loans are included in Loans Receivable in the table below.

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For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2022 and December 31, 2021 are as follows (in thousands):

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

June 30, 2022

Total

(Level 1)

(Level 2)

(Level 3)

Agency bonds

19,541

—

19,541

—

Treasury securities

19,820

—

Mortgage-backed securities

121

—

121

—

Collateralized mortgage obligations

3,567

—

3,567

—

Mutual funds

787

—

43,836

20,607

23,229

—


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2021	Total		(Level 1)		(Level 2)		(Level 3)
Agency bonds	$	20,820	$	—	$	20,820	$	—
Mortgage-backed securities		144		—		144		—
Collateralized mortgage obligations		4,685		—		4,685		—
Mutual funds		849		849		—		—

	$	26,498	$	849	$	25,649	$	—

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2022 and December 31, 2021 are as follows (in thousands):

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

June 30, 2022

Total

(Level 1)

(Level 2)

(Level 3)

Impaired loans

747

—

747

—

747

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			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2021	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	139	$	—	$	—	$	139

	$	139	$	—	$	—	$	139

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to measure fair value at June 30, 2022 and December 31, 2021 (dollars in thousands):


June 30, 2022
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	$	747	Appraisal of collateral	Selling expenses and discounts ⁽¹⁾	58.8% - 79.6% (68.4%)


December 31, 2021
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	$	139	Appraisal of collateral	Selling expenses and discounts ⁽¹⁾	54.0% - 54.0% (54.0%)

(1)	Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The carrying amounts and fair values of the Company’s financial instruments as of the indicated dates are presented in the following table:


		June 30, 2022				December 31, 2021
	Fair Value	Carrying		Estimated		Carrying		Estimated
(In thousands)	Hierarchy	Amounts		Fair Values		Amounts		Fair Values
Financial assets:
Cash and cash equivalents	1	$	45,437	$	45,437	$	26,864	$	26,864
Debt securities - available-for-sale	1 & 2		43,049		43,049		25,649		25,649
Equity securities	1		787		787		849		849
Restricted stocks	2		1,979		1,979		884		884
Loans, net	3		291,680		299,950		249,196		253,558
Accrued interest receivable	1		1,129		1,129		852		852
Bank owned life insurance	2		7,400		7,400		7,313		7,313

Financial liabilities:
Demand deposits, savings, and money market	1		215,931		215,931		174,203		174,203
Certificates of deposit	2		93,082		93,458		76,927		77,291
Long-Term borrowings	2		40,220		40,602		16,681		16,872
Accrued interest payable	1		211		211		195		195

12. Noninterest Revenues

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and investments. In addition, certain noninterest income streams such as gains on equity investments, income associated with bank owned life insurance, and loan fees are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as service charges on deposit accounts and gains on sale of other real estate owned. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Noninterest revenue streams in-scope of Topic 606 are discussed below.

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Service Fees on Deposit Accounts

Service charges on deposit accounts consist of fees on depository accounts includes NSF fees, miscellaneous deposit-based service fees, monthly maintenance fees for consumer and commercial, and account analysis and related fees (commercial).

Service charges and fees charged daily are a result of an event or service being provided on the day with the Company recognizing the revenue on the same day. The Company has determined that all performance obligations for daily service charges and fees are met on the same day as the transaction and, therefore, should be recognized as these occur.

Monthly maintenance/service charges and fees are charged on the last day of the month (i.e. the same month as charges are incurred) after the system has completed its processing. The Company has determined that all performance obligations for monthly fees are typically met during the month or the same day as the customer has not met its obligation. As monthly fees are typically incurred by the customer throughout the month, the fees should be recognized upon completion of the month since the performance obligations have been met for those services.

Account analysis service charges and fees are recorded on a monthly basis on the last day of the month. The Company has determined that all performance obligations for account analysis fees are met during the month.

Debit Card Income

Debit card income consists of interchange fees from consumer debit card networks and other card related services. Interchange rates are set by the card networks. Interchange fees are based on purchase volumes and other factors and are recognized as transactions occur.

Gains on Sale of Other Real Estate Owned

The sale of other real estate owned is currently recognized on the closing date of sale when all performance obligations have been met, and control of the asset has been transferred to the buyer. Any gains are included in noninterest expenses in the consolidated statements of operations.

For the Company, there are no other material revenue streams within the scope of Topic 606. The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Noninterest income	2022		2021		2022		2021
In scope of Topic 606 Service charges on deposit accounts	$	54		47	$	96		91
Debit card income		50		63		98		114
Other service charges		19		28		36		47
Other noninterest income		8		15		19		28
Noninterest income (in scope for Topic 606)		131		153		249		280
Noninterest income (out of scope for Topic 606)		16		45		20		71
Total noninterest income	$	147	$	198	$	269	$	351

Contract Balances

A contract assets balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transaction activity, or standard month-end revenue accruals. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term contracts with

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customers, and therefore, does not experience significant contract balances. As of June 30, 2022 and December 31, 2021, the Company did not have any significant contract balances.

Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize as an expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the assets that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of Topic the Company did not capitalize any contract acquisition cost.

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

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the accompanying financial statements. You should read the information in this section in conjunction with the business and financial information regarding the Company and Bank provided in this Form 10-Q and in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2022 and Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 29, 2022.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:


	·	statements of our goals, intentions and expectations;


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


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


	·	estimates of our risks and future costs and benefits.

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

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


	·	inflation and changes in interest rates generally, including changes in the relative differences between short-term and long-term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;
	·	conditions related to the COVID-19 pandemic, including the severity and duration of any associated economic slowdown either nationally or in our market areas, that are wore than expected;
	·	Government action in response to the COVID-19 pandemic and its effects on our business and operations, including vaccination mandates and their effects on our workforce, human capital resources and infrastructure;


	·	our ability to manage our operations under the current economic conditions nationally and in our market area;


	·	adverse changes in the financial services industry, securities and local real estate markets (including real estate values);

significant increases in our loan losses, including as a result of our inability to resolve classified and non-performing assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses;

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	·	credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;


	·	competition among depository and other financial institutions;


	·	our success in increasing our commercial real estate and commercial and industrial lending;


	·	our ability to attract and maintain deposits and our success in introducing new financial products;


	·	our ability to improve our asset quality even as we increase our commercial real estate lending;


	·	fluctuations in the demand for loans;


	·	technological changes that may be more difficult or expensive than expected;


	·	changes in consumer spending, borrowing and savings habits;


	·	declines in the yield on our assets resulting from a low interest rate environment;


	·	risks related to a high concentration of loans secured by real estate located in our market area;


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


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


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


	·	changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or to implement our strategic plans;


	·	loan delinquencies and changes in the underlying cash flows of our borrowers;


	·	our ability to control costs and expenses, particularly those associated with operating as a publicly traded company;


	·	a failure or breach of our operational or security systems or infrastructure, including cyberattacks;


	·	our ability to manage market risk, credit risk and operational risk in the current economic environment;


	·	the ability of key third-party service providers to perform their obligations to us; and


	·	other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this quarterly report.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

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Overview

Our business has traditionally focused on originating fixed-rate one- to four-family residential real estate loans and offering retail deposit accounts. In September 2019, we hired our current president and chief executive officer, Janak M. Amin, and under his leadership team we have begun the process of developing a commercial lending infrastructure, with a particular focus on expanding our commercial real estate and commercial and industrial loan portfolios to diversify our balance sheet, improve our interest rate risk exposure and increase interest income. Our primary market area now consists of Chester and Lancaster Counties and the surrounding Pennsylvania counties of Cumberland, Dauphin, and Lebanon. Management has also emphasized the importance of attracting commercial deposit accounts from its customers. As a result of these initiatives and the completion of our initial public stock offering on July 14, 2021, we were able to increase our consolidated assets by $81.2 million, or 25.8%, from $314.9 million at December 31, 2021 to $396.1 million at June 30, 2022 and increase our deposits by $57.9 million, or 23.0%, from $251.1 million at December 31, 2021 to $309.0 million at June 30, 2022.

Our results of operations depend primarily on our net interest income and, to a lesser extent, noninterest income. Net interest income is the difference between the interest income we earn on our interest- earning assets, consisting primarily of loans, debt securities and other interest-earning assets (primarily cash and cash equivalents), and the interest we pay on our interest-bearing liabilities, consisting primarily of savings accounts, demand accounts, money market accounts, certificates of deposit and borrowings. Noninterest income consists primarily of debit card income, service charges on deposit accounts, earnings on bank owned life insurance, other service charges and other income. Our results of operations also are affected by our provision for loan losses and noninterest expenses. Noninterest expenses consists primarily of salaries and employee benefits, occupancy and equipment, data and item processing costs, advertising and marketing, professional fees, directors’ fees, FDIC insurance premiums, debit card expenses, and other expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, government policies and actions of regulatory authorities.

For the three months ended June 30, 2022, we reported net income of $347,000 compared to net income of $279,000 for the three months ended June 30, 2021. The period over period increase in earnings of $68,000 was primarily attributable to an increase in net interest income, partially offset by increases in noninterest expenses and provision for loan losses.

For the six months ended June 30, 2022, we reported net income of $592,000 compared to net income of $330,000 for the six months ended June 30, 2021. The period over period increase in earnings of $262,000 was primarily attributable to an increase in net interest income, partially offset by increases in noninterest expenses, provision for loan losses and income tax expense.

Impact of COVID-19 Outbreak

To address the economic impact of COVID-19 in the United States, the CARES Act was signed into law on March 27, 2020. The CARES Act included a number of provisions that affected us, including accounting relief for TDRs. The CARES Act also established the Paycheck Protection Program (the “PPP”) through the Small Business Administration (“SBA”), which allowed us to lend money to small businesses to help maintain employee payrolls through the crisis with guarantees from the SBA. Under this program, loan amounts may be forgiven if the borrower maintains employee payrolls and meets certain other requirements. We originated approximately $6.0 million of PPP loans in the first and second quarters of 2021. The PPP program ended in May 2021. As of January 31, 2022, all PPP loans originated by the Company have been fully forgiven. $-0- and $35,000 of loan income (interest and fees) for PPP loans was recognized for the three months ended June 30 2022 and 2021, respectively. $28,000 and $35,000 of loan income (interest and fees) for PPP loans was recognized for the six months ended June 30, 2022 and 2021, respectively.

We implemented various consumer and commercial loan modification programs to provide our borrowers relief from the economic impacts of COVID-19. Based on guidance in the CARES Act and COVID-19 related legislation, COVID-19 related modifications to loans that were current as of December 31, 2019 are exempt from TDR classification under U.S. GAAP through January 1, 2022. In addition, the bank regulatory agencies issued interagency guidance stating that COVID-19 related short-term modifications (i.e., six months or less) granted to loans that were current as of the loan modification program implementation date are not TDRs.

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As of June 30, 2022, we are no longer tracking COVID-19 deferrals as all of these loans have returned to normal payment status.

Critical Accounting Estimates

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

In 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

Allowance for loan losses. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of a loan receivable is charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. The general component covers pools of loans by loan class including construction and commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential mortgages and consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include: (1) lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; (2) national, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans; (3) nature and volume of the portfolio and terms of loans; (4) volume and severity of past due, classified and nonaccrual loans as well as loan modifications; (5) existence and effect of any concentrations of credit and changes in the level of such concentrations; (6) effect of external factors, such as competition and legal and regulatory requirements; (7) experience, ability, and depth of lending department management and other relevant staff; and (8) quality of loan review and board of directors oversight. Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. As a result of the COVID-19 pandemic, we increased certain of our qualitative loan portfolio risk factors relating to local and national

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economic conditions as well as industry conditions and concentrations, which have experienced deterioration due to the effects of the COVID-19 pandemic. During 2022, these qualitative factors have begun to be adjusted downward to reflect current improved conditions. An unallocated component of the allowance for loan losses is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the PADOB, as an integral part of their examination process, periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Deferred tax assets. We make estimates and judgments to calculate some of our tax liabilities and determine the recoverability of some of our deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expenses. We also estimate a reserve for deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. These estimates and judgments are inherently subjective. Historically, our estimates and judgments to calculate our deferred tax accounts have not required significant revision.

In evaluating our ability to recover deferred tax assets, we consider all available positive and negative evidence, including our past operating results and our forecast of future taxable income. In determining future taxable income, we make assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies, these assumptions require us to make judgments about future taxable income and are consistent with the plans and estimates we use to manage our business. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings.

Realization of a deferred tax asset requires us to exercise significant judgment and is inherently uncertain because it requires the prediction of future occurrences. Valuation allowances are provided to reduce deferred tax assets to an amount that is more likely than not to be realized. In evaluating the need for a valuation allowance, we must estimate our taxable income in future years and the impact of tax planning strategies. If we were to determine that we would not be able to realize a portion of our net deferred tax asset in the future for which there is no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. Conversely, if we were to make a determination that it is more likely than not that the deferred tax assets for which we had established a valuation allowance would be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded.

Estimation of fair values. Fair values for securities available-for-sale are obtained from an independent third-party pricing service. Where available, fair values are based on quoted prices on a nationally recognized securities exchange. If quoted prices are not available, fair values are measured using quoted market prices for similar benchmark securities. Management generally makes no adjustments to the fair value quotes provided by the pricing source. The fair values of foreclosed real estate and the underlying collateral value of impaired loans are typically determined based on evaluations by third parties, less estimated costs to sell. When necessary, appraisals are updated to reflect changes in market conditions.

Comparison of Financial Condition at June 30, 2022 and December 31, 2021

Total assets. Total assets increased $81.2 million to $396.1 million at June 30, 2022 from $314.9 million at December 31, 2021. The increase in assets was primarily due to increases in net loans receivable, cash and cash equivalents and debt securities available-for-sale. Growth was driven by loan growth and liquidity to fund future loan growth. Gross loans increased $42.8 million to $295.8 million at June 30, 2022 from $253.0 million at December 31, 2021, primarily due to growth in the commercial and construction real estate portfolios. Debt securities available-for-sale increased $17.4 million

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to $43.0 million at June 30, 2022 from $25.6 million at December 31, 2021, primarily due to the purchase of $19.9 million of treasury securities, partially offset by a combination of a decrease in the fair market value of debt securities available-for-sale due to the increase in market interest rates during the first half of 2022 and principal repayments on mortgage-backed securities.

Net loans receivable increased $42.5 million, or 17.0%, to $291.7 million at June 30, 2022 from $249.2 million at December 31, 2021 primarily due to increases in commercial and construction real estate portfolios. Commercial real estate loans increased $31.3 million, or 26.5%, to $149.6 million at June 30, 2022 from $118.3 million at December 31, 2021. The increase in commercial real estate loans was primarily due to the continued implementation of our strategy to expand our commercial loan portfolio to diversify our balance sheet. Construction real estate loans increased $8.5 million, or 62.2%, to $22.3 million at June 30, 2022 from $13.8 million at December 31, 2021 primarily due to new construction real estate loans and to a lesser extent draws on existing commitments. One-to four-family residential real estate loans increased $3.6 million, or 3.4%, to $109.6 million at June 30, 2022 from $106.0 million at December 31, 2021. All PPP loans were fully forgiven as of January 31, 2022, previously classified as commercial and industrial loans.

Debt securities available-for-sale increased $17.4 million, or 67.8%, to $43.0 million at June 30, 2022 from $25.6 million at December 31, 2021 due to the purchase of $19.9 million of treasury securities, partially offset by a $1.6 million year to date decrease in the fair market value of debt securities available for sale due to the increase in market interest rates and $892,000 of principal repayments on mortgage-backed securities during the first half of 2022.

Cash and cash equivalents increased by $18.5 million, or 69.1%, to $45.4 million at June 30, 2022 from $26.9 million at December 31, 2021 due to securing liquidity in the rising interest rate environment to fund future loan originations.

Deposits and borrowings. Total deposits increased $57.9 million, or 23.0%, to $309.0 million at June 30, 2022 from $251.1 million at December 31, 2021. The increase in our deposits reflected a $24.1 million increase in money market accounts, a $16.2 million increase in certificates of deposit, a $12.0 million increase in interest-bearing demand accounts, a $4.5 million increase in non-interest-bearing demand deposits and a $1.1 million increase in savings accounts. Money market, demand deposits and savings accounts increased primarily due to management’s continuing focus on increasing the commercial deposit accounts of its customers. The increase in certificates of deposit was due to offering a deposit special and increasing listing service deposits.

Total borrowings from the Federal Home Loan Bank of Pittsburgh increased $23.5 million, or 141.1%, to $40.2 million at June 30, 2022 from $16.7 million at December 31, 2021 due to additional advances to fund future loan originations.

Stockholders’ Equity. Stockholders’ equity decreased $673,000, or 1.5%, to $45.2 million at June 30, 2022 from $45.8 million at December 31, 2021. The decrease was due to an increase of $1.3 million in accumulated other comprehensive loss as a result of a decrease in the fair market value of our debt securities available-for-sale year to date 2022, partially offset by year to date net income of $592,000.

Comparison of Operating Results for the Three Months Ended June 30, 2022 and June 30, 2021

General. Net income increased $68,000 or 24.4%, to $347,000 for the three months ended June 30, 2022 from $279,000 for the three months ended June 30, 2021. The $68,000 period over period increase in earnings was attributable to a $676,000 increase in interest and dividend income, partially offset by a $298,000 increase in noninterest expenses, a $134,000 increase in the provision for loan losses, a $107,000 increase in interest expense, a $51,000 decrease in noninterest income and a $18,000 increase in income tax expense.

Interest and dividend income. Total interest and dividend income increased $676,000, or 27.3%, to $3.2 million for the three months ended June 30, 2022 from $2.5 million for the three months ended June 30, 2021. The increase in interest and dividend income was the result of a $84.1 million increase period over period in the average balance of interest-earning assets, driven by a $68.7 million increase in average loan balances and by a $9.6 million increase in average cash and cash equivalents.

Interest income on loans, including fees, increased $565,000, or 23.7%, to $3.0 million for the three months ended June 30, 2022 as compared to $2.4 million for the three months ended June 30, 2021, reflecting an increase in the average balance of

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loans to $283.5 million for the three months ended June 30, 2022 from $214.7 million for the three months ended June 30, 2021, partially offset by a 27 basis points decrease in the average yield on loans. The increase in the average balance of loans was due primarily to increases in the average balances of commercial and construction real estate loans reflecting our strategy to grow commercial lending. The average yield on loans decreased to 4.17% for the three months ended June 30, 2022 from 4.44% for the three months ended June 30, 2021, as a result of the low interest rate environment when new loans were originated. The three months ended June 30, 2022 and 2021 included $-0- and $35,000, respectively, of PPP loan income in interest and net fees.

Interest income on securities and restricted stocks increased $27,000, or 31.8%, to $112,000 for the three months ended June 30, 2022 from $85,000 for the three months ended June 30, 2021. The increase in interest income on debt and equity securities available for sale was due to an increase in the average balance of debt and equity securities available for sale of $4.9 million, or 16.6%, to $34.2 million for the three months ended June 30, 2022 from $29.3 million for the three months ended June 30, 2021, and an 11 basis points increase in the average yield on debt and equity securities available for sale to 1.12% for the three months ended June 30, 2022 from 1.01% for the three months ended June 30, 2021. The increase in the average balance of debt and equity securities available for sale was primarily due to the purchase of $19.9 million of treasury securities. The average yield on debt and equity securities available for sale increased due to the higher yield on the treasury securities purchased during the second quarter of 2022. Restricted stocks income is also included in the interest income on securities. Restricted stock income increased $6,000 for the three months ended June 30, 2022 from the three months ended June 30, 2021 due to an increase in the average balance of restricted stocks of $945,000, or 105.8%, to $1.8 million for the three months ended June 30, 2022 from $893,000 for the three months ended June 30, 2021, partially offset by a 122 basis points decrease in the average yield on restricted stocks. The decrease in the average yield on restricted stock was due to the Federal Home Loan Bank dividend being paid in arrears and the average balance increasing for the period.

Interest income on cash and cash equivalents increased $84,000, or 1680.0%, to $89,000 for the three months ended June 30, 2022, from $5,000 for the three months ended June 30, 2021. The increase in interest income on cash and cash equivalents was primarily attributable to an increase in the average yield on cash and cash equivalents of 64 basis points to 0.69% for the three months ended June 30, 2022 from 0.05% for the three months ended June 30, 2021 and an increase in the average balance of cash and cash equivalents. The increase in the average yield of cash and cash equivalents was due to the Federal Reserve Bank increasing the Fed Funds rate by 150 basis points during the first half of 2022. The increase in the average balance of cash and cash equivalents of $9.6 million, or 22.6%, to $51.8 million for the three months ended June 30, 2022 from $42.3 million for the three months ended June 30, 2021 was due to securing liquidity in the rising interest rate environment to fund future loan originations.

Interest expense. Interest expense increased $107,000, or 19.4%, to $658,000 for the three months ended June 30, 2022 20from $551,000 for the three months ended June 30, 2021 as a result of an increase in interest expense on borrowings and deposits. The increase was due to an increase in the average balances of interest-bearing liabilities of $65.3 million to $307.4 million for the three months ended June 30, 2022 from $242.1 million for the three months ended June 30, 2021, partially offset by a six basis points decrease in the average cost of interest-bearing liabilities from 0.91% for the three months ended June 30, 2021 to 0.85% for the three months ended June 30, 2022.

Interest expense on deposits increased $27,000, or 6.0%, to $474,000 for the three months ended June 30, 2022 from $447,000 for the three months ended June 30, 2021 as a result of an increase of $45.0 million in the average balance of our interest-bearing deposits, partially offset by a nine basis points decrease in the average cost of interest-bearing deposits. The increase in the average balance of our transaction accounts primarily reflected management’s focus on increasing the commercial deposit accounts of its customers in 2022. The decrease in the average cost of deposits was primarily due to a 26 basis points decrease in the average cost of certificates of deposit, traditionally our higher costing deposits, to 1.30% for the three months ended June 30, 2022 from 1.56% for the three months ended June 30, 2021. In addition, the average cost of transaction accounts, traditionally our lower costing deposit accounts, consisting of demand, savings, and money market accounts increased by three basis points to 0.39% for the three months ended June 30, 2022 from 0.36% for the three months ended June 30, 2021, offset by the increase in the average balance of interest-bearing transaction accounts of $34.0 million to $176.9 million for the three months ended June 30, 2022 from $142.9 million for the three months ended June 30, 2021. The weighted average rate paid on deposits, including non-interest bearing deposits, decreased seven basis points to 0.64% for the three months ended June 30, 2022 from 0.71% for the three months ended June 30, 2021 as a result of replacing new certificates of deposit upon the maturing of existing certificates of deposit at lower rates.

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Interest expense on Federal Home Loan Bank borrowings increased $80,000, or 76.9%, to $184,000 for the three months ended June 30, 2022 from $104,000 for the three months ended June 30, 2021. The increase in interest expense on Federal Home Loan Bank borrowings was caused by a $20.3 million increase in our average balance of Federal Home Loan Bank borrowings to $37.1 million for the three months ended June 30, 2022 compared to $16.8 million for the three months ended June 30, 2021 as a result of increasing our liquidity in the rising rate environment, partially offset by a decrease in the average cost of these funds of 52 basis points to 1.96% for the three months ended June 30, 2022 from 2.48% for the three months ended June 30, 2021 as lower cost borrowings were purchased during 2022.

Net interest income. Net interest income increased $569,000, or 29.6%, to $2.5 million for the three months ended June 30, 2022 as compared to $1.9 million for the three months ended June 30, 2021. The increase in net interest income for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily due to the increase in interest income on loans, partially offset by an increase in interest expense on borrowings. Average net interest-earning assets increased by $18.8 million to $63.9 million for the three months ended June 30, 2022 from $45.1 million for the three months ended June 30, 2021. Our net interest margin increased two basis points to 2.70% for the three months ended June 30, 2022 from 2.68% for the three months ended June 30, 2021. Our net interest rate spread increased two basis points to 2.56% for the three months ended June 30, 2022 from 2.54% for the three months ended June 30, 2021.

Provision for loan losses. We establish provisions for loan losses which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses inherent in the loan portfolio that are both probable and reasonably estimable at the consolidated balance sheet date. In determining the level of the allowance for loan losses, we consider our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and the levels of non-performing and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses in order to maintain the allowance.

Based on our evaluation of the above factors, we recorded a $203,000 provision for loan losses for the three months ended June 30, 2022 compared to a $69,000 provision for loan losses for the three months ended June 30, 2021. The increase in the provision for loan losses was primarily driven by loan growth. We have seen a decrease in historical loss factors in the current quarter driven by no charge- offs in 2021 and no charge-offs to date in 2022. The allowance for loan losses was $3.4 million, or 1.16%, of loans outstanding at June 30, 2022 and $3.1 million, or 1.24%, of loans outstanding at December 31, 2021.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at June 30, 2022. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the PADOB and the FDIC, as an integral part of their examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

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Noninterest income. Noninterest income information is as follows.


	Three Months Ended
	June 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Service charges on deposit accounts	$	54	$	47	$	7	14.9	%
(Loss) gain on equity investments		(27)		1		(28)	(2,800.0)
Bank owned life insurance income		43		44		(1)	(2.3)
Debit card income		50		63		(13)	(20.6)
Other service charges		19		28		(9)	(32.1)
Other income		8		15		(7)	(46.7)
Total noninterest income	$	147	$	198	$	(51)	(25.8)	%

Noninterest income decreased by $51,000, or 25.8%, to $147,000 for the three months ended June 30, 2022 from $198,000 for the three months ended June 30, 2021. The decrease in noninterest income resulted primarily from an increase in the loss on equity investments. The loss on equity investments increased $28,000 as a result of the decrease in fair value of the equity investments.

Noninterest Expenses. Noninterest expenses information is as follows.


	Three Months Ended
	June 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Salaries and employee benefits	$	1,059	$	897	$	162	18.1	%
Occupancy and equipment		168		135		33	24.4
Data and item processing		251		244		7	2.9
Advertising and marketing		25		17		8	47.1
Professional fees		150		84		66	78.6
Directors’ fees		61		61		—	—
FDIC insurance premiums		16		57		(41)	(71.9)
Pennsylvania shares tax		83		—		83	100.0
Debit card expenses		35		36		(1)	(2.8)
Other		161		180		(19)	(10.6)
Total noninterest expenses	$	2,009	$	1,711	$	298	17.4	%

Noninterest expenses increased $298,000, or 17.4%, to $2.0 million for the three months ended June 30, 2022 from $1.7 million for the three months ended June 30, 2021. The increase in noninterest expenses was primarily the result of increases in salaries and employee benefits expense of $162,000, Pennsylvania shares tax of $83,000 and professional fees of $66,000, partially offset by a decrease in FDIC insurance premiums of $41,000. Salaries and employee benefits expense increased $162,000 primarily due to ESOP expense beginning in the third quarter of 2021, the hiring of additional staff and annual salary increases. Pennsylvania shares tax increased $83,000 due to the Bank being subject to the tax as part of the mutual to stock conversion. Professional fees increased $66,000 primarily due to ongoing compliance expense due to becoming an SEC registrant in the third quarter of 2021. FDIC insurance premiums decreased $41,000 due to the decrease in the FDIC quarterly multiplier when comparing the three months ended June 30, 2022 to the three months ended June 30, 2021.

Income tax expense. Income tax expense increased $18,000, to $81,000 for the three months ended June 30, 2022 from $63,000 for the three months ended June 30, 2021. The effective tax rates were 18.9% and 18.4% for the three month periods ended June 30, 2022 and 2021, respectively. The increase in income tax expense for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 was primarily due to an increase in income before income taxes.

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Average balances and yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense. Amortized deferred loan fees totaled $53,000 and $80,000 for the three months ended June 30, 2022 and 2021, respectively.


	For the Three Months Ended June 30,
	2022							2021
	Average							Average
	Outstanding					Average		Outstanding					Average
	Balance			Interest		Yield/Rate (5)		Balance			Interest		Yield/Rate (5)

	(Dollars in thousands)
Interest-earning assets:
Loans	$	283,477		$	2,950	4.17	%	$	214,731		$	2,385	4.44	%
Debt and equity securities available for sale		34,162			95	1.12	%		29,309			74	1.01	%
Restricted stocks		1,838			17	3.71	%		893			11	4.93	%
Cash and cash equivalents		51,842			89	0.69	%		42,292			5	0.05	%
Total interest-earning assets		371,319			3,151	3.41	%		287,225			2,475	3.45	%
Noninterest-earning assets		11,804							8,993
Total assets	$	383,123						$	296,218

Interest-bearing liabilities:
Interest-bearing demand deposits	$	79,628			56	0.28	%	$	75,052			54	0.29	%
Savings deposits		22,617			20	0.35	%		21,001			17	0.32	%
Money market deposits		74,617			94	0.50	%		46,799			55	0.47	%
Certificates of deposit		93,449			304	1.30	%		82,493			321	1.56	%
Total interest-bearing deposits		270,311			474	0.70	%		225,345			447	0.79	%
Long-term borrowings		37,101			184	1.96	%		16,801			104	2.48	%
Total interest-bearing liabilities		307,412			658	0.85	%		242,146			551	0.91	%
Noninterest-bearing demand deposits (1)		26,136							30,714
Other noninterest-bearing liabilities		1,440							1,230
Total liabilities		334,988							274,090
Stockholders' equity		48,135							22,128
Total liabilities and stockholders' equity	$	383,123							296,218
Net interest income				$	2,493						$	1,924
Net interest rate spread (2)						2.56	%						2.54	%
Net interest-earning assets (3)	$	63,907						$	45,079
Net interest margin (4)						2.70	%						2.68	%
Average interest-earning assets to interest-bearing liabilities		120.79	%						118.62	%

(1)	Includes stock subscriptions restricted deposits in 2021, whereas interest was calculated by the Bank at five basis points and paid by the stock transfer agent.

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

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

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

(5)	Annualized.

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Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total increase (decrease) column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.


	Three Months Ended
	June 30, 2022 vs. 2021
	Increase (Decrease) Due to				Total
					Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest-earning assets:
Loans	$	3,052	$	(2,487)	$	565
Debt and equity securities available for sale		49		(28)		21
Restricted stocks		47		(41)		6
Cash and cash equivalents		5		79		84
Total interest-earning assets		3,153		(2,477)		676

Interest-bearing liabilities:
Interest-bearing demand deposits		13		(11)		2
Savings deposits		5		(2)		3
Money market deposits		131		(92)		39
Certificates of deposit		171		(188)		(17)
Total deposits		320		(293)		27
Borrowings		503		(423)		80
Total interest-bearing liabilities		823		(716)		107
Change in net interest income	$	2,330	$	(1,761)	$	569

Comparison of Operating Results for the Six Months Ended June 30, 2022 and June 30, 2021

General. Net income increased $262,000, or 79.4%, to $592,000 for the six months ended June 30, 2022 from $330,000 for the six months ended June 30, 2021. The $262,000 period over period increase in earnings was attributable to a $1.2 million increase in interest and dividend income, partially offset by a $534,000 increase in noninterest expenses, a $155,000 increase in the provision for loan losses, a $115,000 increase in interest expense, a $82,000 decrease in noninterest income and a $69,000 increase in income tax expense.

Interest and dividend income. Total interest and dividend income increased $1.2 million, or 25.8%, to $5.9 million for the six months ended June 30, 2022 from $4.7 million for the six months ended June 30, 2021. The increase in interest and dividend income was the result of a $76.0 million increase period over period in the average balance of interest-earning assets, driven by a $69.5 million increase in average loan balances, a $4.4 million increase in the average balance of cash and cash equivalents and a $1.3 million increase in the average balance of debt and equity securities available for sale.

Interest income on loans, including fees, increased $1.1 million, or 24.8%, to $5.7 million for the six months ended June 30, 2022 as compared to $4.5 million for the six months ended June 30, 2021, reflecting an increase in the average balance of loans to $274.2 million for the six months ended June 30, 2022 from $204.7 million for the six months ended June 30, 2021 partially offset by a 30 basis points decrease in the average yield on loans. The increase in the average balance of loans was due primarily to increases in the average balances of commercial and construction real estate loans reflecting our strategy to grow commercial lending. The average yield on loans decreased to 4.15% for the six months ended June 30, 2022 from 4.45% for the six months ended June 30, 2021, as a result of the low interest rate environment when new loans were originated. The six months ended June 30, 2022 and 2021 included $28,000 and $35,000, respectively, of PPP loan income in interest and net fees.

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Interest income on securities and restricted stocks increased $3,000, or 1.7%, to $181,000 for the six months ended June 30, 2022 from $178,000 for the six months ended June 30, 2021. The increase in interest income on debt and equity securities available for sale was due to an increase in the average balance of debt and equity securities available for sale of $1.3 million, or 4.6%, to $30.1 million for the six months ended June 30, 2022 from $28.8 million for the six months ended June 30, 2021, partially offset by a three basis points decrease in the average yield on debt and equity securities available for sale to 1.03% for the six months ended June 30, 2022 from 1.06% for the six months ended June 30, 2021. The increase in the average balance of debt and equity securities available for sale was primarily due to the purchase of $19.9 million of treasury securities. The average yield on debt and equity securities available for sale decreased due to calls of higher-yielding securities which were replaced by lower-yielding investment securities. Restricted stocks income is also included in the interest income on securities. Restricted stock income increased $1,000 for the six months ended June 30, 2022 from the six months ended June 30, 2021 due to an increase in the average balance of restricted stocks of $726,000, or 79.0%, to $1.6 million for the six months ended June 30, 2022 from $919,000 for the six months ended June 30, 2021, partially offset by a 223 basis points decrease in the average yield on restricted stocks to 3.23% for the six months ended June 30, 2022 from 5.46% for the six months ended June 30, 2021. The decrease in average yield on restricted stock was due to the Federal Home Loan Bank dividend being paid in arrears and the average balance increasing.

Interest income on cash and cash equivalents increased $90,000, or 818.2%, to $101,000 for the six months ended June 30, 2022, from $11,000 for the six months ended June 30, 2021. The increase in interest income on cash and cash equivalents was attributable to an increase in the average yield on cash and cash equivalents of 38 basis points to 0.43% for the six months ended June 30, 2022 from 0.05% for the six months ended June 30, 2021 and an increase in the average balance of cash and cash equivalents. The increase in the average yield of cash and cash equivalents was due to the Federal Reserve Bank increasing the Fed Funds rate by 150 basis points during the first half of 2022. The increase in the average balance of cash and cash equivalents of $4.4 million, or 10.2%, to $47.5 million for the six months ended June 30, 2022 from $43.1 million for the six months ended June 30, 2021 was due to securing liquidity in the rising interest rate environment to fund future loan originations.

Interest expense. Interest expense increased $115,000, or 10.2%, to $1.2 million for the six months ended June 30, 2022 20from $1.1 million for the six months ended June 30, 2021 as a result of an increase in interest expense on borrowings, partially offset by the decrease in the interest expense on deposits. The increase was due to an increase in the average balances of interest-bearing liabilities of $53.2 million to $290.3 million for the six months ended June 30, 2022 from $237.1 million for the six months ended June 30, 2021, partially offset by a ten basis points decrease in the average cost of interest-bearing liabilities from 0.96% for the six months ended June 30, 2021 to 0.86% for the six months ended June 30, 2022.

Interest expense on deposits decreased $5,000, or 0.5%, to $909,000 for the six months ended June 30, 2022 from $914,000 for the six months ended June 30, 2021 as a result of a 13 basis points decrease in the average cost of interest-bearing deposits, partially offset by an increase in the average balance of our interest-bearing deposits. The decrease in the average cost of deposits was primarily due to a 24 basis points decrease in the average cost of certificates of deposit, traditionally our higher costing deposits, to 1.35% for the six months ended June 30, 2022 from 1.59% for the six months ended June 30, 2021. In addition, the average cost of transaction accounts, traditionally our lower costing deposit accounts, consisting of demand, savings, and money market accounts remained flat at 0.37% for the six months ended June 30, 2022 and for the six months ended June 30, 2021, partially offset by the increase in the average balance of interest-bearing transaction accounts of $31.3 million to $167.0 million for the six months ended June 30, 2022 from $135.7 million for the six months ended June 30, 2021. The weighted average rate paid on deposits, including non-interest bearing deposits, decreased ten basis points to 0.65% for the six months ended June 30, 2022 from 0.75% for the six months ended June 30, 2021 as a result of replacing new certificates of deposit upon the maturing of existing certificates of deposit at lower rates. The increase in the average balance of our transaction accounts primarily reflected management’s focus on increasing the commercial deposit accounts of its customers in 2022.

Interest expense on Federal Home Loan Bank borrowings increased $120,000, or 56.3%, to $333,000 for the six months ended June 30, 2022 from $213,000 for the six months ended June 30, 2021. The increase in interest expense on Federal Home Loan Bank borrowings was caused by a $16.5 million increase in our average balance of Federal Home Loan Bank borrowings to $33.8 million for the six months ended June 30, 2022 compared to $17.3 million for the six months ended June 30, 2021 as a result of increasing our liquidity in the rising rate environment, partially offset by a decrease in the average cost

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of these funds of 48 basis points to 1.96% for the six months ended June 30, 2022 from 2.44% for the six months ended June 30, 2021 as lower cost borrowings were purchased in the first half of 2022.

Net interest income. Net interest income increased $1.1 million, or 30.7%, to $4.7 million for the six months ended June 30, 2022 as compared to $3.6 million for the six months ended June 30, 2021. The increase in net interest income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to the increase in interest income on loans and a decrease in interest expense on deposits. Average net interest-earning assets increased by $22.8 million to $63.2 million for the six months ended June 30, 2022 from $40.4 million for the six months ended June 30, 2021. Our net interest margin increased seven basis points to 2.68% for the six months ended June 30, 2022 from 2.61% for the six months ended June 30, 2021. Our net interest rate spread increased five basis points to 2.52% for the six months ended June 30, 2022 from 2.47% for the six months ended June 30, 2021.

Based on our evaluation of the above factors, we recorded a $293,000 provision for loan losses for the six months ended June 30, 2022 compared to a $138,000 provision for loan losses for the six months ended June 30, 2021. The increase in the provision for loan losses was primarily driven by loan growth. We have seen a decrease in historical loss factors in the first half of 2022 driven by no charge- offs in 2021 and no charge-offs to date in 2022. The allowance for loan losses was $3.4 million, or 1.16%, of loans outstanding at June 30, 2022 and $3.1 million, or 1.24%, of loans outstanding at December 31, 2021.

Noninterest income. Noninterest income information is as follows.


	Six Months Ended
	June 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Service charges on deposit accounts	$	96	$	91	$	5	5.5	%
Loss on equity investments		(67)		(14)		(53)	378.6
Bank owned life insurance income		87		85		2	2.4
Debit card income		98		114		(16)	(14.0)
Other service charges		36		47		(11)	(23.4)
Other income		19		28		(9)	(32.1)
Total noninterest income	$	269	$	351	$	(82)	(23.4)	%

Noninterest income decreased by $82,000, or 23.4%, to $269,000 for the six months ended June 30, 2022 from $351,000 for the six months ended June 30, 2021. The decrease in noninterest income resulted primarily from an increase in the loss on equity investments. The loss on equity investments increased $53,000 as a result of the decrease in fair value of the equity investments.

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Noninterest Expenses. Noninterest expenses information is as follows.


	Six Months Ended
	June 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Salaries and employee benefits	$	2,040	$	1,814	$	226	12.5	%
Occupancy and equipment		318		288		30	10.4
Data and item processing		493		487		6	1.2
Advertising and marketing		47		28		19	67.9
Professional fees		317		170		147	86.5
Directors’ fees		122		122		—	—
FDIC insurance premiums		38		104		(66)	(63.5)
Pennsylvania shares tax		163		—		163	100.0
Debit card expenses		69		73		(4)	(5.5)
Other		334		321		13	4.0
Total noninterest expenses	$	3,941	$	3,407	$	534	15.7	%

Noninterest expenses increased $534,000, or 15.7%, to $3.9 million for the six months ended June 30, 2022 from $3.4 million for the six months ended June 30, 2021. The increase in noninterest expenses was primarily the result of increases in salaries and employee benefits expense of $226,000, Pennsylvania shares tax of $163,000 and professional fees of $147,000, partially offset by a decrease in FDIC insurance premiums of $66,000. Salaries and employee benefits expense increased $226,000 primarily due to ESOP expense beginning in the third quarter of 2021, the hiring of additional staff and annual salary increases. Pennsylvania shares tax increased $163,000 due to the Bank being subject to the tax as part of the mutual to stock conversion. Professional fees increased $147,000 primarily due to ongoing compliance expense due to becoming an SEC registrant in the third quarter of 2021. FDIC insurance premiums decreased $66,000 due to the decrease in the FDIC quarterly multiplier when comparing the six months ended June 30, 2022 to the six months ended June 30, 2021.

Income tax expense. Income tax expense increased $69,000, to $136,000 for the six months ended June 30, 2022 from $67,000 for the six months ended June 30, 2021. The effective tax rates were 18.7% and 16.9% for the six month periods ended June 30, 2022 and 2021, respectively. The increase in income tax expense for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 was primarily due to an increase in income before income taxes.

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Average balances and yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense. Amortized deferred loan fees totaled $122,000 and $107,000 for the six months ended June 30, 2022 and 2021, respectively.


	For the Six Months Ended June 30,
	2022							2021
	Average							Average
	Outstanding					Average		Outstanding					Average
	Balance			Interest		Yield/Rate (5)		Balance			Interest		Yield/Rate (5)

	(Dollars in thousands)
Interest-earning assets:
Loans	$	274,218		$	5,653	4.15	%	$	204,727		$	4,529	4.45	%
Debt and equity securities available for sale		30,107			155	1.03	%		28,790			153	1.06	%
Restricted stocks		1,645			26	3.23	%		919			25	5.46	%
Cash and cash equivalents		47,521			101	0.43	%		43,105			11	0.05	%
Total interest-earning assets		353,491			5,935	3.38	%		277,541			4,718	3.43	%
Noninterest-earning assets		8,775							8,582
Total assets	$	362,266						$	286,123

Interest-bearing liabilities:
Interest-bearing demand deposits	$	76,005			107	0.28	%	$	69,880			105	0.30	%
Savings deposits		22,264			39	0.35	%		19,954			33	0.33	%
Money market deposits		68,719			164	0.48	%		45,845			113	0.50	%
Certificates of deposit		89,522			599	1.35	%		84,097			663	1.59	%
Total interest-bearing deposits		256,510			909	0.71	%		219,776			914	0.84	%
Long-term borrowings		33,791			333	1.96	%		17,341			213	2.44	%
Total interest-bearing liabilities		290,301			1,242	0.86	%		237,117			1,127	0.96	%
Noninterest-bearing demand deposits (1)		25,015							25,686
Other noninterest-bearing liabilities		1,282							1,227
Total liabilities		316,598							264,030
Stockholders' equity		45,668							22,093
Total liabilities and stockholders' equity	$	362,266							286,123
Net interest income				$	4,693						$	3,591
Net interest rate spread (2)						2.52	%						2.47	%
Net interest-earning assets (3)	$	63,190						$	40,424
Net interest margin (4)						2.68	%						2.61	%
Average interest-earning assets to interest-bearing liabilities		121.77	%						117.05	%

(1)	Includes stock subscriptions restricted deposits in 2021, whereas interest was calculated by the Bank at five basis points and paid by the stock transfer agent.

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

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

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

(5)	Annualized.

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Rate/Volume Analysis


	Six Months Ended
	June 30, 2022 vs. 2021
	Increase (Decrease) Due to				Total
					Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest-earning assets:
Loans	$	3,092	$	(1,968)	$	1,124
Debt and equity securities available for sale		14		(12)		2
Restricted stocks		40		(39)		1
Cash and cash equivalents		2		88		90
Total interest-earning assets		3,148		(1,931)		1,217

Interest-bearing liabilities:
Interest-bearing demand deposits		18		(16)		2
Savings deposits		8		(2)		6
Money market deposits		114		(63)		51
Certificates of deposit		86		(150)		(64)
Total deposits		226		(231)		(5)
Borrowings		401		(281)		120
Total interest-bearing liabilities		627		(512)		115
Change in net interest income	$	2,521	$	(1,419)	$	1,102

Non-Performing Assets and Allowance for Loan Losses

Non-performing loans. Loans are reviewed on a weekly basis by management and again by our credit committee on a monthly basis. Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. When a loan is determined to be impaired, the measurement of the loan in the allowance for loan losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

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

The CARES Act, in addition to providing financial assistance to both businesses and consumers, created a forbearance program for federally-backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the national emergency, and provided financial institutions the option to temporarily suspend

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certain requirements under U.S. GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. The Federal banking regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board, and provisions of the CARES Act allow modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as troubled debt restructurings. Modifications may include payment deferrals, fee waivers, extensions of repayment term, or other delays in payment. We have worked with our customers affected by COVID-19 and accommodated a significant amount of loan modifications across our loan portfolios. To the extent that additional modifications meet the criteria previously described, such modifications are not expected to be classified as troubled debt restructurings. As of June 30, 2022, we are no longer tracking COVID-19 deferrals as all of these loans have returned to normal payment status.

Real estate owned. When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan losses. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell. We had no real estate owned at June 30, 2022 or as of December 31, 2021.

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Non-Performing Assets. The following table sets forth information regarding our non-performing assets. Non-accrual loans include non-accruing troubled debt restructurings of $328,000 and $379,000 as of June 30, 2022 and December 31, 2021, respectively.


		June 30,			December 31,
	2022			2021

	(Dollars in thousands)
Non-accrual loans:
Real estate:
One- to four-family residential	$	471		$	659
Commercial		435			453
Construction		717			541
Commercial and industrial		—			—
Consumer		—			—
Total non-accrual loans		1,623			1,653

Accruing loans past due 90 days or more
Real estate:
One- to four-family residential		—			—
Commercial		—			—
Construction		—			—
Commercial and industrial		—			—
Consumer		—			—
Total accruing loans past due 90 days or more		—			—
Total non-performing loans	$	1,623		$	1,653
Foreclosed assets		—			—
Total non-performing assets	$	1,623		$	1,653

Non-accruing troubled debt restructurings:
Real estate:
One- to four-family residential		—			—
Commercial		178			190
Construction		150			189
Commercial and industrial		—			—
Consumer		—			—
Total	$	328		$	379

Total accruing troubled debt restructured loans	$	558		$	570
Total non-performing loans to total loans		0.55	%		0.65	%
Total non-accrual loans to total loans		0.55	%		0.65	%
Total non-performing assets to total assets		0.41	%		0.52	%

Non-performing loans were $1.6 million, or 0.55% of total loans, at June 30, 2022 and $1.7 million, or 0.65% of total loans, at December 31, 2021. During the six months ended June 30, 2022, payments on non-accrual loans and the return of a non-accrual loan to accruing status were offset by the purchase of a loan to improve our collateral position that was placed into non-accrual.

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


	At or For the Three Months Ended June 30,						At or For the Six Months Ended June 30,
	2022			2021			2022			2021

	(Dollars in thousands)						(Dollars in thousands)
Allowance for loan losses at beginning of year	$	3,236		$	2,924		$	3,145		$	2,854
Provision for loan losses		203			69			293			138
Charge-offs:
Real estate:
One- to four-family residential		—			—			—			—
Commercial		—			—			—			—
Construction		—			—			—			—
Commercial and industrial		—			—			—			—
Consumer		—			—			—			—
Total charge-offs		—			—			—			—

Recoveries:
Real estate:
One- to four-family residential		—			—			—			—
Commercial		—			—			—			—
Construction		—			—			—			—
Commercial and industrial		—			—			1			1
Consumer		—			—			—			—
Total recoveries		—			—			1			1

Net (charge-offs) recoveries		—			—			1			1

Allowance at end of period	$	3,439		$	2,993		$	3,439		$	2,993

Allowance to non-accrual loans		211.89	%		161.00	%		211.89	%		161.00	%
Allowance to total loans outstanding at the end of the period		1.16	%		1.33	%		1.16	%		1.33	%
Net (charge-offs) recoveries to average loans outstanding during the period		—	%		—	%		—	%		—	%

The provision for loan losses increased $134,000, or 194.2%, to $203,000 for the three months ended June 30, 2022 from $69,000 for the three months ended June 30, 2021. The provision for loan losses increased $155,000, or 112.3%, to $293,000 for the six months ended June 30, 2022 from $138,000 for the six months ended June 30, 2021. The increase for both periods ended June 30, 2022 was due to loan growth. We have seen a decrease in historical loss factors driven by no charge-offs in 2021 and no charge-offs to date in 2022.

Liquidity and Capital Resources

Liquidity management. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from sales, maturities and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Pittsburgh. At June 30, 2022, we had the ability to borrow approximately $147.1 million from the Federal Home Loan Bank of Pittsburgh, of which $40.2 million had been advanced in addition to $19.2 million held in reserve to secure two letters of credit to collateralize municipal deposits. Additionally, at June 30, 2022, we had the ability to borrow $3.0 million from the Atlantic Community Bankers Bank and we also maintained a line of credit of $2.0 million with the Federal Reserve Bank of Philadelphia at June 30, 2022. We did not borrow against the credit lines

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with the Atlantic Community Bankers Bank or the Federal Reserve Bank of Philadelphia during the six months ended June 30, 2022 or 2021.

The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a liquidity ratio of 5.0% or greater. For the six months ended June 30, 2022 and 2021, our liquidity ratio averaged 13.4% and 20.9%, respectively. We believe that we had enough sources of liquidity to satisfy our short and long-term liquidity needs as of June 30, 2022.

We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand; (2) expected deposit flows; (3) yields available on cash and cash equivalents and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in cash and cash equivalents and short-and intermediate-term securities.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2022, cash and cash equivalents totaled $45.4 million. Debt securities classified as available-for-sale, which provide additional sources of liquidity, totaled $43.0 million at June 30, 2022.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of June 30, 2022, totaled $38.3 million, or 41.1% of our certificates of deposit, and 12.4% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital management. At June 30, 2022, Presence Bank exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines due to its compliance with the Community Bank Leverage ratio. See Note 9 of the Notes to the Financial Statements.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At June 30, 2022, we had outstanding commitments to originate loans of $36.7 million, unused lines of credit totaling $10.7 million and $2.4 million in stand-by letters of credit outstanding. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates of deposit that are scheduled to mature in less than one year from June 30, 2022 totaled $38.3 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new deposits, which may result in higher levels of interest expense.

Contractual obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment, agreements with respect to borrowed funds and deposit liabilities.

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Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information related to this item.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures as of June 30, 2022, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are operating in an effective manner.

Internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

As of June 30, 2022, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material effect on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information related to this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered securities or repurchases of shares of common stock during the quarter ended June 30, 2022.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

See Exhibit Index.

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EXHIBIT INDEX


Exhibit No.		Description

31.1†		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH†		XBRL Taxonomy Extension Schema Document

101.CAL†		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†		XBRL Taxonomy Extension Label Linkbase Document

101.PRE†		XBRL Taxonomy Extension Presentation Linkbase Document
104†		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

† Filed herewith.

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SIGNATURES

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

Date: August 12, 2022


	PB BANKSHARES, INC.

	By:	/s/ Janak M. Amin
	Name:	Janak M. Amin
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Lindsay S. Bixler
	Name:	Lindsay S. Bixler
	Title:	Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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