PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	December 31,		September 30,
	2021		2021

	(Dollars in Thousands)
ASSETS

Cash and amounts due from depository institutions	$	2,822	$	2,233
Interest-bearing deposits		111,001		80,465
Total cash and cash equivalents		113,823		82,698

Certificates of deposit		1,106		1,106
Investment and mortgage-backed securities available for sale at fair value		297,524		305,947
Investment and mortgage-backed securities held to maturity (fair value—December 31, 2021, $18,777; September 30, 2021, $21,161)		17,834		20,074
Equity securities		22		22
Loans held for sale		406		—
Loans receivable—net of allowance for loan losses (December 31, 2021, $8,382; September 30, 2021, $8,517)		584,758		618,206
Accrued interest receivable		3,857		4,326
Real estate owned		4,109		4,109
Restricted bank stock—at cost		9,069		10,091
Office properties and equipment—net		6,807		6,850
Bank owned life insurance (BOLI)		33,260		33,116
Deferred income taxes, net		2,391		3,021
Goodwill		6,102		6,102
Core deposit intangible		224		246
Prepaid expenses and other assets		2,880		4,554
TOTAL ASSETS	$	1,084,172	$	1,100,468

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:
Deposits:
Non-interest-bearing	$	35,594	$	37,409
Interest-bearing		685,090		674,106
Total deposits		720,684		711,515
Advances from Federal Home Loan Bank - Long Term		207,880		232,025
Accrued interest payable		1,398		2,558
Advances from borrowers for taxes and insurance		2,790		1,698
Interest rate swap contracts		9,031		12,834
Accounts payable and accrued expenses		8,799		9,382
Total liabilities		950,582		970,012

STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares authorized; NaN issued		—		—
Common stock, $.01 par value, 40,000,000 shares authorized; 10,819,006 issued and 7,769,387 outstanding at December 31, 2021 and September 30, 2021		108		108
Additional paid-in capital		118,506		118,424
Treasury stock, at cost: 3,049,619 shares at December 31, 2021 and September 30, 2021		(44,351)		(44,351)
Retained earnings		59,744		58,450
Accumulated other comprehensive loss		(417)		(2,175)
Total stockholders’ equity		133,590		130,456

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,084,172	$	1,100,468

December 31, September 30,
2017 2017
(Dollars in Thousands, except per share data)
ASSETS

Cash and amounts due from depository institutions $ 2,477 $ 2,274
Interest-bearing deposits 14,182 25,629

Total cash and cash equivalents 16,659 27,903

Certificates of deposit 1,604 1,604
Investment and mortgage-backed securities available for sale (amortized cost— December 31, 2017, $217,350; September 30, 2017, $180,087) 214,570 178,402
Investment and mortgage-backed securities held to maturity (fair value— December 31, 2017, $62,156; September 30, 2017, $60,179) 63,377 61,284
Loans receivable—net of allowance for loan losses (December 31, 2017, $4,676; September 30, 2017, $4,466) 579,987 571,343
Accrued interest receivable 3,452 2,825
Real estate owned 363 192
Federal Home Loan Bank stock—at cost 6,859 6,002
Office properties and equipment—net 7,711 7,804
Bank owned life insurance 28,212 28,048
Deferred tax assets-net 2,836 4,091
Goodwill 6,102 6,102
Core deposit intangible 672 709
Prepaid expenses and other assets 1,346 3,231
TOTAL ASSETS $ 933,750 $ 899,540

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Deposits:
Noninterest-bearing $ 11,578 $ 9,375
Interest-bearing 640,454 626,607
Total deposits 652,032 635,982
Advances from Federal Home Loan Bank (short-term) 30,000 20,000
Advances from Federal Home Loan Bank (long-term) 106,916 94,318
Accrued interest payable 641 1,933
Advances from borrowers for taxes and insurance 3,498 2,207
Accounts payable and accrued expenses 7,249 8,921

Total liabilities 800,336 763,361

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued - -
Common stock, $.01 par value, 40,000,000 shares authorized; 10,819,006 issued and 8,981,755 outstanding at December 31, 2017; 10,819,006 issued and 9,008,125 outstanding at September 30, 2017 108 108
Additional paid-in capital 119,039 118,751
Treasury stock, at cost: 1,837,251 shares at December 31, 2017 and 1,810,881 shares at September 30, 2017 (27,296 ) (26,707 )
Retained earnings 43,328 44,787
Accumulated other comprehensive loss (1,765 ) (760 )

Total stockholders' equity 133,414 136,179

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 933,750 $ 899,540

See notes to unaudited consolidated financial statements.

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PRUDENTIAL ~~bancorp, inc. and subsidiarIES~~BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended
	December 31,
	2021		2020

INTEREST INCOME:
Interest and fees on loans	$	6,287	$	6,275
Interest on mortgage-backed securities		1,035		1,616
Interest and dividends on investments		1,763		1,714
Interest on interest-bearing deposits		154		84
Total interest income		9,239		9,689

INTEREST EXPENSE:
Interest on deposits		1,948		2,170
Interest on advances from FHLB - short term		—		25
Interest on advances from FHLB - long term		1,362		1,811
Total interest expense		3,310		4,006
NET INTEREST INCOME		5,929		5,683

PROVISION FOR LOAN LOSSES		—		—

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,929		5,683

NON-INTEREST INCOME:
Fees and other service charges		122		139
Gain on equity securities		—		11
Gain on sale of loans		—		40
Swap income		25		103
Earnings from BOLI		144		160
Other		79		84
Total non-interest income		370		537

NON-INTEREST EXPENSES:
Salaries and employee benefits		2,369		2,416
Data processing		226		195
Professional services		421		457
Office occupancy		228		229
Depreciation		109		111
Director compensation		58		53
Federal Deposit Insurance Corporation premiums		70		130
Advertising		23		32
Core deposit amortization		22		26
Other		681		448
Total non-interest expenses		4,207		4,097

INCOME BEFORE INCOME TAXES		2,092		2,123

INCOME TAXES:
Current		91		162
Deferred		163		124
Total		254		286

NET INCOME	$	1,838	$	1,837

BASIC EARNINGS PER SHARE	$	0.24	$	0.23

DILUTED EARNINGS PER SHARE	$	0.24	$	0.23

DIVIDENDS PER SHARE	$	0.07	$	0.07

Three Months Ended
December 31,
2017 2016
(Dollars in Thousands, Except Per Share Data)
INTEREST INCOME:
Interest on loans $ 6,107 $ 3,325
Interest on mortgage-backed securities 842 571
Interest and dividends on investments 949 606
Interest on interest-bearing assets 138 3

Total interest income 8,036 4,505

INTEREST EXPENSE:
Interest on deposits 1,412 691
Interest on advances from Federal Home Loan Bank (short-term) 82 73
Interest on advances from Federal Home Loan Bank (long-term) 406 93

Total interest expense 1,900 857

NET INTEREST INCOME 6,136 3,648

PROVISION FOR LOAN LOSSES 210 185

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,926 3,463

NON-INTEREST INCOME:
Fees and other service charges 167 124
Gain on sale of loans, net - 44
Income from bank owned life insurance 164 166
Other 84 24

Total non-interest income 415 358

NON-INTEREST EXPENSE:
Salaries and employee benefits 1,974 1,569
Data processing 176 112
Professional services 792 319
Office occupancy 271 170
Depreciation 156 82
Director compensation 59 68
Advertising 60 37
Core deposit amortization 37 -
Other 518 363
Total non-interest expense 4,043 2,720

INCOME BEFORE INCOME TAXES 2,298 1,101

INCOME TAXES:
Current expense 648 470
Deferred tax (benefit) 1,616 (100 )

Total income tax expense 2,264 370

NET INCOME $ 34 $ 731

BASIC EARNINGS PER SHARE $ 0.004 $ 0.100

DILUTED EARNINGS PER SHARE $ 0.004 $ 0.100

DIVIDENDS PER SHARE $ 0.20 $ 0.03

See notes to unaudited consolidated financial statements.

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PRUDENTIAL ~~bancorp, inc. and subsidiarIES~~BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~

INCOME

Three months ended December 31,
2017 2016

(Dollars in Thousands)
Net income $ 34 $ 731

Unrealized holding losses on available-for-sale securities (1,107 ) (3,456 )
Tax effect 376 1,177
Unrealized holding gain on interest rate swaps 44 733
Tax effect (15 ) (249 )

Total other comprehensive loss (702 ) (1,795 )

Comprehensive loss $ (668 ) $ (1,064 )


	Three Months Ended December 31,
	2021		2020


Net income	$	1,838	$	1,837

Unrealized holding (loss) gain on available-for-sale securities		(1,196)		2,082

Tax effect		251		(446)

Unrealized holding gain on interest rate swaps		3,421		1,395

Tax effect		(718)		(295)

Total other comprehensive income		1,758		2,736

Comprehensive income	$	3,596	$	4,573

See notes to unaudited consolidated financial statements.

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PRUDENTIAL ~~bancorp, inc. and subsidiarIES~~BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


									Accumulated
			Additional						Other		Total
	Common		Paid-In		Treasury		Retained		Comprehensive		Stockholders’
	Stock		Capital		Stock		Earnings		Loss		Equity

	(Dollars in Thousands, Except Per Share Data)
BALANCE, October 1, 2021	$	108	$	118,424	$	(44,351)	$	58,450	$	(2,175)	$	130,456

Net income								1,838				1,838

Other comprehensive income										1,758		1,758

Dividends paid ($0.07 per share)								(544)				(544)

Stock option expense				41								41

Restricted share award expense				41								41

BALANCE, December 31, 2021	$	108	$	118,506	$	(44,351)	$	59,744	$	(417)	$	133,590


									Accumulated
			Additional						Other		Total
	Common		Paid-In		Treasury		Retained		Comprehensive		Stockholders’
	Stock		Capital		Stock		Earnings		Loss		Equity

	(Dollars in Thousands, Except Per Share Data)
BALANCE, October 1, 2020	$	108	$	118,270	$	(39,207)	$	52,889	$	(2,943)	$	129,117

Net income								1,837				1,837

Other comprehensive income										2,736		2,736

Dividends paid ($0.07 per share)								(571)				(571)

Purchase of treasury stock (141,811 shares)						(1,960)						(1,960)

Stock option expense				43								43

Restricted share award expense				43								43

BALANCE, December 31, 2020	$	108	$	118,356	$	(41,167)	$	54,155	$	(207)	$	131,245

Accumulated
Additional Unearned Other Total
Common Paid-In ESOP Treasury Retained Comprehensive Stockholders'
Stock Capital Shares Stock Earnings Loss Equity
(Dollars in Thousands, Except Per Share Data)
BALANCE, October 1, 2017 $ 108 $ 118,751 $ - $ (26,707 ) $ 44,787 $ (760 ) $ 136,179

Net income 34 34

Other comprehensive loss (702 ) (702 )

Dividends paid ($0.20 per share) (1,796 ) (1,796 )

Purchase of Treasury Stock (48,541 shares) (898 ) (898 )
Treasury Stock used for employee benefit plans (22,171 shares) 309 309

Stock option expense 169 169

Recognition and Retention Plan expense 119 119

Reclassification due to change in feceral income tax rate 303 (303 ) -

BALANCE, December 31, 2017 $ 108 $ 119,039 $ - $ (27,296 ) $ 43,328 $ (1,765 ) $ 133,414

Accumulated
Additional Unearned Other Total
Common Paid-In ESOP Treasury Retained Comprehensive Stockholders'
Stock Capital Shares Stock Earnings (Loss) Income Equity
(Dollars in Thousands, Except Per Share Data)
BALANCE, Octoober 1, 2016 $ 95 $ 95,713 $ (4,550 ) $ (21,098 ) $ 43,044 $ 798 $ 114,002

Net income 731 731

Other comprehensive loss (1,795 ) (1,795 )

Dividends paid ($0.03 per share) (225 ) (225 )

Stock option expense 130 130

Recognition and Retention Plan expense 134 134

ESOP shares committed to be released (8,879 shares) 45 94 139

BALANCE, December 31, 2016 $ 95 $ 96,022 $ (4,456 ) $ (21,098 ) $ 43,550 $ (997 ) $ 113,116

See notes to unaudited consolidated financial statements.

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PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended December 31,
	2021		2020

	(Dollars in Thousands)
OPERATING ACTIVITIES:
Net income	$	1,838	$	1,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		109		111
Net amortization of premiums and other amortization		(179)		(174)
Accretion of deferred loan fees and costs		(258)		(3)
Income from bank owned life insurance		(144)		(160)
Gain on sale of loans		—		(40)
Proceeds from the sale of loans held for sale		634		2,765
Originations of loans held for sale		(1,040)		(2,725)
Share-based compensation expense		82		86
Holding (gains) losses on equity securities		—		(11)
Deferred income tax expense		(162)		124
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		469		324
Accrued interest payable		(1,160)		(1,814)
Other, net		1,415		(426)
Net cash provided by (used in) operating activities		1,604		(106)
INVESTING ACTIVITIES:
Purchase of investment and mortgage-backed securities available for sale		(11,887)		(14,196)
Loans originated or acquired		(49,051)		(73,715)
Principal collected on loans		82,847		56,310
Principal payments received on investment and mortgage-backed securities:
Held-to-maturity		2,194		247
Available-for-sale		18,887		35,502
Proceeds from redemption of FHLB stock		1,032		1,296
Purchase of FHLB stock		(10)		(960)
Purchases of equipment		(66)		(80)
Net cash provided by investing activities		43,946		4,404
FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts, and savings accounts		18,992		(32,831)
Net (decrease) increase in certificates of deposit		(9,820)		10,345
Repayment of FHLB advances - long term		(24,145)		(5,354)
Increase (decrease) in advances from borrowers for taxes and insurance		1,092		(49)
Cash dividends paid		(544)		(571)
Purchase of treasury stock		—		(1,960)
Net cash used in financing activities		(14,425)		(30,420)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		31,125		(26,122)
CASH AND CASH EQUIVALENTS—Beginning of period		82,698		117,081

CASH AND CASH EQUIVALENTS—End of period	$	113,823	$	90,959
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid on deposits with and advances from FHLB	$	4,470	$	5,820

Three Months Ended December 31,
2017 2016
(Dollars in Thousands)
OPERATING ACTIVITIES:
Net income $ 34 $ 731
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 156 82
Net (accretion) amortization of premiums/discounts 53 (9 )
Provision for loan losses 210 185
Net amortization of deferred loan fees and costs 3 46
Share-based compensation expense for stock options and awards 288 264
Income from bank owned life insurance (164 ) (166 )
Gain from sale of loans - (44 )
Proceeds from sale of loans held for sale - 2,478
Compensation expense of ESOP - 139
Deferred income tax expense (benefit) 1,616 (100 )
Changes in assets and liabilities which used cash:
Accrued interest receivable (627 ) (147 )
Prepaid escrow for the Polonia Merger - (18,949 )
Accrued interest payable (1,292 ) (1,226 )
Net other 24 (1,489 )
Net cash provided by (used in) operating activities 301 (18,205 )
INVESTING ACTIVITIES:
Purchase of investment and mortgage-backed securities available for sale (40,641 ) -
Purchase of investment securities held for maturity (2,458 ) (5,061 )
Loans originated or acquired (28,346 ) (27,848 )
Principal collected on loans 19,475 20,637
Principal payments received on investment and mortgage-backed securities:
Held-to-maturity 345 295
Available-for-sale 3,332 2,607
Purchase of FHLB stock (857 ) (507 )
Purchase of BOLI - (10,000 )
Purchases of equipment (63 ) (6 )
Net cash used in investing activities (49,213 ) (19,883 )
FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts, and savings accounts (5,691 ) (1,105 )
Net increase in certificates of deposit 21,741 20,119
Net proceeds from FHLB advances (short-term) 10,000 29,012
Proceeds from FHLB advances (long-term) 26,000 -
Repayment of FHLB advances (long-term) (13,287 ) (14,850 )
Increase in advances from borrowers for taxes and insurance 1,290 765
Cash dividends paid (1,796 ) (225 )
Treasury stock used for employee benefit plans 309 -
Purchase of treasury stock (898 ) -
Net cash provided by financing activities 37,668 33,716

NET DECREASE IN CASH AND CASH EQUIVALENTS (11,244 ) (4,372 )

CASH AND CASH EQUIVALENTS—Beginning of period 27,903 12,440

CASH AND CASH EQUIVALENTS—End of period $ 16,659 $ 8,068
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid on deposits and advances from Federal
Home Loan Bank $ 3,192 $ 2,083

Income taxes paid $ - $ 650

SUPPLEMENTAL DISCLOSURE OF NONCASH ITEMS:
Real estate acquired in settlement of loans $ 171 $ -

See the notes to the unaudited consolidated financial ~~statements.~~statements

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~~PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Prudential Bancorp, Inc. (the “Company”) is a Pennsylvania corporation and the parent holding company for Prudential Bank (the “Bank”). The Company is a registered bank holding company.

The Bank is a community-oriented, Pennsylvania-chartered savings bank headquartered in South Philadelphia. The banking office network currently consists of the headquarters and main ~~office(which~~office (which includes a branch office), an administrative office, and 109 additional full-service branch offices. ~~Nine~~NaN of the branch offices are located in Philadelphia (Philadelphia County), ~~one~~1 is in Drexel Hill, Delaware County, and ~~one~~1 is in Huntingdon Valley, Montgomery County (both Pennsylvania counties). The Bank maintains ATMs at all 1110 of the banking offices. The Bank also provides on-line and mobile banking services.

The Bank is subject to regulation by the Pennsylvania Department of Banking and Securities (the “Department”), as its chartering authority and primary regulator, and by the Federal Deposit Insurance Corporation (the “FDIC”), which insures the Bank’s deposits up to applicable limits. As a bank holding company, the Company is subject to the regulation of the Board of Governors of the Federal Reserve System.

On June 2, 2016, the Company announced the entering into of a definitive merger agreement with Polonia Bancorp, Inc. (“Polonia Bancorp”); effective January 1, 2017, Polonia Bancorp, merged with and into the Company, and Polonia Bank, Polonia’s wholly owned subsidiary, merged with and into the Bank.

Basis of presentation – The accompanying unaudited consolidated financial statements were prepared pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (“SEC”) for interim information and therefore do not include all the information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the financial statements have been included. The results for the three months ended December 31, ~~2017~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, ~~2018,~~2022, or any other period. These financial statements should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, ~~2017.~~2021. The significant accounting policies followed in the presentation of interim financial results are the same as those followed on an annual basis. These policies are presented on pages 8473 through 8878 of the Annual Report on Form ~~10K~~10-K, as amended, for the year ended September 30, ~~2017.~~2021.

Use of Estimates in the Preparation of Financial Statements—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The most significant estimates and assumptions in the Company’s consolidated financial statements are ~~recorded~~reflected in the allowance for loan losses, deferred income taxes, other-than-temporary impairment, and the fair value measurement for financial instruments. Actual results could differ from those estimates.

Recent Accounting Pronouncements

~~In May 2014, the FASB issued ASU 2014-09,~~~~Revenue from Contracts with Customers~~ (a new revenue recognition standard). The Update’s core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Since the guidance scopes out revenue associated with financial instruments, including loan receivables and investment securities, we do not expect the adoption of the new standard, or any of the amendments, to result in a material change from our current accounting for revenue because the majority of the Company's revenue is not within the scope of Topic 606. However, we do expect that the standard will result in new disclosure requirements, which are currently being evaluated.

~~In January 2016, the FASB issued ASU 2016-01,~~~~Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~. This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments. Among other things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (g) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations

~~In February 2016, the FASB issued ASU 2016-02,~~~~Leases (Topic 842)~~. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the practical expedients it may elect at adoption, but does not anticipate the amendments will have a significant impact on the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1 percent increase in assets and liabilities. The Company also anticipates additional disclosures to be provided at adoption.

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13,Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be ~~effected~~affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ~~ASU 2016-13 is effective~~This

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Update for ~~annual~~SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and ~~interim periods~~all other companies to fiscal years beginning after December 15, ~~2019, and early adoption is permitted for annual and~~2022, including interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.within those fiscal years. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In ~~August 2016,~~May 2019, the FASB issued ASU ~~2016-15,~~~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~,2019-05, Financial Instruments – Credit Losses, Topic 326, which ~~addresses eight specific cash flow issues with~~allows entities to irrevocably elect the ~~objective of reducing diversity in practice. Among these include recognizing cash payments~~fair value option for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact thecertain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard ~~will have~~and eligible for the applying the fair value option in ASC 825-10-3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the ~~Company’s statement of cash flows.~~

~~In January 2017,~~fair value option, the ~~FASB issued ASU 2017-01,~~~~Business Combinations (Topic 805), Clarifying~~difference between the ~~Definition of a Business~~~~, which provides a more robust framework to use in determining when a set of assets~~carrying amount and ~~activities (collectively referred to as a “set”) is a business. The screen requires that when substantially all of~~ the fair value of the ~~gross assets acquired (or disposed of) is concentrated~~financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. Public business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The amendments in this Update should be applied prospectively on or after the effective date. This Update is not expected to have a significant impact on the Company’s financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~~~Simplifying the Test for Goodwill Impairment~~~~. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied~~ fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that financial asset would subsequently be ~~required~~reported in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profitcurrent earnings. For entities that ~~are adopting~~have not yet adopted ASU 2016-13, the ~~amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021.This Update is not expected to have a significant impact on the Company’s financial statements.~~

~~In February 2017, the FASB issued ASU 2017-05,~~~~Other Income—Gains~~effective dates and ~~Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20).~~The amendments in this Update clarify what constitutes a financial asset within the scope of Subtopic 610-20. The amendments also clarify that entities should identify each distinct nonfinancial asset or in substance nonfinancial asset that is promised to a counterparty and to derecognize each asset when the counterparty obtains control. There is also additional guidance provided for partial sales of a nonfinancial asset and when derecognition, and the related gain or loss, should be recognized. The amendments in this Updatetransition requirements are ~~effective at~~ the same ~~time~~ as ~~the amendments~~those in Update 2014-09. Therefore, for public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. For all other entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.ASU 2016-13. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and/or results of operations.

In ~~March 2017,~~November 2019, the FASB issued ASU ~~2017-08,~~2019-10, Financial Instruments ‒ ~~Receivables – Nonrefundable Fees~~Credit Losses (Topic 326),Derivatives and Hedging (Topic 815), and Leases (Topic 842). The Update defers the effective dates of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update also amends the mandatory effective date for the elimination of Step 2 from the goodwill impairment test under ASU No. 2017-04, Intangibles ‒ Goodwill and Other ~~Costs~~(Topic 350): Simplifying the Test for Goodwill Impairment (Goodwill), to align with those used for credit losses. Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging and leases for companies that are not public business entities. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic ~~310-20).~~~~The amendments~~470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in ~~this Update shorten~~Entity’s Own Equity (Subtopic 815-40), which requires an entity to treat a modification of an equity-classified warrant that does not cause the ~~amortization period~~warrant to become liability-classified as an exchange of the original warrant for ~~certain callable debt securities held at~~ a ~~premium. Specifically,~~new warrant. This guidance applies whether the ~~amendments require the premium to be amortized~~modification is structured as an amendment to the ~~earliest call date.~~terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. An entity should measure the effect of a modification as the difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification. The ~~amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the~~ amendments in this Update are effective for ~~fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.For~~ all ~~other~~ entities ~~the amendments are effective~~ for fiscal years beginning after December 15, ~~2019, and~~2021, including interim periods within those fiscal ~~years beginning~~years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after ~~December 15, 2020.~~the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early ~~adopts~~adopt the amendments in this Update in an interim period, ~~any adjustments~~the guidance should be ~~reflected~~applied as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position ~~and~~and/or results of operations.

In ~~May 2017,~~October 2021, the FASB issued ASU ~~2017-09,~~2021-07, ~~Compensation –~~ Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards, which ~~affects any~~provides a practical expedient whereby a nonpublic entity ~~that changes~~is allowed to determine the ~~terms or conditions~~current price input of equity-classified share-based awards issued to both employees and nonemployees using the reasonable application of a share-based payment award. This Update amends the definition of modification by qualifying that modification accounting does not apply to changes to outstanding share-based payment awards that do not affect the total fair value, vesting requirements, or equity/liability classification of the awards.reasonable valuation method. The ~~amendments in this Update are~~ASU is effective prospectively for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied prospectively to an awardqualifying awards granted or modified ~~on or after the adoption date.This Update is not expected to have a significant impact on the Company’s financial statements.~~

~~In August 2017, the FASB issued ASU 2017-12,~~~~Derivatives and Hedging (Topic 850)~~, the objective of which is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the amendments in this Update make certain targeted improvements to simplify the application and disclosure of the hedge accounting guidance in current general accepted accounting principles. For public business entities, the amendments in this Update are effective forduring fiscal years beginning after December 15, ~~2018,~~2021, and interim periods within fiscal years beginning after December 15, 2022.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which addresses how an acquirer should recognize and measure revenue contracts acquired in a business combination. For public business entities, the ASU is effective for

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fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the ~~amendments are~~ASU is effective for fiscal years beginning after December 15, ~~2019, and~~2023, including interim periods beginning after December 15, 2020. Early application is permitted in any period after issuance. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of thewithin those fiscal ~~year that an entity adopts the amendments in this Update. The amended presentation and disclosure guidance is required only prospectively. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.~~years.

~~In January 2018, the FASB issued ASU 2018-01,~~~~Leases (Topic 842)~~, which provides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current lease guidance in Topic 840. An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date the entity adopts Topic 842; otherwise, an entity should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02 Topic 842.~~The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.~~

2. EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock ~~outstanding,~~issued, net of any treasury shares and unearned restricted share awards, during the period. Diluted earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, after consideration of the potential dilutive effect of common stock equivalents (CSEs), based upon the treasury stock method using an average market price for the period.

The calculated basic and diluted earnings per share are as follows:

Three Months Ended December 31,
2017 2016
Basic Diluted Basic Diluted
(Dollars in Thousands Except Per Share Data)

Net income $ 34 $ 34 $ 731 $ 731
Weighted average shares outstanding 8,855,116 8,855,116 7,333,531 7,333,531
Effect of common stock equivalents - 357,871 - 320,745
Adjusted weighted average shares used in earnings per share computation 8,855,116 9,212,987 7,333,531 7,654,276
Earnings per share - basic and diluted $ 0.004 $ 0.004 $ 0.100 $ 0.096


	Three Months Ended December 31,
	2021				2020

	(Dollars in Thousands Except Per Share Data)
	Basic		Diluted		Basic		Diluted

Net income	$	1,838	$	1,838	$	1,837	$	1,837

Weighted average common shares outstanding		7,769,095		7,765,095		8,104,713		8,104,713

Effect of CSEs		0		44,253		0		21,077

Adjusted weighted average common shares used in earnings per share computation		7,769,095		7,809,348		8,104,713		8,125,790

Earnings per share	$	0.24	$	0.24	$	0.23	$	0.23

~~All exercisable stock options outstanding as~~

As of December 31, ~~2017~~2021 and ~~2016~~2020, there were 299,728 and 282,728 shares of common stock, respectively, subject to options with exercise prices less than the then current market for the common stock and which were included in the computation of diluted earnings per share. At December 31, 2021 and 2020, there were 221,530 and 288,533 shares, respectively, that had exercise prices ~~below~~greater than the then current ~~per share~~ market ~~price~~value for the ~~Company’s~~ common stock and which were considered ~~dilutive for the earnings per share calculation.~~anti-dilutive at such dates.

~~ACCUMULATED OTHER COMPREHENSIVE LOSS~~

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3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following ~~table presents~~tables present the changes in accumulated other comprehensive income (loss)~~income~~ by component, net of ~~tax:~~tax, for the periods presented:

Three Months Ended December 31, Three Months Ended December 31,
2017 2017 2017 2016 2016 2016
Unrealized gain(loss) on AFS securities (a) Unrealized gain(loss) on interest rate swaps (a) Total accumulated other comprehensive income Unrealized gain(loss) on AFS securities (a) Unrealized gain(loss) on interest rate swaps (a) Total accumulated other comprehensive income
Beginning Balance, October 1 $ (1,091 ) $ 331 $ (760 ) $ 931 $ (133 ) $ 798
Other comprehensive (loss)income before reclassification (731 ) 29 (702 ) (2,279 ) 484 (1,795 )
Total (1,822 ) 360 (1,462 ) (1,348 ) 351 (997 )
Reclassification due to change in federal income tax rate
(303 ) - (303 ) - - -
Ending Balance, December 31 $ (2,125 ) $ 360 $ (1,765 ) $ (1,348 ) $ 351 $ (997 )

~~(a) All amounts are net of tax. Amounts in parentheses indicate debits.~~


	Three Months Ended December 31,						Three Months Ended December 31,
	2021		2021		2021		2020		2020		2020

					Total						Total
					accumulated						accumulated
	Unrealized gain		Unrealized gain (loss)		other		Unrealized gain		Unrealized gain (loss)		other
	(loss) on AFS		on interest rate swaps		comprehensive		on AFS		on interest rate swaps		comprehensive
	securities (a)		(a)		loss		securities (a)		(a)		loss
Beginning balance, October 1	$	6,098	$	(8,273)	$	(2,175)	$	10,585	$	(13,528)	$	(2,943)
Other comprehensive (loss) income before reclassification		(945)		2,703		1,758		1,636		1,100		2,736
Total other comprehensive income (loss)		5,153		(5,570)		(417)		12,221		(12,428)		(207)
Ending balance, December 31	$	5,153	$	(5,570)	$	(417)	$	12,221	$	(12,428)	$	(207)

(a)

All amounts are net of tax. Amounts in parentheses indicate debits.

4. INVESTMENT AND MORTGAGE-BACKED SECURITIES

The amortized cost and fair value of investment and mortgage-backed securities, with gross unrealized gains and losses, are as follows:


										December 31, 2021
												Gross		Gross
										Amortized		Unrealized		Unrealized		Fair
										Cost		Gains		Losses		Value
	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
										(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	25,927	$	-	$	(430	)	$	25,497	$	2,951	$	71	$	0	$	3,022
State and political subdivisions											73,562		2,592		(18)		76,136
Mortgage-backed securities - U.S. government agencies		134,588		175		(2,473	)		132,290		114,351		2,732		(836)		116,247
Corporate bonds		56,829		226		(339	)		56,716
Corporate debt securities											100,136		2,497		(514)		102,119
Total debt securities available for sale		217,344		401		(3,242	)		214,503	$	291,000	$	7,892	$	(1,368)	$	297,524

FHLMC preferred stock		6		61		-			67

Total securities available for sale	$	217,350	$	462	$	(3,242	)	$	214,570


Securities Held to Maturity:
U.S. government and agency obligations	$	33,500	$	197	$	(1,688	)	$	32,009	$	1,000	$	150	$	0	$	1,150
State and political subdivisions											12,939		659		0		13,598
Mortgage-backed securities - U.S. government agencies		6,664		233		(66	)		6,831		3,895		163		(29)		4,029
State and political subdivisions		23,213		195		(92	)		23,316


Total securities held to maturity	$	63,377	$	625	$	(1,846	)	$	62,156	$	17,834	$	972	$	(29)	$	18,777

September 30, 2017
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in Thousands)
Securities Available for Sale:
  U.S. government and agency obligations $ 26,125 $ 9 $ (335 ) $ 25,799
  Mortgage-backed securities - U.S.
   government agencies 119,456 146 (1,475 ) 118,127
  Corporate debt securities 34,500 185 (285 ) 34,400
     Total debt securities available for sale 180,081 340 (2,095 ) 178,326

  FHLMC preferred stock 6 70 - 76

           Total securities available for sale $ 180,087 $ 410 $ (2,095 ) $ 178,402

Securities Held to Maturity:
  U.S. government and agency obligations $ 33,500 $ 229 $ (1,688 ) $ 32,041
  State and political subdivisions 20,781 165 (104 ) 20,842
  Mortgage-backed securities - U.S.
   government agencies 7,003 304 (11 ) 7,296

           Total securities held to maturity $ 61,284 $ 698 $ (1,803 ) $ 60,179

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	September 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	3,117	$	77	$	—	$	3,194
State and political subdivisions		70,625		1,793		(159)		72,259
Mortgage-backed securities - U.S. government agencies		131,842		4,267		(756)		135,353
Corporate debt securities		92,645		2,683		(187)		95,141
Total debt securities	$	298,229	$	8,820	$	(1,102)	$	305,947

Securities Held to Maturity:
U.S. government and agency obligations	$	1,000	$	173	$	—	$	1,173
State and political subdivisions		14,983		727		—		15,710
Mortgage-backed securities - U.S. government agencies		4,091		211		(24)		4,278

Total securities held to maturity	$	20,074	$	1,111	$	(24)	$	21,161

The Company recognized 0 holding gain on equity securities for the three months ended December 31, 2021 and a holding gain on equity securities of $11,000 during the three months ended December 31, 2020.

As of December 31, ~~2017~~2021, the Bank maintained ~~$104.9~~$93.9 million of securities in a safekeeping account at the FHLB of Pittsburgh available to be used for collateral ~~as a~~and convenience. ~~The~~As of December 31, 2021, the Bank ~~is not~~was only required to ~~maintain any~~hold $16.7 million as specific collateral for its ~~borrowings;~~borrowings from the FHLB of Pittsburgh; therefore ~~these~~the $77.2 million of excess securities ~~are~~as of such date were not restricted and could be sold or transferred if needed.

The following table shows the gross unrealized losses and related fair values of the Company’s investment and mortgage-backed securities, aggregated by investment category and length of time that individual securities had been in a continuous loss position as of December 31, 2021:


		Less than 12 months				More than 12 months				Total
		Gross				Gross				Gross
		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
		Losses		Value		Losses		Value		Losses		Value

	(Dollars in Thousands)
Securities Available for Sale:
State and political subdivisions		$	(18)	$	2,100	$	—	$	—	$	(18)	$	2,100
Mortgage-backed securities -U.S. government agencies			(128)		7,256		(708)		18,292		(836)		25,548
Corporate debt securities			(514)		25,439		—		—		(514)		25,439

Total securities available for sale		$	(660)	$	34,795	$	(708)	$	18,292	$	(1,368)	$	53,087

Securities Held to Maturity:
Mortgage-backed securities -U.S. government agencies		$	(29)	$	1,257	$	—	$	—	$	(29)	$	1,257

Total securities held to maturity		$	(29)	$	1,257	$	—	$	—	$	(29)	$	1,257

Total		$	(689)	$	36,052	$	(708)	$	18,292	$	(1,397)	$	54,344

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The following table shows the gross unrealized losses and related fair values of the Company’s investment securities, aggregated by investment category and length of time that individual securities had been in a continuous loss position ~~at December 31, 2017:~~

Less than 12 months More than 12 months Total
Gross Gross Gross
Unrealized Fair Unrealized Fair Unrealized Fair
Losses Value Losses Value Losses Value
(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations $ (19 ) $ 4,919 $ (411 ) $ 20,578 $ (430 ) $ 25,497
Mortgage-backed securities - US government agencies (1,404 ) 80,664 (1,069 ) 38,269 (2,473 ) 118,933
Corporate bonds (206 ) 25,331 (133 ) 3,928 (339 ) 29,259

Total securities available for sale $ (1,629 ) $ 110,914 $ (1,613 ) $ 62,775 $ (3,242 ) $ 173,689

Securities Held to Maturity:
U.S. government and agency obligations $ (114 ) $ 2,886 $ (1,574 ) $ 25,927 $ (1,688 ) $ 28,813
Mortgage-backed securities - US government agencies (43 ) 1,544 (23 ) 1,132 (66 ) 2,676
State and political subdivisions (77 ) 8,322 (15 ) 1,798 (92 ) 10,120

Total securities held to maturity $ (234 ) $ 12,752 $ (1,612 ) $ 28,857 $ (1,846 ) $ 41,609

~~The following table shows the gross unrealized losses and related fair values~~as of ~~the Company’s investment securities, aggregated by investment category and length of time that individual securities had been in a continuous loss position at~~ September 30, ~~2017:~~2021


	Less than 12 months				More than 12 months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value

	(Dollars in Thousands)
Securities Available for Sale:
State and political subdivisions	$	(93)	$	14,383	$	(66)	$	4,417	$	(159)	$	18,800
Mortgage-backed securities - US government agencies		(487)		18,493		(269)		7,849		(756)		26,342
Corporate debt securities		(187)		24,816		—		—		(187)		24,816

Total securities available for sale	$	(767)	$	57,692	$	(335)	$	12,266	$	(1,102)	$	69,958

Securities Held to Maturity:
Mortgage-backed securities - US government agencies	$	(24)	$	1,269	$	—	$	—	$	(24)	$	1,269

Total securities held to maturity	$	(24)	$	1,269	$	—	$	—	$	(24)	$	1,269

Total	$	(791)	$	58,961	$	(335)	$	12,266	$	(1,126)	$	71,227

Less than 12 months More than 12 months Total
Gross Gross Gross
Unrealized Fair Unrealized Fair Unrealized Fair
Losses Value Losses Value Losses Value
(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations $ (335 ) $ 20,655 $ - $ - $ (335 ) $ 20,655
Mortgage-backed securities - U.S. government agencies (1,135 ) 77,176 (340 ) 11,684 (1,475 ) 88,860
Corporate debt securities (285 ) 22,511 - - (285 ) 22,511

Total securities available for sale $ (1,755 ) $ 120,342 $ (340 ) $ 11,684 $ (2,095 ) $ 132,026

Securities Held to Maturity:
U.S. government and agency obligations $ (1,688 ) $ 28,813 $ - $ - $ (1,688 ) $ 28,813
Mortgage-backed securities - U.S. government agencies (11 ) 1,176 - - (11 ) 1,176
Corporate debt securities - - - - - -
State and political subdivisions (104 ) 7,854 - - (104 ) 7,854

Total securities held to maturity $ (1,803 ) $ 37,843 $ - $ - $ (1,803 ) $ 37,843

Total $ (3,558 ) $ 158,185 $ (340 ) $ 11,684 $ (3,898 ) $ 169,869

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least once each quarter, and more frequently when economic or market concerns warrant such evaluation. The evaluation is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing performance of the securities. Management also evaluates other facts and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of the type of security involved, the length of time and extent to which the fair value of the security has been less than cost, and the near-term prospects of the issuer.

The Company assesses whether a credit loss exists with respect to a security by considering whether (1) the Company has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery has occurred, or (3) it does not expect to recover the entire amortized cost basis of the security. The Company bifurcates the OTTI impact on impaired securities where impairment in value ~~was~~is deemed to be other than temporary between the component representing credit loss and the component representing loss related to other factors. The portion of the fair value decline attributable to credit loss must be recognized through a charge to earnings. The credit component is determined by comparing the present value of the cash flows expected to be collected, discounted at the rate in effect before recognizing any OTTI, with the amortized cost basis of the debt security. The Company uses the cash flows expected to be realized from the security, which includes assumptions about interest rates, timing and severity of defaults, estimates of potential recoveries, the cash flow distribution from the security and other factors, then applies a discount rate equal to the effective yield of the security. The difference between the present value of the expected cash flows and the amortized book value is considered a credit loss. The fair value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from open market and other sources as appropriate for the particular security. The difference between the fair value and the security’s remaining amortized cost is recognized in other comprehensive income (loss).

For ~~both~~ the three months ended December 31, ~~2017~~2021 and ~~2016,~~2020, the Company did ~~not~~0t record any credit losses on investment securities through earnings.

~~U.S. Government and Agency Obligations -~~Mortgage-Backed Securities – At December 31, ~~2017,~~2021, there were ~~two securities~~8 mortgage-backed security in a gross unrealized loss position for less than 12 months, while there were ~~thirteen~~6 securities in a gross unrealized loss position for more than 12 months at such date. These securities represent asset-backed issues that are issued or guaranteed by a

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U.S. Government sponsored agency or carry the full faith and credit of the United States through a government agency and all of them are currently rated AAA by at least one bond credit rating agency. As a result, the Company ~~does~~did not consider these investments to be other-than-temporarily impaired at December 31, ~~2017.~~

2021.

~~Mortgage-Backed~~Corporate Debt Securities –At December 31, ~~2017,~~2021, there were ~~27 mortgage-backed~~6 securities in a gross unrealized loss ~~position~~ for less than 12 months, while there were 310 securities in a gross unrealized loss position for more than 12 months at such date. These securities ~~represent asset-backed issues that are~~were issued or guaranteed by a U.S. Government sponsored agency or carry the full faith and credit of the United States through a government agency and are currently rated AAA by at least one bond credit rating agency. As a result, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2017.

~~Corporate Debt Securities~~ – At December 31, 2017, there were 21 securities in a gross unrealized loss for less than 12 months, while there were five securities in a gross unrealized loss position for more than 12 months at such date. These securities are backed by publicly ~~traded~~reporting companies each with an investment grade rating by at least one bond credit rating agency. As a result, the Company ~~does~~did not consider these investments to be other-than-temporarily impaired at December 31, ~~2017.~~

2021.

State and political subdivisions– At December 31, ~~2017,~~2021, there ~~were six securities~~was 1 security in a gross unrealized loss for less than 12 months, while there ~~was one security~~were 0 securities in a gross unrealized loss position for more than 12 months at such date. ~~These securities are backed by local municipalities/school districts located~~The unrealized losses on this debt security relate principally to the changes in market rates of interest in the ~~Commonwealth~~financial markets and are not as a result of ~~Pennsylvania~~projected shortfall of cash flows. This security was issued by a municipality with an investment grade rating by at least one bond credit rating agency. As a result, the Company ~~does~~did not consider ~~these investments~~this investment to be other-than-temporarily impaired at December 31, ~~2017.~~

2021.

The amortized cost and fair value of debt securities, 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.

The maturity table below excludes mortgage-backed securities because the contractual maturities of such securities are not indicative of actual maturities due to significant prepayments.


									December 31, 2021
									Held to Maturity				Available for Sale
									Amortized		Fair		Amortized		Fair
									Cost		Value		Cost		Value
	December 31, 2017
	Held to Maturity				Available for Sale

	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in Thousands)
									(Dollars in Thousands)
Due within one year									$	1,035	$	1,043	$	—	$	—
Due after one through five years	$	6,057	$	6,112	$	6,053	$	6,044	$	5,421	$	5,889	$	45,130	$	46,181
Due after five through ten years		23,846		23,613		50,776		50,672		3,448		3,515		58,152		59,184
Due after ten years		26,810		25,600		25,927		25,497		4,035		4,301		73,367		75,912


Total	$	56,713	$	55,325	$	82,756	$	82,213	$	13,939	$	14,748	$	176,649	$	181,277

~~During~~The Company sold 0 investment securities during the three month periods ended December 31, ~~2017 and 2016, the Company did not sell any securities.~~2021 or 2020.

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5. LOANS RECEIVABLE

Loans receivable consist of the following:


							December 31,		September 30,
							2021		2021
	December 31,			September 30,
	2017			2017
	(Dollars in Thousands)
							(Dollars in Thousands)
One-to-four family residential	$	355,327		$	351,298		$	190,269	$	202,330
Multi-family residential		16,825			21,508			73,069		76,122
Commercial real estate		115,233			127,644			164,508		165,992
Construction and land development		151,830			145,486			195,751		205,413
Commercial business		3,333			488			63,531		57,236
Leases		3,617			4,240
Consumer		1,903			1,943			516		530


Total loans		648,068			652,607			687,644		707,623


Undisbursed portion of loans-in-process		(60,566	)		(73,858	)		(94,524)		(80,620)
Deferred loan fees		(2,839	)		(2,940	)		20		(280)
Allowance for loan losses		(4,676	)		(4,466	)		(8,382)		(8,517)


Net loans	$	579,987		$	571,343		$	584,758	$	618,206

The following table summarizes by loan segment the balance in the allowance for loan losses and the loans individually and collectively evaluated for impairment by loan segment at December 31, ~~2017:~~2021:


																			One- to
																			four-		Multi-family		Commercial		Construction and		Commercial
																			family residential		residential		real estate		land development		business		Consumer		Unallocated		Total
	One- to-four family residential		Multi-family residential		Commercial real estate		Construction and land development		Commercial business		Leases		Consumer		Unallocated		Total
	(Dollars in Thousands)
Allowance for Loan Losses:
																			(Dollars in Thousands)

Allowance for loan losses:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	0	$	0	$	0	$	0	$	0	$	0	$		$	0
Collectively evaluated for impairment		1,270		158		1,064		1,621		26		20		24		493		4,676		1,656		1,053		2,300		1,648		925		16		784		8,382
Total ending allowance balance	$	1,270	$	158	$	1,064	$	1,621	$	26	$	20	$	24	$	493	$	4,676	$	1,656	$	1,053	$	2,300	$	1,648	$	925	$	16	$	784	$	8,382


Loans:
Individually evaluated for impairment	$	11,102	$	312	$	3,765	$	8,734	$	-	$	-	$	10			$	23,923	$	3,185	$	0	$	1,280	$	3,593	$	0	$	0			$	8,058
Collectively evaluated for impairment		344,225		16,513		111,468		143,096		3,333		3,617		1,893				624,145		187,084		73,069		163,228		192,158		63,531		516				679,586
Total loans	$	355,327	$	16,825	$	115,233	$	151,830	$	3,333	$	3,617	$	1,903			$	648,068	$	190,269	$	73,069	$	164,508	$	195,751	$	63,531	$	516			$	687,644


																			One- to
																			four-		Multi-family		Commercial		Construction and		Commercial
																			family residential		residential		real estate		land development		business		Consumer		Unallocated		Total
	One- to-four family residential		Multi-family residential		Commercial real estate		Construction and land development		Commercial business		Leases		Consumer		Unallocated		Total
	(Dollars in Thousands)
Allowance for Loan Losses:
																			(Dollars in Thousands)

Allowance for loan losses:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Collectively evaluated for impairment		1,241		205		1,201		1,358		4		23		24		410		4,466		1,665		1,051		2,220		1,968		799		15		799		8,517
Total ending allowance balance	$	1,241	$	205	$	1,201	$	1,358	$	4	$	23	$	24	$	410	$	4,466	$	1,665	$	1,051	$	2,220	$	1,968	$	799	$	15	$	799	$	8,517


Loans:
Individually evaluated for impairment	$	8,277	$	317	$	2,337	$	8,724	$	-	$	-	$	10			$	19,665	$	3,006	$	0	$	1,280	$	4,093	$	0	$	0			$	8,379
Collectively evaluated for impairment		343,021		21,191		125,307		136,762		488		4,240		1,933				632,942		199,324		76,122		164,712		201,320		57,236		530				699,244
Total loans	$	351,298	$	21,508	$	127,644	$	145,486	$	488	$	4,240	$	1,943			$	652,607	$	202,330	$	76,122	$	165,992	$	205,413	$	57,236	$	530			$	707,623

The loan portfolio is segmented at a level that allows management to monitor both risk and performance. Management evaluates for potential impairment all construction loans, multi-family loans, commercial real estate loans, commercial business loans and all ~~leases and all~~ loans ~~and leases~~ more than 90 days delinquent as to principal and/or interest. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect in full the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

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Once the determination is made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is generally measured by comparing the recorded investment in the loan to the fair value of the loan using one of the following three methods: (a) the present value of the expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. Management primarily utilizes the fair value of collateral method as a practically expedient alternative. On collateral method evaluations, any portion of the loan deemed uncollectible is charged-off against the loan loss allowance.

The following table presents impaired loans by class as of December 31, ~~2017,~~2021, segregated by those for which a specific allowance was required and those for which ano specific allowance was ~~not~~ required.


					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans

	(Dollars in Thousands)
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
	Investment		Allowance		Investment		Investment		Balance
One-to-four family residential	$	0	$	0	$	3,185	$	3,185	$	3,483
Commercial real estate		0		0		1,280		1,280		1,457
Construction and land development		0		0		3,593		3,593		3,840
Total	$	0	$	0	$	8,058	$	8,058	$	8,780

Impaired
Loans with
Impaired Loans with No Specific
Specific Allowance Allowance Total Impaired Loans
(Dollars in Thousands)
Unpaid
Recorded Related Recorded Recorded Principal
Investment Allowance Investment Investment Balance
One-to-four family residential $ - $ - $ 11,102 $ 11,102 $ 11,421
Multi-family residential - - 312 312 312
Commercial real estate - - 3,765 3,765 3,848
Construction and land development - - 8,734 8,734 11,115
Consumer - - 10 10 10
Total loans $ - $ - $ 23,923 $ 23,923 $ 26,706

The following table presents impaired loans by class as of September 30, ~~2017,~~2021, segregated by those for which a specific allowance was required and those for which ano specific allowance was ~~not~~ required.


															Impaired
															Loans with
											Impaired Loans with				No Specific
											Specific Allowance				Allowance		Total Impaired Loans
					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
	(Dollars in Thousands)
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
	Investment		Allowance		Investment		Investment		Balance
											(Dollars in Thousands)
																			Unpaid
											Recorded		Related		Recorded		Recorded		Principal
											Investment		Allowance		Investment		Investment		Balance
One-to-four family residential	$	-	$	-	$	8,277	$	8,277	$	9,245	$	0	$	0	$	3,006	$	3,006	$	3,304
Multi-family		-		-		317		317		317
Commercial real estate		-		-		2,337		2,337		2,449		0		0		1,280		1,280		1,457
Construction and land development		-		-		8,724		8,724		11,105		0		0		4,093		4,093		4,340
Consumer		-		-		10		10		10
Total loans	$	-	$	-	$	19,665	$	19,665	$	23,126
Total											$	0	$	0	$	8,379	$	8,379	$	9,101

The following tables present the average recorded investment in impaired loans and related interest income recognized for the periods indicated:


	Three Months Ended December 31, 2021
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis

	(Dollars in Thousands)
One-to-four family residential	$	3,096	$	4	$	5
Commercial real estate		1,280		0		0
Construction and land development		3,843		0		0
Total impaired loans	$	8,219	$	4	$	5

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Three Months Ended December 31, 2017
Average
Recorded
Investment Income
Recognized on
Accrual Basis Income
Recognized on
Cash Basis
(Dollars in Thousands)
One-to-four family residential $ 9,690 $ 34 $ 4
Multi-family residential 315 6 -
Commercial real estate 3,051 29 -
Construction and land development 8,729 - -
Consumer 10 - -
Total loans $ 21,795 $ 69 $ 4


	Three Months Ended December 31, 2020
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis

	(Dollars in Thousands)
One-to-four family residential	$	3,091	$	5	$	0
Commercial real estate		1,373		0		0
Construction and land development		8,475		0		0
Total impaired loans	$	12,939	$	5	$	0

Three Months Ended December 31, 2016
Average
Recorded
Investment Income
Recognized on
Accrual Basis Income
Recognized on
Cash Basis
(Dollars in Thousands)
One-to-four family residential $ 5,522 $ 17 $ 24
Multi-family residential 332 6 -
Commercial real estate 2,938 17 11
Construction and land development 10,399 - -
Total loans $ 19,191 $ 40 $ 35

Federal regulations and our loan policy require that the Company utilize an internal asset classification system as a means of reporting problem and potential problem assets. The Company has incorporated an internal asset classification system, consistent with Federal banking regulations, as a part of its credit monitoring system. Management currently classifies problem and potential problem assets as “special mention”, “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the three aforementioned categories but possess weaknesses are required to be designated “special mention.”

The following tables present the classes of the loan portfolio in which a formal risk weighting system is utilized summarized by the aggregate “Pass” and the criticized category of “special mention”, and the classified categories of “substandard”, “doubtful” and “loss” within the Company’s risk rating system as applied to the loan portfolio. The Company had no loans classified as “doubtful” or “loss” at either of the dates presented.


	December 31, 2021
			Special				Total
	Pass		Mention		Substandard		Loans

	(Dollars in Thousands)
One-to-four residential	$	185,552	$	1,532	$	3,185	$	190,269
Multi-family residential		73,069		—		—		73,069
Commercial real estate		161,189		2,039		1,280		164,508
Construction and land development		192,158		—		3,593		195,751
Commercial business		63,531		—		—		63,531
Total	$	675,499	$	3,571	$	8,058	$	687,128


	September 30, 2021
			Special				Total
	Pass		Mention		Substandard		Loans

	(Dollars in Thousands)
One-to-four residential	$	197,920	$	1,404	$	3,006	$	202,330
Multi-family residential		71,497		4,625		0		76,122
Commercial real estate		162,657		2,055		1,280		165,992
Construction and land development		201,320		0		4,093		205,413
Commercial business		57,236		0		0		57,236
Total	$	690,630	$	8,084	$	8,379	$	707,093

Table of Contents

December 31, 2017
Special Total
Pass Mention Substandard Loans
(Dollars in Thousands)
One-to-four family residential $ - $ 3,336 $ 4,217 $ 7,553
Multi-family residential 16,513 - 312 16,825
Commercial real estate 111,468 1,966 1,799 115,233
Construction and land development 143,096 - 8,734 151,830
Commercial business 3,333 - - 3,333
Total loans $ 274,410 $ 5,302 $ 15,062 $ 294,774

September 30, 2017
Special Total
Pass Mention Substandard Loans
(Dollars in Thousands)
One-to-four family residential $ - $ 1,635 $ 3,878 $ 5,513
Multi-family residential 21,191 - 317 21,508
Commercial real estate 125,307 1,449 888 127,644
Construction and land development 136,763 - 8,723 145,486
Commercial business 488 - - 488
Total loans $ 283,749 $ 3,084 $ 13,806 $ 300,639

The Company evaluates the classification of ~~one-to-four family residential and~~ consumer loans primarily on a pooled basis. If the Company becomes aware that adverse or distressed conditions exist that may affect a particular ~~single-family residential~~ loan, the loan is downgraded following the above definitions of special mention, substandard, doubtful and loss.

The following tables represent loans in which a formal risk rating system is not utilized, but loans are segregated between performing and non-performing based primarily on delinquency status. Non-performing loans that would be included in the table are those loans ~~greater than~~ 90 days or more past due as to principal and/or interest that do not have a designated risk rating.


	December 31, 2021
			Non-		Total
	Performing		Performing		Loans

	(Dollars in Thousands)
Consumer	$	516	$	0	$	516
Total	$	516	$	0	$	516


	September 30, 2021
			Non-		Total
	Performing		Performing		Loans

	(Dollars in Thousands)
Consumer	$	530	$	—	$	530
Total	$	530	$	—	$	530

December 31, 2017
Non- Total
Performing Performing Loans
(Dollars in Thousands)
One-to-four family residential $ 344,225 $ 3,549 $ 347,774
Leases 3,617 - 3,617
Consumer 1,903 - 1,903
Total loans $ 349,745 $ 3,549 $ 353,294

September 30, 2017
Non- Total
Performing Performing Loans
(Dollars in Thousands)
One-to-four family residential $ 343,021 $ 2,764 $ 345,785
Leases $ 4,240 - $ 4,240
Consumer 1,943 - 1,943
Total loans $ 349,204 $ 2,764 $ 351,968

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is due or overdue, as the case may be. The following ~~table presents~~tables present the loan categories of the loan portfolio summarized by the aging categories of performing ~~and~~loans, delinquent loans and nonaccrual loans:


															December 31, 2021
																											90 Days+
																	30‑89 Days		90 Days +		Total		Total		Non-		Past Due
															Current		Past Due		Past Due		Past Due		Loans		Accrual		and Accruing
	December 31, 2017
													90 Days+
			30-89 Days		90 Days +		Total		Total		Non-		Past Due
	Current		Past Due		Past Due		Past Due		Loans		Accrual		and Accruing
	(Dollars in Thousands)
															(Dollars in Thousands)
One-to-four family residential	$	348,012	$	3,238	$	4,077	$	7,315	$	355,327	$	5,892	$	-	$	186,910	$	1,532	$	1,827	$	3,359	$	190,269	$	3,185	$	—
Multi-family residential		16,825		-		-		-		16,825		-		-		73,069		0		0		0		73,069		0		0
Commercial real estate		113,747		-		1,486		1,486		115,233		1,563		-		162,579		649		1,280		1,929		164,508		1,280		0
Construction and land development		142,921		175		8,734		8,909		151,830		8,734		-		192,158		0		3,593		3,593		195,751		3,593		0
Commercial business		3,333		-		-		-		3,333		-		-		63,465		66		0		66		63,531		0		0
Leases		3,617		-		-		-		3,617		-		-
Consumer		1,903		-		-		-		1,903		-		-		468		48		0		48		516		0		0
Total loans	$	630,358	$	3,413	$	14,297	$	17,710	$	648,068	$	16,189	$	-
Total Loans															$	678,649	$	2,295	$	6,700	$	8,995	$	687,644	$	8,058	$	0


	September 30, 2021
													90 Days+
			30‑89 Days		90 Days +		Total		Total		Non-		Past Due
	Current		Past Due		Past Due		Past Due		Loans		Accrual		and Accruing

	(Dollars in Thousands)
One-to-four family residential	$	199,799	$	487	$	2,044	$	2,531	$	202,330	$	3,006	$	0
Multi-family residential		76,122		0		0		0		76,122		0		0
Commercial real estate		164,712		0		1,280		1,280		165,992		1,280		0
Construction and land development		201,320		0		4,093		4,093		205,413		4,093		0
Commercial business		57,236		0		0		0		57,236		0		0
Consumer		493		37		0		37		530		0		0
Total Loans	$	699,682	$	524	$	7,417	$	7,941	$	707,623	$	8,379	$	0

September 30, 2017
90 Days+
30-89 Days 90 Days + Total Total Non- Past Due
Current Past Due Past Due Past Due Loans Accrual and Accruing
(Dollars in Thousands)
One-to-four family residential $ 346,877 $ 1,746 $ 2,675 $ 4,421 $ 351,298 $ 5,107 $ -
Multi-family residential 21,508 - - - 21,508 - -
Commercial real estate 125,157 1,000 1,487 2,487 127,644 1,566 -
Construction and land development 136,762 - 8,724 8,724 145,486 8,724 -
Commercial business 488 - - - 488 - -
Leases 4,240 - - - 4,240 - -
Consumer 1,874 69 - 69 1,943 - -
Total loans $ 636,906 $ 2,815 $ 12,886 $ 15,701 $ 652,607 $ 15,397 $ -

The allowance for loan losses is established through a provision for loan losses charged to expense. The Company maintains the allowance at a level believed to cover all known and inherent losses in the portfolio that are both

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probable and reasonable to estimate at each reporting date. Management reviews the allowance for loan losses no less than quarterly in order to identify these inherent losses and to assess the overall collection probability for the loan portfolio in view of these inherent losses. For each primary type of loan, a loss factor is established reflecting an estimate of the known and inherent losses in such loan type contained in the portfolio using both a quantitative analysis as well as consideration of qualitative factors. The evaluation process includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the Company’s loans, the value of collateral securing the loans, the borrowers’ ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience.

For the three months ended December 31, 2021 and 2020, the analysis took into account the pandemic and its effects on the Company's business, especially with respect to commercial real estate, commercial business and construction and land development loans.

Commercial real estate loans entail significant additional credit risks compared to owner-occupied one-to-four family residential mortgage loans, as they generally involve large loan balances concentrated with a single ~~borrowers~~borrower or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related real estate project and/or business operation of the borrower who is, in some cases, also the primary occupant, and thus may be subject to a greater extent to the effects of adverse conditions in the real estate market and in the economy in general. Commercial business loans typically involve a higher risk of default than residential loans of like duration since their repayment is generally dependent on the successful operation of the borrower’s business and the sufficiency of collateral, if any. Land acquisition, development and construction lending exposes the Company to greater credit risk than permanent mortgage financing. The repayment of land acquisition, development and construction loans depends upon the sale of the property to third parties and/or the availability of permanent financing upon completion of all improvements. These events may adversely affect the sale of the properties, potentially reducing both the borrowers’ ability to make required payments as well as reducing the value of the collateral property. Such lending is additionally subject to the risk that if the estimate of construction cost proves to be inaccurate, the Company potentially will be compelled to advance additional funds to allow completion of the project. In addition, if the estimate of value proves to be inaccurate, the Company may be confronted with a project, when completed, having less value than the loan amount. If the Company is forced to foreclose on a construction project prior to completion, there is no assurance that the Company would be able to recover the entire unpaid portion of the loan.

The following tables summarize the primary segments of the allowance for loan losses. Activity in the allowance is presented for the three month periods ended December 31, ~~2017~~2021 and ~~2016:~~2020:


	Three Months Ended December 31, 2021
	One- to		Multi-				Construction				Loans to
	four-family		family		Commercial		and land		Commercial		financial
	residential		residential		real estate		development		business		institutions		Leases		Consumer		Unallocated		Total

	(In Thousands)
ALLL balance at September 30, 2021	$	1,665	$	1,051	$	2,220	$	1,968	$	799	$	0	$	0	$	15	$	799	$	8,517
Charge-offs		—		0		(136)		0		0		0		0		0		0		(136)
Recoveries		1		0		0		0		0		0		0		0		0		1
Provision		(10)		2		216		(320)		126				0		1		(15)		—
ALLL balance at December 31, 2021	$	1,656	$	1,053	$	2,300	$	1,648	$	925	$	0	$	0	$	16	$	784	$	8,382


	Three Months Ended December 31, 2020
	One- to		Multi-				Construction				Loans to
	four-family		family		Commercial		and land		Commercial		financial
	residential		residential		real estate		development		business		institutions		Leases		Consumer		Unallocated		Total

	(In Thousands)
ALLL balance at September 30, 2020	$	1,877	$	460	$	1,989	$	2,888	$	194	$	89	$	3	$	6	$	797	$	8,303
Charge-offs		—		0		0		0		0		0		0		0		0		—
Recoveries		1		0		0		0		14		0		0		0		0		15
Provision		133		(3)		(54)		(60)		111		(89)		0		0		(38)		—
ALLL balance at December 31, 2020	$	2,011	$	457	$	1,935	$	2,828	$	319	$	0	$	3	$	6	$	759	$	8,318

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Three Months Ended December 31, 2017
One- to
four-family
residential Multi-
family
residential Commercial
real estate Construction
and land
development Commercial
business Leases Consumer Unallocated Total
(Dollars in Thousands)
ALLL balance at September 30, 2017 $ 1,241 $ 205 $ 1,201 $ 1,358 $ 4 $ 23 $ 24 $ 410 $ 4,466
Charge-offs - - - - - - - - -
Recoveries - - - - - - - - -
Provision 29 (47 ) (137 ) 263 22 (3 ) - 83 210
ALLL balance at December 31, 2017 $ 1,270 $ 158 $ 1,064 $ 1,621 $ 26 $ 20 $ 24 $ 493 $ 4,676

Three Months Ended December 31, 2016
One- to
four-family
residential Multi-
family
residential Commercial
real estate Construction
and land
development Commercial
business Leases Consumer Unallocated Total
(Dollars in Thousands)
ALLL balance at September 30, 2016 $ 1,627 $ 137 $ 859 $ 316 $ 1 $ 21 $ 10 $ 298 $ 3,269
Charge-offs - - - - - - - - -
Recoveries - - - - - - - - -
Provision (63 ) (2 ) 104 99 (1 ) 7 25 16 185
ALLL balance at December 31, 2016 $ 1,471 $ 58 $ 359 $ 757 $ - $ 8 $ 8 $ 266 $ 3,454

The Company recorded a0 provision for loan losses ~~in the amount of $210,000~~ for the three months ~~period~~periods ended December 31, ~~2017, compared to $185,000 for~~2021 or 2020. During the ~~same period in 2016.~~

quarter ended December 31, 2021, the Company recorded 1 charge off of $136,000 and recoveries of $1,000. During the quarter ended December 31, 2020, the Company recorded 0 charge offs and recoveries of $15,000.

At December 31, ~~2017,~~2021, the Company had ~~eleven~~3 loans ~~aggregating $7.6~~totaling $1.6 million that were classified as troubled debt restructurings (“TDRs”). ~~Seven~~All 3 TDRs are on non-accrual. NaN of ~~such~~the TDRs consist of loans aggregating ~~$1.2 million as of December 31, 2017 were~~$898,000 secured by single-family residential properties and are performing in accordance with the restructured terms and accruing interest. Three of the TDRs which are classified as non-accrual totaling $4.9 million are a part of a troubled lending relationship totaling $10.7 million (after taking into account the previously disclosed $1.9 million write-down recognized during the quarter ending March 31, 2017 related to this borrowing relationship).terms. The remaining TDR is ~~also on~~a $705,000 commercial real estate loan classified as non-accrual and ~~consists~~is part of a ~~$1.5 million~~lending relationship totaling $5.5 million.

The Company restructured 1 loan ~~secured by various commercial~~aggregating $516,000 as a TDR, during the three months ended December 31, 2021 The loan is on nonaccrual and ~~residential properties. No~~will remain on nonaccrual until a sufficient payment history under the restructured terms is developed. The Company did 0t restructure any loans as a TDR during the three months ended December 31, 2020.

NaN TDRs defaulted during the three month ~~period~~periods ending December 31, ~~2017.~~2021 or 2020.

The Company restructured one loan, with a balance of $77,000, during the three month period ended December 31, 2017, while no loans were restructured during the same period in 2016. The restructure entailed extending the loan maturity date to February 2018.

As of and for the Three months Ended December 31, 2017
(Dollars in thousands) Number
of Loans Pre- Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment

One-to-four family residential 1 $ 77 $ 77
1 $ 77 $ 77

~~No TDRs defaulted during the three month period ending December 31, 2017.~~

6. DEPOSITS

Deposits consist of the following major classifications:


											December 31,				September 30,
											2021				2021
											Amount		Percent		Amount		Percent
	December 31,					September 30,
	2017					2017

	Amount		Percent			Amount		Percent
	(Dollars in Thousands)
											(Dollars in Thousands)
Non-interest-bearing checking accounts											$	35,594	4.9	%	$	37,409	5.3	%
Interest-bearing checking accounts												107,451	14.9	%		87,752	12.3	%
Money market deposit accounts	$	71,484		11.0	%	$	76,272		12.0	%		112,224	15.6	%		111,488	15.7	%
Interest-bearing checking accounts		46,758		7.2	%		54,267		8.5	%
Non interest-bearing checking accounts		11,578		1.8	%		9,375		1.5	%
Passbook, club and statement savings		106,146		16.3	%		101,743		16.0	%		230,357	32.0	%		229,989	32.3	%
Certificates maturing in six months or less		158,204		24.3	%		154,750		24.3	%		127,557	17.7	%		143,767	20.2	%
Certificates maturing in more than six months		257,862		39.4	%		239,575		37.7	%		107,501	14.9	%		101,110	14.2	%


Total	$	652,032		100.0	%	$	635,982		100.0	%	$	720,684	100.0	%	$	711,515	100.0	%

Certificates in the amount of $250,000 and over totaled ~~$47.9~~$94.9 million as of December 31, ~~2017~~2021 and ~~$28.9~~$95.3 million as of September 30, ~~2017.~~2021.

~~ADVANCES FROM FEDERAL HOME LOAN BANK – SHORT TERM~~

~~The periods ended December 31, 2017 and September 30, 2017 outstanding balances and related information~~Table of ~~short-term borrowings from the FHLB are summarized follows:~~Contents

December 31, September 30,
2017 2017
Type Maturity Date Coupon Call Date Amount Amount
(Dollars in Thousands)
Fixed Rate - Amortizing 6-Oct-17 1.30 % Not Applicable $ 10,000
Fixed Rate - Amortizing 13-Oct-17 1.31 % Not Applicable 10,000
Weighted average rate 1.31 %

Fixed Rate - Amortizing 3-Jan-18 1.54 % Not Applicable $ 10,000
Fixed Rate - Amortizing 5-Jan-18 1.53 % Not Applicable 10,000
Fixed Rate - Amortizing 12-Jan-18 1.57 % Not Applicable 10,000
Weighted average rate 1.55 % $ 30,000 $ 20,000

As of December 31, 2017 and September 30, 2017, $20.0 million consists of two $10.0 million 30 day FHLB advances associated with an interest rate swap contract with a weighted average effective cost of 125 basis points and 117 bps respectively. The additional $10.0 million at December 31, 2017 consisted of a one week borrowing to provide additional liquidity.

7. ADVANCES FROM FEDERAL HOME LOAN BANK – LONG TERM

Pursuant to collateral agreements with the FHLB of Pittsburgh, advances are secured by a blanket collateral of loans held by the ~~Company~~Bank and qualifying fixed-income securities and FHLB stock. The long-term advances outstanding as of December 31, ~~2017~~2021 and September 30, 2021 are as follows:


Lomg-term FHLB advances:	Maturity range		Weighted average			Stated interest rate range				December 31,		September 30,
Description	from	to	interest rate			from		to		2021		2021

										(Dollars in Thousands)
Fixed Rate - Amortizing	1‑Oct‑21	30‑Sep‑22		2.99	%	2.94	%	3.05	%	$	1,519	$	2,227
Fixed Rate - Amortizing	1‑Oct‑22	30‑Sep‑23		2.52	%	1.94	%	3.11	%		3,115		3,551
Total				2.76	%						4,634		5,778

Fixed Rate - Advances	1‑Oct‑21	30‑Sep‑22		2.15	%	1.94	%	2.33	%		40,249		63,250
Fixed Rate - Advances	1‑Oct‑22	30‑Sep‑23		2.57	%	2.00	%	3.22	%		94,999		94,999
Fixed Rate - Advances	1‑Oct‑23	30‑Sep‑24		2.83	%	2.38	%	3.20	%		67,998		67,998
Total				2.60	%						203,246		226,247

				2.62	%			Total		$	207,880	$	232,025

December 31, September 30,
2017 2017
Type Maturity Date Coupon Call Date Amount Amount
(Dollars in Thousands)
Fixed Rate - Amortizing 1-Dec-17 1.16 % Not Applicable $ - $ 505
Fixed Rate - Amortizing 18-Nov-19 1.53 % Not Applicable 2,677 3,044
Fixed Rate - Amortizing 26-Oct-20 1.94 % Not Applicable 3,784 -
Fixed Rate - Amortizing 12-Oct-21 1.99 % Not Applicable 2,880 -
Fixed Rate - Amortizing 15-Aug-23 1.94 % Not Applicable 1,895 1,974
1.86 % (a) 11,236 5,523

Fixed Rate - Advances 17-Nov-17 1.20 % Not Applicable - 10,000
Fixed Rate - Advances 4-Dec-17 1.15 % Not Applicable - 2,000
Fixed Rate - Advances 19-Mar-18 2.53 % Not Applicable 5,013 5,029
Fixed Rate - Advances 19-Mar-18 2.13 % Not Applicable 5,009 5,041
Fixed Rate - Advances 20-Jun-18 1.86 % Not Applicable 3,007 3,011
Fixed Rate - Advances 25-Jun-18 2.09 % Not Applicable 3,011 3,016
Fixed Rate - Advances 27-Aug-18 4.15 % Not Applicable 7,126 7,174
Fixed Rate - Advances 15-Nov-18 1.89 % Not Applicable 3,011 3,014
Fixed Rate - Advances 16-Nov-18 1.40 % Not Applicable 7,500 7,500
Fixed Rate - Advances 26-Nov-18 1.81 % Not Applicable 2,006 2,008
Fixed Rate - Advances 3-Dec-18 1.54 % Not Applicable 3,000 3,000
Fixed Rate - Advances 16-Aug-19 2.66 % Not Applicable 3,048 3,056
Fixed Rate - Advances 9-Oct-19 2.54 % Not Applicable 2,029 2,034
Fixed Rate - Advances 26-Nov-19 2.35 % Not Applicable 3,040 3,062
Fixed Rate - Advances 22-Jun-20 2.60 % Not Applicable 3,056 3,000
Fixed Rate - Advances 24-Jun-20 2.85 % Not Applicable 2,049 2,054
Fixed Rate - Advances 27-Jul-20 1.38 % Not Applicable 249 249
Fixed Rate - Advances 17-Aug-20 3.06 % Not Applicable 2,062 2,068
Fixed Rate - Advances 9-Oct-20 2.92 % Not Applicable 2,056 2,061
Fixed Rate - Advances 27-Jul-21 1.52 % Not Applicable 249 249
Fixed Rate - Advances 28-Jul-21 1.48 % Not Applicable 249 249
Fixed Rate - Advances 29-Jul-21 1.42 % Not Applicable 249 249
Fixed Rate - Advances 19-Aug-21 1.55 % Not Applicable 249 249
Fixed Rate - Advances 7-Oct-21 3.19 % Not Applicable 2,084 2,089
Fixed Rate - Advances 12-Oct-21 3.23 % Not Applicable 2,079 2,084
Fixed Rate - Advances 20-Oct-21 2.12 % Not Applicable 4,000 -
Fixed Rate - Advances 6-Jun-22 2.05 % Not Applicable 10,000 10,000
Fixed Rate - Advances 6-Sep-22 1.94 % Not Applicable 249 249
Fixed Rate - Advances 22-Sep-22 2.11 % Not Applicable 5,000 5,000
Fixed Rate - Advances 12-Oct-22 2.22 % Not Applicable 3,000 -
Fixed Rate - Advances 17-Oct-22 2.18 % Not Applicable 3,000 -
Fixed Rate - Advances 26-Oct-22 2.29 % Not Applicable 3,000 -
Fixed Rate - Advances 31-Oct-22 2.30 % Not Applicable 2,000 -
Fixed Rate - Advances 13-Dec-22 2.44 % Not Applicable 4,000 -
2.36 % (a) 95,680 88,795

(a) Weighted average coupon rate Total $ 106,916 $ 94,318

~~DERIVATIVES~~

8. DERIVATIVES

The ~~Company~~Bank has contracted with a third party to participate in interest rate swap contracts. ~~Two of the swaps are~~There were 13 cash flow hedges ~~associated with $20.0 million of FHLB advances~~tied to wholesale funding at both December 31, ~~2017~~2021 and September 30, ~~2017.~~2021. These interest rate swaps involve the receipt of ~~variable rate~~variable-rate amounts from a counterparty in exchange for the Company making ~~fixed~~fixed-rate payments. During the quarter ended December 31, ~~2017, $42,000 of~~2021, 0 income was recognized as ineffectiveness through earnings, while ~~$-0-~~$2,000 of income was recognized as ineffectiveness through earnings during the comparable period in ~~2016.~~fiscal 2021. There ~~was one Interest~~were 9 interest rate ~~swap~~swaps designated as a fair value ~~hedge~~hedges involving the receipt of ~~variable rate~~variable-rate payments from a counterparty in exchange for ~~Prudential~~the Company making ~~fixed rate~~fixed-rate payments over the life of the agreements that were applicable to ~~a $1.1 million commercial loan~~3 loans and 7 investment securities as of both December 31, ~~2017~~2021 and September 30, ~~2017. For derivatives that are designated and qualify~~2021. There was $10.1 million on deposit with the counterparty as collateral for the hedges at December 31, 2021. The fair value ~~hedges,~~is recorded in the ~~gain or loss on~~other liabilities section of the ~~derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. During the quarter ended December 31, 2017, $13,000~~Consolidated Statement of ~~income was recognized through earnings, while $-0- was recognized through earnings during the comparable period in 2016.~~

Financial Condition.

Below is a summary of the interest rate swap agreements and ~~the~~their terms as of December 31, ~~2017.~~2021.

Notional Pay Receive Maturity Unrealized
Amount Rate Rate Date Gain
(Dollars in thousands)
Interest rate swap contract $ 10,000 1.15 % 1 Month Libor 6-Apr-21 $ 267
Interest rate swap contract 10,000 1.18 % 1 Month Libor 13-Jun-21 279
Interest rate swap contract 1,100 4.10 % 1 Month Libor +276 bp 1-Aug-26 -

$ 546


2021
Hedged	Notional		Pay Rate				Receive	Maturity Date		Unrealized
Item	Amount		from		to		Rate	from	to	Gain (Loss)
(Dollars in Thousands)
State and political subdivisions	$	21,570	3.06	%	3.07	%	3 Mth Libor	1-Feb-27	1-May-28	$	(1,983)
Commercial loans		23,656	4.10	%	5.74	%	1 Mth Libor +225 to 276 bp	13-Jun-25	1-Aug-26		0
30 day wholesale funding		90,000	1.36	%	2.70	%	1 Mth Libor	15-Feb-24	12-Jun-26		(2,181)
90 day wholesale funding		135,000	2.51	%	2.78	%	3 Mth Libor	11-Jan-24	27-Mar-24		(4,867)

										$	(9,031)

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Below is a summary of the interest rate swap agreements and ~~the~~their terms as of September 30, ~~2017.~~2021.

Notinal Pay Receive Maturity Unrealized
Amount Rate Rate Date Gain
(Dollar in thousands)

Interest rate swap contract $ 10,000 1.15 % 1 Mth Libor 6-Apr-21 $ 217
Interest rate swap contract 10,000 1.18 % 1 Mth Libor 13-Jun-21 223
Interest rate swap contract 1,100 4.10 % 1 Mth Libor +276 bp 1-Aug-26 62

$ 502


2021
Hedged	Notional		Pay Rate				Receive	Maturity Date		Unrealized
Item	Amount		from		to		Rate	from	to	Gain (Loss)
(Dollars in Thousands)
State and political subdivisions	$	21,570	3.06	%	3.07	%	3 Mth Libor	1-Feb-27	1-May-28	$	(2,365)
Commercial loans		23,656	4.10	%	5.74	%	1 Mth Libor +225 to 276 bp	13-Jun-25	1-Aug-26		0
30 day wholesale funding		90,000	1.36	%	2.70	%	1 Mth Libor	15-Feb-24	12-Jun-26		(3,495)
90 day wholesale funding		135,000	2.51	%	2.78	%	3 Mth Libor	11-Jan-24	27-Mar-24		(6,974)

										$	(12,834)

All ~~three~~ interest swaps are carried at fair value in accordance with FASB ASC 815 “Derivatives and Hedging.”

In December 2021, the SEC issued, SEC Staff Statement on LIBOR Transition – Key Considerations for Market Participants. The statement indicates that new libor swap contracts cannot be entered into after December 31, 2021. In addition, any existing contracts tied to libor must be amended to a new index by June 30, 2023. The Company anticipates utilizing the Secured Overnight Financing Rate (“SOFR”) for existing contracts on or before June 2023. The statement recognizes SOFR as the preferred alternative to libor. The Company does not anticipate a material impact to the Company’s financial position and/or results of operations.

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~~10.~~

9. INCOME TAXES

Items that gave rise to significant portions of deferred income taxes are as follows:


							December 31,		September 30,
							2021		2021
	December 31,			September 30,
	2017			2017
	(Dollars in Thousands)
							(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,344		$	1,675		$	1,697	$	1,716
Nonaccrual interest		249			349			408		395
Accrued vacation		7			12			14		14
Capital loss carryforward		300			476			4		4
Other real estate owned								8		0
Split dollar life insurance		10			15			9		9
Post-retirement benefits		60			98			66		67
Unrealized losses on available for sale securities		584			569
Unrealized losses on interest rate swaps								1,481		2,199
Deferred compensation		912			1,439			775		767
Goodwill		89			148			44		47
Purchse accounting adjustments		198			731
Lease liability								266		256
Other		50			254			25		79
Employee benefit plans		97			90			198		242

Total deferred tax assets		3,900			5,856			4,995		5,795
Valuation allowance		(239	)		(378	)		(4)		(4)
Total deferred tax assets, net of valuation allowance		3,661			5,478			4,991		5,791


Deferred tax liabilities:
Property		199			332			170		127
Unrealized gains on interest rate swaps		115			171
Right of Use								242		233
Realized gain on equity securities								3		3
Unrealized gains on available for sale securities								1,370		1,621
Purchase accounting adjustments								379		394
Deferred loan fees		511			884			436		392

Total deferred tax liabilities		825			1,387			2,600		2,770

Net deferred tax assets	$	2,836		$	4,091		$	2,391	$	3,021

The Company establishes a valuation allowance for deferred tax assets when management believes that the use of the deferred tax assets is not likely to be fully realized through future reversals of existing taxable temporary differences and/or, to a lesser extent, future taxable income. The tax deduction generated by the redemption of the shares of a mutual fund held by the Bank and the subsequent impairment charge on the assets acquired through the redemption in kind are considered capital losses and can only be utilized to the extent of capital gains recognized over a five year period, resulting in the establishment of a valuation allowance for the carryforward period. The valuation allowance totaled ~~$239,000 and $378,000~~$4,000 at both December 31, ~~2017,~~2021 and September 30, ~~2017, respectively.~~

For the three-month period ended December 31, 2017, the Company recorded income tax expense of $2.3 million, which included a $1.8 million one-time charge related to a re-evaluation of the Company’s deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act in December 2017, compared to income tax expense of $370,000 and an effective tax rate of 33.6% for the same period in 2016. The reevaluation reflected the effect of the significant decline in the federal corporate income tax rate applicable to the company. During fiscal 2018, commencing with the quarter ended December 31, 2017, the Company’s statutory income tax rate will be 24.25% as compared to companies which are calendar year tax reporting companies whose statutory rate will decrease to 21% starting January 1, 2018. Effective October 1, 2018, the Company’s statutory tax rate will be reduced to 21%.

~~The income tax expense differs from that computed at the statutory federal corporate tax rate as follows:~~

2017 2016
Percentage Percentage
of Pretax of Pretax
Amount Income Amount Income
(Dollars in Thousands)
Tax at statutory rate $ 557 24.25 % $ 374 34.00 %
Adjustments resulting from:
Write-down of deferred tax asset 1,756 76.41 - -
Tax exempt income (33 ) (1.44 ) (6 ) (0.54 )
Income from bank owned life insurance (40 ) (1.74 ) (57 ) (5.19 )
Employee benefit plans 21 0.91 68 6.17
Other 3 0.13 (9 ) (0.83 )

Income tax expense $ 2,264 98.52 % $ 370 33.61 %

2021.

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statements of Operations as a component of income tax expense. ~~During fiscal 2017, the Internal Revenue Service conducted an audit of the Company’s tax return for the year ended September 30, 2014, and no adverse findings were reported.~~ The Company’s federal and state income tax returns for taxable years through September 30, ~~2014~~2017 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

~~11.~~

10. STOCK COMPENSATION PLANS

The Company maintains the 2008 Recognition and Retention Plan (“RRP”) which is administered by a committee of the Board of Directors of the Company. The RRP provides for the grant of shares of common stock of the Company to officers, employees and directors of the Company. In order to fund the grant of shares under the RRP, the RRP Trust purchased 213,528 shares of the Company’s common stock in the open market for approximately $2.5 million, at an average purchase price per share of $11.49 as part of the RRP. The CompanyGrants can no longer be made ~~sufficient contributions~~pursuant to the 2008 RRP ~~Trust to fund the RRP Trust’s purchases. Shares subject to awards under the RRP generally vest at the rate~~even if

Table of ~~20% per year over five years.~~Contents

previously awarded grants are forfeited. During February 2015, shareholders approved the 2014 Stock Incentive Plan (the “2014 SIP”). As part of the 2014 SIP, a maximum of 285,655 shares of common stock can be awarded as restricted stock awards or units, of which ~~235,500~~233,500 shares were awarded during ~~February.~~February 2015. In ~~August 2016,~~March 2019, the Company granted ~~7,473~~8,209 shares under the 2008 RRP and ~~3,027~~18,291 shares under the 2014 SIP. ~~In March 2017,~~There were 0 shares awarded during 2020 and 2021. Shares subject to awards under either plan generally vest at the ~~Company granted 17,128 shares under the 2014 SIP.~~

rate of 20% per year over five years.

Compensation expense related to the shares subject to restricted stock awards granted is recognized ratably over the five-year vesting period in an amount which totals the grant date fair value multiplied by the number of shares subject to the grant. During the three months ended December 31, ~~2017 and 2016, $151,000 and $134,000, respectively,~~2021, an aggregate of $41,000 was recognized in compensation expense for the grants pursuant to the RRP and the 2014 SIP. During the three months ended December 31, 2020, $43,000 was recognized in compensation expense for the grants pursuant to the RRP and the 2014 SIP. At December 31, ~~2017,~~2021, approximately ~~$1.3 million~~$113,000 in additional compensation expense for ~~the~~unvested shares awarded ~~which remained outstanding~~ related to the RRP and ~~the~~ 2014 SIP remained ~~unrecognized~~

unrecognized.

A summary of the Company’s non-vested stock award activity for the three months ended December 31, ~~2017 and 2016~~2021 is presented in the following ~~tables:~~table:

	Three Months Ended December 31, 2017
	Number of Shares (1)			Weighted Average Grant Date Per Share Fair Value

Nonvested stock awards at October 1, 2017		142,594		$	12.79

						Three Months Ended
						December 31, 2021
						Number of	Weighted Average
						Shares	Grant Date Fair Value
Non-vested stock awards at October 1, 2021						23,056	$	17.78
Granted		-			-	0		0
Forfeited		(3,736	)	$	11.84	0		0
Vested		-			-	0		0
Nonvested stock awards at December 31, 2017		138,858		$	12.82
Non-vested stock awards at December 31, 2021						23,056	$	17.78

Three Months Ended
December 31, 2016
Number of
Shares Weighted Average
Grant Date Per
Share Fair Value

Nonvested stock awards at October 1, 2016 172,788 $ 12.03
Granted - -
Forfeited - -
Vested - -
Nonvested stock awards at December 31, 2016 172,788 $ 12.03

The Company maintains the 2008 Stock Option Plan (the “Option Plan”) which authorizes the grant of stock options to officers, employees and directors of the Company to acquire shares of common stock with an exercise price at least equal to the fair market value of the common stock on the grant date. Options generally become vested and exercisable at the rate of 20% per year over five years and are generally exercisable for a period of ten years after the grant date. A total of 533,808 shares of common stock were approved for future issuance pursuant to the ~~Stock~~ Option Plan. As of ~~December 31, 2017,~~September 30, 2019, all of the options had been awarded under the Option ~~Plan. As of December 31, 2017, 524,287 options were vested under~~Plan and 0 grants can be made in the future by the Option ~~Plan.~~Plan even if previously awarded grants are forfeited. The 2014 SIP reserved up to 714,145 shares for issuance pursuant to options. ~~Options to purchase 605,000 shares were awarded during February 2015. During August 2016,~~In July 2019, the Company granted ~~18,867 shares under the Option Plan and 8,633~~39,702 shares under the 2014 SIP. In ~~March 2017,~~September 2020, the Company granted ~~22,828~~12,500 shares under the 2014 SIP. In ~~May 2017,~~June 2021, the Company granted ~~24,717~~4,500 shares under the 2014 ~~SIP and 283 shares under the Option Plan.~~

SIP.

A summary of the status of the Company’s stock options under the ~~2008~~ Option Plan and the 2014 SIP ~~as of~~for the three months ended December 31, ~~2017 and 2016 are~~2021 is presented below:

	Three Months Ended December 31, 2017
	Number of Shares			Weighted Average Exercise Price

Outstanding at October 1, 2017		922,564		$	12.04

						Three Months Ended
						December 31, 2021
						Number of	Weighted Average
						Shares	Exercise Price
Options outstanding at October 1, 2021						521,258	$	14.23
Granted		-			-	0		0
Exercised		(22,171	)	$	11.27	—		—
Forfeited		(8,364	)	$	11.76	0		0
Outstanding at December 31, 2017		892,029		$	12.28
Exercisable at December 31, 2017		524,267		$	11.47
Outstanding at December 31, 2021						521,258	$	14.23
Exercisable at December 31, 2021						418,471	$	13.74

Three Months Ended
December 31, 2016
Number of
Shares Weighted Average
Exercise Price Per Share

Outstanding at October 1, 2016 921,909 $ 11.70
Granted - -
Exercised - -
Forfeited - -
Outstanding at December 31, 2016 921,909 $ 11.70
Exercisable at December 31, 2016 467,397 $ 11.40

The weighted average remaining contractual term was approximately ~~4.0~~4.3 years for options outstanding as of December 31, ~~2017.~~2021.

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The estimated fair value of options granted during fiscal ~~2009~~2020 was ~~$2.98~~$2.31 per share ~~$2.92~~and $3.91 for options granted ~~during~~in fiscal 2010, $3.34 for options granted during fiscal 2013, $4.67 for the options granted during fiscal 2014, $4.58 for options granted during fiscal 2015, $2.13 for options granted during fiscal 2016 and $3.18 for options granted during fiscal 2017.2021. The fair value for grants made in fiscal ~~2016~~2020 was estimated on the date of grant using the Black-Scholes pricing model with the following assumptions: an exercise and fair value of ~~$14.42,~~$10.00, term of seven years, volatility rate of ~~13.82%~~33.22%, interest rate of ~~1.36%~~0.41% and a yield rate of ~~0.80%~~2.80%. The fair value for grants made in fiscal ~~2017~~2021 was estimated on the date of grant using the Black-Scholes pricing model with the following assumptions: an exercise and fair value ~~based on grant date market value and range from $17.43 to $18.39,~~of $13.86, term of seven years, volatility rate of ~~14.37%~~34.46%, interest rate of ~~2.22%~~1.19% and a yield rate of ~~0.69%~~2.02%.

During the three months ended December 31, ~~2017~~2021 and ~~2016, $137,000~~2020, $41,000 and ~~$130,000,~~$43,000, respectively, was recognized in compensation expense for options granted pursuant to the Option Plan and the 2014 SIP.

At December 31, ~~2017,~~2021, there was approximately ~~$1.2 million~~$230,000 in additional compensation expense to be recognized for awarded options which remained outstanding and unvested at such date. The weighted average period over which this expense will be recognized is approximately ~~2.8~~1.84 years.

~~12.~~

11. COMMITMENTS AND CONTINGENT LIABILITIES

At December 31, ~~2017,~~2021, the Company had ~~$56.6~~$22.1 million in outstanding commitments to originate ~~fixed-rate~~ loans with market interest rates ranging from ~~4.75%~~4.25% to ~~5.50%~~5.00%. At September 30, ~~2017,~~2021, the Company had ~~$45.9~~$34.9 million in outstanding commitments to originate ~~fixed-rate~~ loans with market interest rates ranging from ~~3.75%~~2.99% to ~~5.25%~~5.00%. The aggregate undisbursed portion of loans-in-process amounted to ~~$60.6~~$94.5 million at December 31, ~~2017~~2021 and ~~$73.9~~$80.6 million at September 30, ~~2017.~~

2021.

The Company also had commitments under unused lines of credit of ~~$6.8~~$43.3 million as of December 31, ~~2017~~2021 and ~~$7.4~~$68.1 million as of September 30, ~~2017~~2021 and letters of credit outstanding of ~~$1.8~~$1.2 million as of December 31, ~~2017~~2021 and ~~$1.4~~$1.2 million as of September 30, ~~2017.~~

2021.

Among the Company’s contingent liabilities are exposures to limited recourse arrangements with respect to the Company’s sales of whole loans and participation interests. At December 31, ~~2017,~~2021, the exposure, which represents a portion of credit risk associated with the interests sold, amounted to ~~$1.7~~$1.0 million. This exposure is for the life of the related loans and payables, on our proportionate share, as actual losses are incurred.

The Company is involved in various legal proceedings occurring in the ordinary course of business. Management of the Company, based on discussions with litigation counsel, believes that such proceedings will not have a material adverse effect on the financial condition, operations or cash flows of the Company. However, thereThere can be no assurance that any of the outstanding legal proceedings to which the Company is a party will not be decided adversely to the ~~Company's~~Company’s interests and not have a material adverse effect on the financial condition and operations of the Company.

~~13.~~

12. FAIR VALUE MEASUREMENT

The fair value estimates presented herein are based on pertinent information available to management as of December 31, ~~2017~~2021 and September 30, ~~2017,~~2021, respectively. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

Generally accepted accounting principles used in the United States establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

The three broad levels of hierarchy are as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

	~~Level 1~~	~~Quoted prices in active markets for identical assets or liabilities.~~

	~~Level 2~~	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

	~~Level 3~~	~~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 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 25 Table of Contents Level 3 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 the determination of fair value requires significant management judgment or estimation. Those 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 the determination of fair value requires significant management judgment or estimation.

~~Those assets~~ as of December 31, ~~2017 which are to be measured at fair value on a recurring basis are as follows:~~

Category Used for Fair Value Measurement
Level 1 Level 2 Level 3 Total
(Dollars in Thousands)

Assets:
Securities available for sale:
U.S. Government and agency obligations $ - $ 25,497 $ - $ 25,497
Mortgage-backed securities - U.S. Government agencies - 132,290 - 132,290
Corporate bonds - 56,716 - 56,716
FHLMC preferred stock 67 - - 67
Interest rate swap contracts - 601 - 601
Total $ 67 $ 215,104 $ - $ 215,171

~~Those assets as of September 30, 2017~~2021 which are measured at fair value on a recurring basis are as follows:


									Category Used for Fair Value Measurement
									Level 1		Level 2		Level 3		Total
	Category Used for Fair Value Measurement
	Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)

									(Dollars in Thousands)

Assets:
Securities available for sale:
U.S. Government and agency obligations	$	-	$	25,799	$	-	$	25,799	$	—	$	3,022	$	—	$	3,022
State and political subdivisions										—		76,136		—		76,136
Mortgage-backed securities - U.S. Government agencies		-		118,127		-		118,127		—		116,247		—		116,247
Corporate bonds		-		34,400		-		34,400		—		102,119		—		102,119
FHLMC preferred stock		76		-		-		76
Equity securities										22		—		—		22
Loans held for sale										406		—		—		406
Total									$	428	$	297,524	$	—	$	297,952

Liabilities:
Interest rate swap contracts		-		502		-		502	$	—	$	9,031	$	—	$	9,031
Total	$	76	$	178,828	$	-	$	178,904	$	—	$	9,031	$	—	$	9,031

Those assets and liabilities as of September 30, 2021 which are measured at fair value on a recurring basis are as follows:


	Category Used for Fair Value Measurement
	Level 1		Level 2		Level 3		Total

	(Dollars in Thousands)

Assets:
Securities available for sale:
U.S. Government and agency obligations	$	—	$	3,194	$	—	$	3,194
State and political subdivisions		—		72,259		—		72,259
Mortgage-backed securities - U.S. Government agencies		—		135,353		—		135,353
Corporate bonds		—		95,141		—		95,141
Equity securities		22		—		—		22
Total	$	22	$	305,947	$	—	$	305,969

Liabilities:
Interest rate swap contracts	$	—	$	12,834	$	—	$	12,834
Total	$	—	$	12,834	$	—	$	12,834

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is

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evidence of impairment). The Company measures impaired loans and real estate owned at fair value on a non-recurring basis.

Investments and Mortgage-Backed Securities

~~Impaired Loans~~

The ~~Company considers loans to be impaired when it becomes more likely than not that the Company will be unable to collect all amounts due in accordance with the contractual terms~~fair value of ~~the loan agreements.~~ investment and mortgage-backed securities is based on quoted market prices, dealer quotes, and prices obtained from independent pricing services.

Impaired Loans

Collateral dependent impaired loans are based on the fair value of the collateral which is based on appraisals and would be categorized as Level 2 measurement. In some cases, adjustments are made to the appraised values for various factors including the age of the appraisal, age of the comparable included in the appraisal, and known changes in the market and in the collateral. These adjustments are based upon unobservable inputs, and therefore, the fair value measurement of these assets has been categorized as a Level 3 measurement. These loans are reviewed for impairment and written down to their net realizable value by charges against the allowance for loan losses. ~~The collateral underlying these~~There were no loans ~~had a~~carried at fair value ~~in excess of $23.9 million as of~~at December 31, ~~2017.~~2021 or September 30, 2021.

Real Estate Owned

Once an asset is determined to be uncollectible, the underlying collateral is generally repossessed and reclassified to foreclosed real estate and repossessed assets. These repossessed assets are carried at the lower of cost or fair value of the collateral, based on independent appraisals, less cost to sell and would be categorized as Level 23 measurement. In some cases, adjustments are made to the appraised values for various factors including the age of the appraisal, the age of the ~~comparable~~comparables included in the appraisal, and known changes in the market and in the collateral. ~~As a result,~~Thus the evaluations are based upon unobservable inputs, and therefore, the fair value measurement of these assets has been categorized as a Level 3 measurement.

Summary of Non-Recurring Fair Value Measurements


	At December 31, 2021
	(Dollars in Thousands)
	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	4,109	$	4,109
Total	$	—	$	—	$	4,109	$	4,109


	At September 30, 2021
	(Dollars in Thousands)
	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	4,109	$	4,109
Total	$	—	$	—	$	4,109	$	4,109

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At December 31, 2017
(Dollars in Thousands)
Level 1 Level 2 Level 3 Total
Impaired loans $ - $ - $ 23,923 $ 23,923
Real estate owned - - 363 363
Total $ - $ - $ 24,286 $ 24,286

At September 30, 2017
(Dollars in Thousands)
Level 1 Level 2 Level 3 Total
Impaired loans $ - $ - $ 19,665 $ 19,665
Real estate owned - - 192 192
Total $ - $ - $ 19,857 $ 19,857

The following table provides information describing the valuation ~~processes~~process used to determine nonrecurring fair value measurements categorized within ~~Level~~level 3 of the fair value hierarchy:


	At December 31, 2021
	(Dollars in Thousands)
			Valuation		Range/
	Fair Value		Technique	Unobservable Input	Weighted Ave.
Other real estate owned	$	4,109	Property appraisals (1) (3)	Management discount for selling costs, property type and market volatility (2)	2% discount

At December 31, 2017
(Dollars in Thousands)
Valuation Range/
Fair Value Technique Unobservable Input Weighted Ave.
Impaired loans $ 23,923 Property appraisals (1) (3) Management discount for selling costs, property type and market volatility (2) 6% to 57% discount/ 7%
Real estate owned $ 363 Property appraisals (1)(3) Management discount for selling costs, property type and market volatility (2) 10% discount


	At September 30, 2021
	(Dollars in Thousands)
			Valuation		Range/
	Fair Value		Technique	Unobservable Input	Weighted Ave.
Other real estate owned	$	4,109	Property appraisals (1) (3)	Management discount for selling costs, property type and market volatility (2)	2% discount

At September 30, 2017
(Dollars in Thousands)
Valuation Range/
Fair Value Technique Unobservable Input Weighted Ave.
Impaired loans $ 19,665 Property appraisals (1) (3) Management discount for selling costs, property type and market volatility (2) 6% to 57% discount/ 7%
Real estate owned $ 192 Property appraisals (1)(3) Management discount for selling costs, property type and market volatility (2) 10% discount

(1)

Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various ~~Level~~level 3 inputs, which are not identifiable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3)

Includes qualitative adjustments by management and estimated liquidation expenses.

The fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Fair Value Measurements at
Carrying Fair December 31, 2017
Amount Value (Level 1) (Level 2) (Level 3)
(Dollars in Thousands)
Assets:
Cash and cash equivalents $ 16,659 $ 16,659 $ 16,659 $ - $ -
Certificates of deposit 1,604 1,604 1,604 - -
Investment and mortgage-backed securities available for sale 214,570 214,570 67 214,503 -
Investment and mortgage-backed securities held to maturity 63,377 62,156 - 62,156 -
Loans receivable, net 579,987 580,226 - - 580,226
Accrued interest receivable 3,452 3,452 3,452 - -
Federal Home Loan Bank stock 6,859 6,859 6,859 - -
Bank owned life insurance 28,212 28,212 28,212 - -
Interest rate swap contracts 601 601 - 601 -

Liabilities:
Checking accounts 58,336 58,336 58,336 - -
Money market deposit accounts 71,484 71,484 71,484 - -
Passbook, club and statement savings accounts 106,146 106,146 106,146 - -
Certificates of deposit 416,066 420,294 - - 420,294
Advances from FHLB short-term 30,000 30,000 30,000 - -
Advances from FHLB long-term 106,916 106,147 - - 106,147
Accrued interest payable 641 641 641 - -
Advances from borrowers for taxes and insurance 3,498 3,498 3,498 - -

Fair Value Measurements at
Carrying Fair September 30, 2017
Amount Value (Level 1) (Level 2) (Level 3)
(Dollars in Thousands)
Assets:
Cash and cash equivalents $ 27,903 $ 27,903 $ 27,903 $ - $ -
Certificates of deposit 1,604 1,604 1,604 - -
Investment and mortgage-backed securities available for sale 178,402 178,402 76 178,326 -
Investment and mortgage-backed securities held to maturity 61,284 60,179 - 60,179 -
Loans receivable, net 571,343 575,876 - - 575,876
Accrued interest receivable 2,825 2,825 2,825 - -
Federal Home Loan Bank stock 6,002 6,002 6,002 - -
Interest rate swap contracts 502 502 - 502 -
Bank owned life insurance 28,048 28,048 28,048 - -

Liabilities:
Checking accounts 59,956 59,956 59,956 - -
Money market deposit accounts 48,797 48,797 48,797 - -
Passbook, club and statement savings accounts 101,743 101,743 101,743 - -
Certificates of deposit 394,325 398,078 - - 398,078
Accrued interest payable 1,933 1,933 1,933 - -
Advances from FHLB -short-term 20,000 20,000 20,000 - -
Advances from FHLB -long-term 94,318 93,579 - - 93,579
Advances from borrowers for taxes and insurance 2,207 2,207 2,207 - -

~~Cash and Cash Equivalents~~—For cash and cash equivalents, certificates of deposit, accrued interest receivable, restricted bank stock, bank owned life insurance and accrued interest payable the carrying ~~amount~~value is a reasonable estimate of fair ~~value.~~value and are considered a level 1 measurement.


					Fair Value Measurements at
	Carrying		Fair		December 31, 2021
	Amount		Value		(Level 1)		(Level 2)		(Level 3)

	(Dollars in Thousands)
Assets:
Investment and mortgage-backed securities held to maturity	$	17,834	$	18,777	$	0	$	18,777	$	0
Loans receivable, net		584,758		582,718		0		0		582,718

Liabilities:
Certificates of deposit		235,058		241,342		0		0		241,342
Advances from FHLB -long-term		207,880		213,008		0		0		213,008

~~Certificates of deposit~~~~—For certificates of deposit, the carrying amount is a reasonable estimate of fair value.~~

~~Investments and Mortgage-Backed Securities~~—~~The fair value of investment securities and mortgage-backed securities is based on quoted market prices, dealer quotes, and prices obtained from independent pricing services.~~

~~Loans Receivable~~—The fair value of loans is estimated based on present value using the current market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The carrying value that fair value is compared to is net of the allowance for loan losses and other associated premiums and discounts. Due to the significant judgment involved in evaluating credit quality, loans are classified within Level 3 of the fair value hierarchy.

~~Accrued Interest Receivable –~~ ~~For accrued interest receivable, the carrying amount is a reasonable estimate of fair value.~~

~~Federal Home Loan Bank (FHLB) Stock~~—Although FHLB stock is an equity interest in an FHLB, it is carried at cost because it does not have a readily determinable fair value as its ownership is restricted and it lacks a market. The estimated fair value approximates the carrying amount.

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					Fair Value Measurements at
	Carrying		Fair		September 30, 2021
	Amount		Value		(Level 1)		(Level 2)		(Level 3)

	(Dollars in Thousands)
Assets:
Investment and mortgage-backed securities held to maturity	$	20,074	$	21,161	$	0	$	21,161	$	0
Loans receivable, net		618,206		620,017						620,017

Liabilities:
Certificates of deposit		244,877		252,510		0		0		252,510
Advances from FHLB -long-term		232,025		239,301		0		0		239,301

~~Bank Owned Life Insurance~~—~~The fair value of bank owned life insurance is based on the cash surrender value obtained from an independent advisor that is derivable from observable market inputs.~~

~~Checking Accounts, Money Market Deposit Accounts, Passbook Accounts, Club Accounts, Statement Savings Accounts, and Certificates of Deposit~~—The fair value of passbook accounts, club accounts, statement savings accounts, checking accounts, and money market deposit accounts is the amount reported in the financial statements. The fair value of certificates of deposit is based on market rates currently offered for deposits with similar remaining maturities.

~~Short-term Advances from Federal Home Loan Bank~~—~~The fair value of short-term advances from FHLB is the amount payable on demand at the reporting date.~~

~~Long-term Advances from Federal Home Loan Bank —~~~~The fair value of long-term advances from FHLB is based on market rates currently offered for advances with similar remaining maturities.~~

~~Accrued Interest Payable –~~ ~~For accrued interest payable, the carrying amount is a reasonable estimate of fair value.~~

~~Interest rate swaps –~~ ~~The fair values of the interest rate swap contracts are based upon the estimated amount the Company would receive or pay, as applicable, to terminate the contracts.~~

~~Advances from borrowers for taxes and insurance –~~ ~~For advances from borrowers for taxes and insurance, the carrying amount is a reasonable estimate of fair value.~~

~~Commitments to Extend Credit and Letters of Credit~~—The majority of the Bank’s commitments to extend credit and letters of credit carry current market interest rates if converted to loans. Because commitments to extend credit and letters of credit are generally unassignable by either the Bank or the borrower, they only have value to the Bank and the borrower. The estimated fair value approximates the recorded deferred fee amounts, which are not significant.

~~14.~~

13. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company’s goodwill and intangible assets are related to the acquisition of Polonia Bancorp, onInc., which was completed as of January 1, 2017.


	Balance						Balance
	October 1,		Additions/				December 31,		Amortization
	2021		Adjustments		Amortization		2021		Period

					(Dollars in Thousands)
Goodwill	$	6,102	$	0	$	—	$	6,102
Core deposit intangible		246		0		(22)		224	10 years
	$	6,348	$	0	$	(22)	$	6,326

Balance Balance
October 1, Additions/ December 31, Amortization
2017 Adjustments Amortization 2017 Period

Goodwill $ 6,102 $ - $ - $ 6,102
Core deposit intangible 710 - (38 ) 672 10 years
$ 6,812 $ - $ (38 ) $ 6,774

As of December 31, ~~2017,~~2021, the current fiscal year and the future fiscal periods amortization expense for the core deposit intangible is:

(In thousands)
2018 $ 100
2019 123
2020 108
2021 93
2022 77
Thereafter 171
Total 672


(in Thousands)

2022	$	56
2023		64
2024		49
2025		34
2026		18
Thereafter		3
	$	224

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

The following discussion should be read in conjunction with our unaudited consolidated financial statements included elsewhere in this Form 10-Q and with our Annual Report on Form 10-K, as amended, for the year ended September 30, ~~2017~~2021 (the “Form 10-K”).

Overview. Prudential Bancorp, Inc. (the “Company”) was formed by Prudential Bancorp, Inc. of Pennsylvania to become the successor holding company for Prudential Bank (the “Bank”)~~(formerly~~ (formerly known as Prudential Savings Bank) as a result of the second-step conversion of Prudential Mutual Holding Company completed in October 2013. The Company’s results of operations are primarily dependent on the results of the Bank, which is a wholly owned subsidiary of the Company. The Company’s results of operations depend to a large extent on net interest income, which primarily is the difference between the income earned on its loan and securities portfolios and the cost of funds, which is the interest paid on deposits and borrowings. Results of operations are also affected by our ~~provisions~~provision for loan losses, non-interest income (which includes impairment charges) and non-interest expense. Non-interest expense principally consists of salaries and employee benefits, office occupancy expense, depreciation, data processing expense, payroll taxes and other ~~expense.~~expenses. Our results of operations are also significantly affected by general economic and competitive conditions, ~~particularly~~especially changes resulting from the ongoing COVID-19 pandemic and the governmental actions taken to address it including shelter-in-place orders and required closing of non-essential businesses, as well as changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable laws, regulations or government policies may materially impact our financial condition and results of operations.

The Bank is subject to regulation by the Federal Deposit Insurance Corporation (the “FDIC”) and the Pennsylvania Department of Banking and Securities (the “Department”). The Bank’s main office is located in Philadelphia, Pennsylvania, with ~~ten~~nine additional full-service banking offices located in Philadelphia, Delaware and ~~Delaware~~Montgomery Counties in Pennsylvania. The Bank’s primary business consists of attracting deposits from the general public and using those funds together with borrowings to originate loans and to invest primarily in U.S. Government and agency securities and mortgage-backed securities. In ~~November~~ 2005, the Bank formed PSB Delaware, Inc., a Delaware corporation, as a subsidiary of the Bank. In ~~March~~ 2006, all mortgage-backed securities then owned by the Company’s predecessor were transferred to PSB Delaware, Inc. PSB Delaware, Inc.’s activities are included as part of the consolidated financial statements.

Critical Accounting ~~Policies.~~Policies and Estimates. In reviewing and understanding financial information for the Company, you are encouraged to read and understand the significant accounting policies used in preparing our financial statements. These policies are described in Note 1 of the notes to our unaudited consolidated financial statements included in Item 1 hereof as well as in Note 2 to our audited consolidated financial statements included in the Form 10-K. The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities as well as contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. The following accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

Allowance for Loan Losses. The allowance for loan losses is established through a provision for loan losses charged to expense. Losses are charged against the allowance for loan losses when management believes that the collectability in full of the principal of a loan is unlikely. Subsequent recoveries are added to the allowance. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairments based upon an evaluation of known and inherent losses in the loan portfolio that are both probable and reasonable to estimate. For the quarter ended December 31, 2021, the analysis took into account the exposure to credit deterioration

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due to the ongoing COVID-19 pandemic. Loan impairment is evaluated based on the fair value of collateral or estimated net realizable value. It is the policy of management to provide for losses on unidentified loans in its portfolio in addition to criticized and classified loans.

Management monitors its allowance for loan losses at least quarterly and makes adjustments to the allowance through the provision for loan losses as economic conditions and other pertinent factors indicate. The quarterly review and adjustment of the qualitative factors employed in the allowance methodology and the updating of historic loss experience allow for timely reaction to emerging conditions and trends. In this context, a series of qualitative factors are used in a methodology as a measurement of how current circumstances are affecting the loan portfolio. Included in these qualitative factors are:

·●

Levels of past due, classified, criticized and non-accrual loans, troubled debt restructurings and loan modifications;

·●

Nature and volume of loans;

·●

Changes in lending policies and procedures, underwriting standards, collections, charge-offs and recoveries and for commercial loans, the level of loans being approved with exceptions to the Bank’s lending policy;

·●

Experience, ability and depth of management and staff;

·●

National and local economic and business conditions, including various market ~~segments;~~segments, especially in light of the effects of the COVID-19 pandemic and actions taken to address it on both the national and local economies;

·●

Quality of the Bank’s loan review system and the degree of Board oversight;

·●

Concentrations of credit and changes in levels of such concentrations; and

·●

Effect of external factors on the level of estimated credit losses in the current portfolio.

In determining the allowance for loan losses, management has established a general pooled allowance. Values assigned to the qualitative factors and those developed from historic loss experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (the general pooled allowance) and those for criticized and classified loans. The amount of the specific allowance is determined through a loan-by-loan analysis of certain large dollar commercial real estate loans, construction and land development loans and multi-family loans. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historical loss experience and the qualitative factors described above. In determining the appropriate level of the general pooled allowance, management makes estimates based on internal risk ratings, which take into account such factors as debt service coverage, loan-to-value ratios and external factors. Estimates are periodically measured against actual loss experience.

This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impaired loans, value of collateral, estimated losses on our commercial, construction and residential loan portfolios and historical loss experience. All of these estimates may be susceptible to significant change.

While management analyzed its allowance in light of the COVID-19 pandemic, such analysis will need to be continually refined and reviewed in light of the ongoing nature of the effects of the COVID-19 pandemic.

While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. In addition, the Department and the FDIC, as an integral part of their examination processes, periodically review our allowance for loan losses. The Department and the FDIC may require the recognition of adjustments to the allowance for loan losses based on their judgment of information available to them at the time of their examination. To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for loan losses may be required that would adversely affect earnings in future periods.

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Investment and mortgage-backed securities available for sale.Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated using quoted prices of securities with similar characteristics or discounted cash flows and are classified within Level 2 of the fair value hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. There were no securities with a Level 3 classification as of December 31, ~~2017~~2021 or September 30, ~~2017.~~

2021.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. In light of the ongoing COVID-19 pandemic, management is taking into account the effects the pandemic may have on securities and their impairment. The Company determines whether the unrealized losses are temporary or are considered other than temporary. The evaluation is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing performance of the securities. In addition, the Company also considers the likelihood that the security will be required to be sold because of regulatory concerns, our internal intent not to dispose of the security prior to maturity and whether the entire cost basis of the security is expected to be recovered. In determining whether the cost basis will be recovered, management evaluates other facts and circumstances that may be indicative of an “other-than-temporary” impairment condition. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost, and near-term prospects of the issuer.

In addition, certain assets are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company measures impaired loans and other real estate owned at fair value on a non-recurring basis.

Valuation techniques and models utilized for measuring financial assets and liabilities are reviewed and validated by the Company at least quarterly.

Derivatives. The Company uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty. The Company uses interest rate swaps to manage its exposure to changes in fair value. Interest rate swaps designated as fair value hedges involve the receipt of variable-rate payments from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.

Income Taxes. The Company accounts for income taxes in accordance with U.S. GAAP. The Company records deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management exercises significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based upon changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods.

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 our 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 an additional 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.

U.S. GAAP prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The Company recognizes, when applicable, interest and penalties related to unrecognized tax

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benefits in the provision for income taxes in the consolidated income statement. Assessment of uncertain tax positions requires careful consideration of the technical merits of a position based on ~~management's~~management’s analysis of tax regulations and interpretations. Significant judgment may be involved in the assessment of the tax position.

Forward-looking Statements. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, expectations or predictions of future financial or business performance, conditions relating to the ~~Company and “Polonia Bancorp Inc.” or other effects of the merger of the Company and Polonia Bancorp.~~Company. These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company’s control). The words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements.

In addition to factors previously disclosed in the reports filed by the Company with the Securities and Exchange ~~commission~~Commission (“SEC”) and those identified elsewhere in this ~~Form 10-Q,~~press release, the following factors, among others, could cause actual results to differ materially from ~~forward looking~~forward-looking statements or historical performance: ~~difficulties and delays in integrating the Polonia business or fully realizing anticipated cost savings and other benefits of the merger; business disruptions following the merger;~~ the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations; general economic conditions; the scope and duration of the COVID-19 pandemic; the effects of the COVID-19 pandemic, including on the Company’s credit quality and operations as well as its impact on general economic conditions; legislative and regulatory ~~changes;~~changes including actions taken by governmental authorities in response to the COVID-19 pandemic; monetary and fiscal policies of the federal government; the effect of the Federal Reserve’s Open Market Committee’s likely increase in the federal funds rate starting potentially in March 2022; changes in tax policies, rates and regulations of federal, state and local tax ~~authorities;~~authorities including the effects of the Tax Reform Act; changes in interest rates, deposit flows, the cost of funds, demand for loan products, including potential declines in demand due to the COVID-19 pandemic, and the demand for financial services, in each case as may be affected by the COVID-19 pandemic, competition, changes in the quality or composition of the ~~Company's~~Company’s loan, investment and mortgage-backed securities portfolios; geographic concentration of the Company’s business; fluctuations in real estate values, especially in light of the COVID-19 pandemic; the adequacy of loan loss reserves; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; changes in accounting principles, policies or guidelines and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and ~~fees; and the success of the Company at managing the risks involved in the foregoing.~~

fees.

The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company to reflect events or circumstances occurring after the date of this Form 10-Q.

For a complete discussion of the assumptions, risks and uncertainties related to our business, readers are encouraged to review the Company’s filings with the SEC, including the “Risk Factors” section in the Company’s most recent Form 10-K, as supplemented by its quarterly or other reports subsequently filed with the SEC.

Market Overview.The ~~economy~~ongoing worldwide COVID-19 pandemic has ~~continued~~caused significant volatility and disruption in the financial markets both in the United States and globally as well as other effects such as supply chain disruptions. We continue to ~~improve during 2017~~work with both residential and ~~2016.~~

commercial borrowers to help them meet the unexpected financial challenges stemming from the COVID-19 pandemic.

The Company continues to focus on the credit quality of its customers, especially in light of the COVID-19 pandemic, closely monitoring the financial status of borrowers throughout the Company’s markets, gathering information, working on early detection of potential problems, taking pre-emptive steps where necessary and performing the analysis required to maintain adequate reserves for loan losses.

~~Despite the current market and economic conditions, the~~The Company continues to maintain capital well in excess of regulatory requirements.

The following discussion provides further details on the financial condition of the Company at December 31, ~~2017~~2021 and September 30, ~~2017,~~2021, and the results of operations for the three months ended December 31, ~~2017~~2021 and ~~2016.~~2020.

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COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, ~~2017~~2021 AND SEPTEMBER 30, ~~2017~~2021

AtTotal assets decreased by $16.3 million to approximately $1.1 billion at December 31, ~~2017, the Company had total assets of $933.8~~2021 from September 30, 2021. Net loans receivable decreased $33.4 million ~~as compared~~ to ~~$899.5~~$584.8 million at December 31, 2021 from $618.2 million at September 30, ~~2017, an increase of 3.8%.~~At2021. The decrease was primarily related to paydowns in construction and land development loans and one-to-four family loans, partially offset by increases in commercial business loans. The investment portfolio decreased between September 30, 2021 and December 31, ~~2017, the investment portfolio increased~~2021 by ~~$38.3~~$10.7 million primarily as a result of paydowns of securities, while cash and cash equivalents increased by $31.1 million.

Total liabilities decreased by $19.4 million during the ~~purchase of investment grade corporate bonds and U.S. government agency mortgage-backed securities. Net loans receivable increased $8.7 million~~quarter to ~~$580.0~~$950.6 million at December 31, ~~2017 from $571.3~~2021 due primarily to a $24.1 million ~~at September 30, 2017. These increases were~~decrease in borrowings partially offset by a $9.2 million increase in deposits. The growth in deposits was primarily due to an ~~$11.2 million decrease~~increase in ~~cash and cash equivalents as available cash was redeployed into higher yielding assets.~~

Total liabilities increased by $37.0 million to $800.3 million at December 31, 2017 from $763.4 million at September 30, 2017. Total deposits increased $16.1 million, consisting primarily of short-term certificates of deposit which were used to fund asset growth as well as meet short-term liquidity needs.demand deposits. At December 31, ~~2017,~~2021, the Company had FHLB advances outstanding of ~~$136.9~~$207.9 million, as compared to ~~$114.3~~$232.0 million at September 30, ~~2017. The increase in~~2021 as the ~~level of~~Company allowed higher costing FHLB borrowings ~~was primarily due~~ to ~~match funding of purchases of investment securities~~run-off as they matured in order to ~~lock in the yield with minimal interest rate risk as part~~reduce its cost of ~~the Company’s asset/liability management.~~funds. All of the borrowings at December 31, 2021 had maturities of less than ~~six~~five years.

Total stockholders’ equity ~~decreased~~increased by ~~$2.8~~$3.1 million to ~~$133.4~~$133.6 million at December 31, ~~2017~~2021 from ~~$136.2~~$130.5 million at September 30, ~~2017.~~2021. The ~~decrease~~increase was primarily due to a ~~dividend payment~~$2.7 million increase in the fair value of ~~$1.8 million consisting of both an increased regular quarterly dividend of $0.05 per share as well as a special dividend of $0.15 per share.~~interest rate swap arrangements. Also contributing to the ~~decrease~~increase was the $1.8 million in net income for the first quarter of fiscal 2022. These increases were partially offset by a ~~reduction~~$945,000 decrease in the fair ~~market~~ value of investment securities available for sale ~~securities due to rising market rates of interest as well as~~combined with dividend payments totaling $544,000 during the ~~cost of purchases of treasury stock in conjunction with employee benefit plans.~~three months ended December 31, 2021.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, ~~2017~~2021 AND ~~2016~~

2020

Net income.The Company ~~recognized~~reported net income of ~~$34,000,~~$1.8 million, or ~~$0.004~~$0.24 per basic share and diluted share, for the quarter ended December 31, ~~2017~~2021 as compared to ~~$731,000~~$1.8 million, or ~~$0.100~~$0.23 per basic share and diluted share, for the ~~comparable period in 2016. The substantial decrease in net income for the three month period ended December 31, 2017 as compared to the~~ same quarter in ~~the prior year was in large part due toa $1.8 million one-time charge related to a re-evaluation of the Company’s deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act.~~

fiscal 2021.

Net interest income.For the three months ended December 31, ~~2017,~~2021, net interest income ~~increased~~amounted to ~~$6.1~~$5.9 million as compared to ~~$3.6~~$5.7 million for the same period in ~~2016.~~2020. The increase reflected a ~~$3.5 million increase in interest income which was partially offset by an increase~~decrease of ~~$1.0 million~~$696,000 in interest paid on deposits and ~~borrowings.~~borrowings which was partially offset by a $451,000 decrease in interest income. The ~~increase in net interest income in the 2017 period was primarily due to the increase in the~~ weighted average balance of earning assets which reflected in large part the addition of earning assets acquired as of January 1, 2017 upon completion of the acquisition of Polonia Bancorp. In addition, during calendar 2017, the average balance of loans, excluding loans obtained in the Polonia Bancorp acquisition, increased $68.8 million with such growth primarily funded through an increase in deposits, the use of Federal Home Loan Bank of Pittsburgh(“FHLB”) borrowings and the redeployment of excess liquidity. The yield on interest-earning assets increased 17 basis points to ~~3.66%~~3.61% from 3.44% for the ~~quarter~~three months ended December 31, ~~2017 from 3.33% for~~2020 primarily as a result of a change in the ~~same period in 2016 due primarily to~~mix of the ~~shift in emphasis to commercial and construction loans, which generally produce higher yields~~investment portfolio as shorter term amortizing securities have paid down more quickly than ~~those obtained on residential loans.~~the longer term bullet securities. The weighted average cost of borrowings and deposits ~~increased~~decreased 13 basis points to ~~0.98% during~~1.46% for the quarter ended December 31, ~~2017~~2021 from ~~0.78% during~~1.59% for the ~~comparable~~same period in ~~2016~~2020 due to ~~increases~~decreases in market rates of interest. The net interest margin increased to ~~2.80%~~2.32% during the quarter ended December 31, ~~2017~~2021 from ~~2.70% during~~2.02% for the comparable period in ~~2016 due to~~2020. The margin improvement experienced in the current period in large part reflected the decline in interest-bearing liability costs combined with the increase in the ~~average balance of interest-earning assets and the~~ yield earned on ~~those~~interest-earning assets, offset partially by the decline in net interest-earning assets.

Average balances, net interest income, and yields earned and rates paid. The following table shows for the periods indicated the total dollar amount of interest earned from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates, the interest rate spread and the net interest margin. Average yields and rates have been annualized. Tax-exempt income and yields have not been adjusted to a tax-equivalent basis. All average balances are based on monthly balances. Management does not believe that the monthly averages differ significantly from what the daily averages would be.

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Three Months
Ended December 31,
2017 2016
Average Average Average Average
Balance Interest Yield/Rate (1) Balance Interest Yield/Rate (1)
(Dollars in Thousands)
Interest-earning assets:
Investment securities (4) $ 132,530 $ 996 2.98 % $ 57,046 $ 401 2.79 %
Mortgage-backed securities 132,623 842 2.52 121,288 763 2.50
Loans receivable(2) 576,336 6,107 4.20 346,980 3,325 3.80
Other interest-earning assets 29,488 91 1.22 11,627 16 0.55
Total interest-earning assets 870,977 8,036 3.66 536,941 4,505 3.33
Cash and non interest-bearing balances 2,262 1,574
Other non interest-earning assets 48,811 28,641
Total assets $ 922,050 $ 567,156
Interest-bearing liabilities:
Savings accounts $ 103,204 19 0.07 $ 68,505 16 0.09
Money market deposit and NOW accounts 127,149 49 0.15 91,570 34 0.15
Certificates of deposit 409,294 1,343 1.30 221,863 640 1.14
Total deposits 639,647 1,411 0.88 381,938 690 0.72
Advances from Federal Home Loan Bank 127,799 488 1.51 50,975 166 1.29
Advances from borrowers for taxes and insurance 2,750 1 0.14 2,065 1 0.19
Total interest-bearing liabilities 770,196 1,900 0.98 434,978 857 0.78
Non interest-bearing liabilities:
Non interest-bearing demand accounts 10,529 3,713
Other liabilities 5,439 15,000
Total liabilities 786,164 453,691
Stockholders' equity 135,886 113,465
Total liabilities and stockholders' equity $ 922,050 $ 567,156
Net interest-earning assets $ 100,781 $ 101,963
Net interest income; interest rate spread $ 6,136 2.68 % $ 3,648 2.55 %
Net interest margin(3) 2.80 % 2.70 %

Average interest-earning assets to average interest-bearing liabilities 113.09 % 123.44 %


	Three Months							Three Months
	Ended December 31,							Ended December 31,
	2021							2020
						Average							Average
	Average					Yield/		Average					Yield/
	Balance		Interest			Rate (1)		Balance		Interest			Rate (1)

Interest-earning assets:
Investment securities	$	194,245	$	1,763		3.60	%	$	209,764	$	1,715		3.24	%
Mortgage-backed securities		129,863		1,035		3.16			224,157		1,616		2.86
Loans receivable (2)		600,862		6,287		4.15			601,637		6,275		4.14
Other interest-earning assets		90,859		154		0.67			81,817		84		0.41
Total interest-earning assets		1,015,829		9,239		3.61			1,117,375		9,690		3.44
Cash and non-interest-bearing balances		2,616							2,501
Non-interest-earning assets		63,791							69,375
Total assets	$	1,082,236						$	1,189,251
Interest-bearing liabilities:
Savings accounts	$	64,253	$	2		0.01		$	59,983	$	1		0.01
Checking and money market accounts		377,615		843		0.89			371,757		966		1.03
Certificate accounts		239,253		1,102		1.83			271,943		1,202		1.75
Total deposits		681,121		1,947		1.13			703,683		2,169		1.22
Advances from Federal Home Loan Bank		218,147		1,362		2.48			291,933		1,836		2.50
Advances from borrowers for taxes and insurance		2,215		1		0.18			2,611		1		0.15
Total interest-bearing liabilities		901,483		3,310		1.46			998,227		4,006		1.59
Non-interest-bearing liabilities
Non interest-bearing demand accounts		36,192							28,553
Other liabilities		12,620							31,170
Total liabilities		950,295							1,057,950
Stockholders' equity		131,941							131,301
Total liabilities and stockholders' equity	$	1,082,236						$	1,189,251
Net interest-earning assets	$	114,346						$	119,148
Net interest income, interest rate spread			$	5,929		2.15	%			$	5,684		1.85	%
Net interest margin (3)						2.32	%						2.02	%
Average interest-earning assets to average interest-bearing liabilities				112.68	%						111.94	%

(1)

Yields and rates for the three month periods are annualized.

(2)

Includes non-accrual loans. Calculated net of unamortized deferred fees, undisbursed portion of loans-in-process and the allowance for loan losses.

(3)

Equals net interest income divided by average interest-earning assets.

~~(4)~~

~~Tax exempt yields have been adjusted to a tax equivalent basis~~

Provision for loan losses. The Company recorded ano provision for loan losses ~~in the amount of $210,000~~ for the three months ended December 31, ~~2017, primarily due~~2021 as the $3.0 million provision expense incurred in fiscal 2020, combined with minimal recent charge-offs, was deemed sufficient to maintain the ~~growth~~allowance at a level sufficient to cover all inherent and known losses in the ~~loan portfolio as well as the continued shift in its composition, compared to a provision for loan losses of $185,000 for the same period in 2016.~~current portfolio. During the three months ended December 31, ~~2017~~2021 and ~~2016,~~2020, the Company ~~did not record any~~recorded recoveries orof $1,000 and $15,000, respectively, and a charge ~~offs.~~

off totaling $136,000 for the three months ending December 31, 2021 and none in the three-month period ending December 31, 2020. Although our COVID-19 loan deferrals were as high as $149.7 million during portions of fiscal 2020, all COVID-19 deferrals had ended by September 30, 2020. All of loans that had been granted COVID-19 deferrals were current as of December 31, 2021.

The allowance for loan losses totaled ~~$4.7~~$8.4 million, or ~~0.8%~~1.4% of total loans, and ~~28.9%~~104.0% of total non-performing loans at December 31, 2021 (which included loans acquired ~~from Polonia~~ at their ~~fair-value) at December 31, 2017~~fair value as a result of the acquisition of Polonia Bancorp, Inc. (“Polonia”) as of January 1, 2017) as compared to ~~$4.5~~$8.5 million, or ~~0.8%~~1.4% of total loans and ~~29.0%~~101.6% of total non-performing loans at September 30, ~~2017.~~2021. The Company believes that the allowance for loan losses at December 31, ~~2017~~2021 was sufficient to cover all inherent and known losses associated with the loan portfolio at such date.

~~The Company’s methodology for assessing the adequacy~~Table of the allowance establishes both specific and general pooled allocations of the allowance. Loans are assigned ratings, either individually for larger credits or in homogeneous pools, based on an internally developed grading system. The resulting determinations are reviewed and approved by senior management.Contents

At December 31, ~~2017,~~2021, the Company’s non-performing assets totaled ~~$16.6~~$12.2 million or ~~1.8%~~1.1% of total assets as compared to ~~$15.6~~$12.5 million or ~~1.7%~~1.1% of total assets at September 30, ~~2017.~~2021. Non-performing assets at December 31, ~~2017~~2021 included ~~five~~three construction loans aggregating ~~$8.7~~$3.6 million, 2618 one-to-four family residential mortgage loans aggregating ~~$4.5~~$3.2 million, ~~one single-family residential investment property loan in the amount of $1.4 million and five~~two commercial real estate loans aggregating ~~$1.6 million. Non-performing assets also included at December 31, 2017 three single-family residential properties with an aggregate carrying value~~$1.3 million and two pieces of ~~$363,000.~~other real estate owned that related to two non-performing construction loans aggregating $4.1 million that were foreclosed during the third quarter of fiscal 2021. At December 31, ~~2017,~~2021, the Company had 11three loans ~~aggregating $7.5~~totaling $1.6 million that were classified as troubled debt restructurings (“TDRs”). ~~Seven~~All three TDRs are on non-accrual. Two of ~~such~~the TDRs consist of loans aggregating ~~$1.2 million were~~$898,000 secured by two single-family residential properties and are performing in accordance with the restructured ~~terms as of December 31, 2017 and accruing interest. Three of the TDRs which are classified as non-accrual totaling $4.9 million are~~terms. The remaining TDR is a $705,000 commercial real estate loan is part of a ~~troubled~~ lending relationship totaling ~~$10.7~~$5.5 million (after taking into account the previously disclosed $1.9 million write-down recognized during the quarter ending March 31, 2017 related to this borrowing ~~relationship). The remaining TDR is also on non-accrual~~relationship and ~~consists of a $1.5 million loan secured by various commercial and residential properties.~~ the two construction loans noted above that became other real estate owned during the quarter ended June 30, 2021).The primary project of the borrower (the development of a 169-unit townhouse project in Bristol Borough, Pennsylvania) is the subject of litigation between the Bank and the ~~borrower and as a result, the project currently is not proceeding. Subsequent~~borrower. As previously disclosed, subsequent to the commencement of the litigation, ~~previously disclosed,~~ the borrower filed for bankruptcy under Chapter 11 (Reorganization) of the federal bankruptcy code in June 2017. The Bank ~~has~~ moved the underlying litigation ~~noted above~~ with the borrower ~~and the Bank~~noted above from state court to the federal bankruptcy court in which the bankruptcy proceeding is being heard. The state litigation is stayed pending the resolution of the bankruptcy proceedings. ~~The Bank successfully moved to have portions of the bankruptcy proceedings converted to Chapter 7 (Liquidation). See Item 1 “Legal Proceedings” in Part II of this form 10Q.~~ As of December 31, ~~2017,~~2021, 45 units have been sold in the ~~Company had reviewed $23.9~~project resulting in $1.3 million ~~of loans for possible impairment compared to $19.7 million reviewed for possible impairment as of September 30, 2017.~~applied against the outstanding debt owed the Bank.

At December 31, ~~2017,~~2021, the Company had ~~$1.4~~$2.3 million of loans delinquent 30-89 days as to interest and/or principal. Such amount consisted of ~~eight~~seven one-to-four family residential loans totaling ~~$1.0~~$1.5 million, one commercial real estate loan in the amount of ~~$183,000 and~~$649,000, one ~~lease~~commercial business loan in the amount of ~~$133,000.~~$66,000 and one consumer loan in the amount of $48,000. At September 30, ~~2017,~~2021, the Company had ~~$2.8 million~~$524,000 of loans delinquent 30-89 days as to interest and/or principal. Such amount consisted of ~~twenty-three~~six one-to-four family residential loans totaling ~~$1.7 million, three commercial real estate loans~~$423,000 and one consumer loan totaling ~~$1.0 million and two consumer loans totaling $69,000.~~

$37,000.

At December 31, ~~2017, we~~2021, the Company also had a total of ~~twenty-seven~~15 loans aggregating ~~$5.3~~$3.6 million that had been designated “special mention”. These loans consist of ~~nineteen~~12 one-to-four family residential loans totaling ~~$3.3~~$1.5 million and ~~eight~~three commercial real estate loans totaling $2.0 million. At September 30, ~~2017,~~2021, we had a total of ~~nine~~19 loans aggregating ~~$3.1~~$8.1 million designated as “special mention”.

The following table shows the amounts of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due as to principal and/or interest and real estate owned) as of December 31, ~~2017~~2021 and September 30, ~~2017.~~2021. At neither date did the Company have any ~~accruing~~ loans 90 days or more past due that were accruing.


	December 31,			September 30,
	2021			2021

Non-accruing loans:
One-to-four family residential	$	3,185		$	3,006
Commercial real estate		1,280			1,280
Construction and land development		3,593			4,093
Total non-accruing loans		8,058			8,379
Other real estate owned, net (1)		4,109			4,109
Total non-performing assets	$	12,167		$	12,488

Total non-performing loans as a percentage of loans		1.38	%		1.36	%
Total non-performing loans as a percentage of total assets		0.74	%		0.76	%
Total non-performing assets as a percentage of total assets		1.12	%		1.13	%

December 31,
2017 September 30,
2017
(Dollars in Thousands)
Non-accruing loans:
One-to-four family residential $ 5,892 $ 5,107
Commercial real estate 1,563 1,566
Construction and land development 8,734 8,724
Total non-accruing loans 16,189 15,397
Real estate owned, net: (1) 363 192
Total non-performing assets $ 16,552 $ 15,589

Total non-performing loans as a percentage of loans, net 2.79 % 2.67 %
Total non-performing loans as a percentage of total assets 1.73 % 1.71 %
Total non-performing assets as a percentage of total assets 1.77 % 1.73 %

~~(1)~~

~~Real estate owned balances are shown net of related loss allowances and consist solely of real property.~~

Non-interest income. With respect to the quarter ended December 31, ~~2017,~~2021, non-interest income amounted to ~~$415,000~~$370,000 as compared to ~~$358,000~~$537,000 for the same quarter in fiscal ~~2017. The primary reason for~~2021. Non-interest income was lower in the ~~higher level~~first

Table of ~~non-interest income in~~Contents

quarter of fiscal 2022 as compared to the first quarter of fiscal ~~2018 was increased earnings~~2021 primarily due to decreases in interest rate swap income of $78,000 together with a $40,000 decrease in income from fees and other service charges and transaction fees associated with the Polonia Bancorp acquisition which was completed during January 2017 and were not included in the operating results for the quarter ended December 31, 2016. The acquisition of Polonia resulted in the addition of five full-service financial centers along with the related customer deposit base.gain recognized on loans sold.

Non-interest expense.~~For~~Non-interest expense stayed relatively stable increasing modestly from $4.1 million for the three month period ended December 3, 2020 to $4.2 million for the three months ended December 31, 2017, non-interest expense increased $1.3 million, compared to the same period in the prior year. The primary reason for the increase was the additional expense resulting from the Polonia Bancorp acquisition which added five full-service financial centers to our branch network as well as additional personnel.2021.

Income tax expense. For the three-month period ended December 31, ~~2017,~~2021, the Company recorded income tax expense of ~~$2.3 million, which included a $1.8 million one-time charge related to the re-evaluation of the Company’s deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act,~~$254,000, compared to income tax expense of ~~$370,000 and an effective tax rate of 33.6%~~$286,000 for the same period in ~~2016.~~the prior year. The decline is primarily due to the increase in the current quarter of interest income on municipal securities, which is generally non taxable for federal income tax purposes. The decline also reflects the slight decrease in income before taxes earned for the first quarter of fiscal 2022.

COVID-19 Related Information

As noted above, in response to the current situation surrounding the COVID-19 pandemic, the Company continues to provide assistance to its customers in a variety of ways. The Company participated in the Paycheck Protection Program offered under the CARES Act as a Small Business Administration (“SBA”) lender. All of such loans were sold, recognizing a gain of $110,000 during fiscal 2020. During fiscal ~~2018, commencing~~2021, we worked with a third party in order for our customers to be able to participate in the ~~quarter~~updated PPP loan program adopted as part of the COVID-19 stimulus bill enacted in December 2020 as part of the 2021 Consolidated Appropriations Act.

The primary method of relief was to allow borrowers to defer their loan payments for three months (and extending the term of the loan accordingly). The CARES Act and regulatory guidelines suspend temporarily the determination of certain loan modifications related to the COVID-19 pandemic from being treated as TDRs. Such suspension period ended December 31, ~~2017,~~2021. See “Asset Quality” above.

While the Company’s ~~statutory federal income tax rate has been reduced~~banking operations were not restricted by the government stay-at-home orders, the Company took and continues to ~~24.25% as compared~~take steps to ~~companies which are calendar year tax reporting companies whose statutory rate will decrease to 21% starting January 1, 2018. Effective October 1, 2018,~~protect its employees and customers by providing for remote working for many employees, enhancing cleaning procedures for the Company’s ~~statutory tax rate~~offices, in particular its branch offices, requiring face masks to be worn by employees and maintaining appropriate social distancing in our offices. The Company continues to assess and monitor the ongoing COVID-19 pandemic and will ~~be reduced~~take additional such steps as are necessary to ~~21%.~~protect its employees and assist its depositor and borrower customers during these challenging times.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity is the ability to maintain cash flows that are adequate to fund operations and meet other obligations on a timely and cost-effective basis in various market conditions. The ~~Company’s liquidity, represented by cash and cash equivalents,~~ability of the Company to meet its current financial obligations is a ~~product~~function of ~~its operating, investing~~balance sheet structure, the ability to liquidate assets and ~~financing activities.~~ the availability of alternative sources of funds. To meet the needs of the clients and manage the risk of the Company, the Company engages in liquidity planning and management.

Our primary sources of funds are deposits, scheduled principal and interest payments on loans, loan prepayments and the maturity of loans, mortgage-backed securities and other investments, and other funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan and securities prepayments can be greatly influenced by market rates of interest, economic conditions and competition. WeThe Company also ~~maintain~~maintains excess funds in short-term, interest-earning assets that provide additional liquidity. At December 31, ~~2017, our~~2021, the Company’s cash and cash equivalents amounted to ~~$16.7~~$113.8 million. In addition, ~~our~~its available-for-sale investment securities amounted to an aggregate of ~~$214.6~~$297.5 million at such date.

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We use our liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, and to meet operating expenses. At December 31, ~~2017,~~2021, the Company had ~~$45.9~~$22.1 million in outstanding commitments to originate ~~fixed~~ loans, not including loans in process. The Company also had commitments under unused lines of credit of ~~$6.8~~$34.9 million and letters of credit outstanding of ~~$1.8~~$1.1 million at December 31, ~~2017.~~2021. Certificates of deposit as of December 31, ~~2017~~2021 that are maturing in one year or less totaled ~~$254.8~~$159.1 million. ~~Based upon our historical experience, we~~We anticipate that a significant portion of the maturing certificates of deposit will be redeposited with ~~us.~~

us unless we determine to lower rates to below those of our competition in order to facilitate the reduction of higher cost deposits during periods when there is excess cash on hand or in order to satisfy our asset/liability goals. There were no deposits as of December 31, 2021 requiring the pledging of collateral.

In addition to cash flows from loan and securities payments and prepayments as well as from sales of available for sale securities, we have significant borrowing capacity available to fund liquidity needs should the need arise. Our borrowings consist solely of advances from the FHLB of Pittsburgh, of which we are a member. Under terms of the collateral agreement with the FHLB, we pledge residential mortgage loans, certain investment securities as well as our stock in the FHLB as collateral for such advances. At December 31, ~~2017,~~2021, we had ~~$136.9~~$207.9 million in outstanding FHLB advances and had the ability to obtain an additional ~~$262.5~~$135.0 million in FHLB advances. ~~Additional~~The Bank maintains unsecured borrowing ~~capacity~~facilities with ~~the FHLB could be obtained with the pledging~~ACBB and PNC for $12.5 million and $10.0 million, respectively. There were no draws on either facility as of ~~certain investment securities.~~December 31, 2021. The Bank has also obtained approval to borrow from the Federal Reserve Bank discount window.

We anticipate that we will continue to have sufficient funds and alternative funding sources to meet our current commitments.

Capital Resources

The following table summarizes the Company’s and Bank’s regulatory capital ratios as of December 31, ~~2017~~2021 and September 30, ~~2017~~2021 and compares them to current regulatory guidelines. The Company is not subject to capital ratios

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imposed by Basel III on bank holding companies because the Company is deemed to be a small bank holding company. ~~The~~Accordingly, the Company’s regulatory capital ratios ~~provided for the company~~ are ~~presented~~provided for informational purposes only.

To Be
Well Capitalized
Required for Under Prompt
Capital Adequacy Corrective Action
Actual Ratio Purposes Provisions

December 31, 2017:
Tier 1 capital (to average assets)
The Company 14.32 % N/A N/A
The Bank 13.19 % 4.0 % 5.0 %

Tier 1 common (to risk-weighted assets)
The Company 22.38 % N/A N/A
The Bank 20.90 % 4.5 % 6.5 %

Tier 1 capital (to risk-weighted assets)
The Company 22.38 % N/A N/A
The Bank 20.90 % 6.0 % 8.0 %

Total capital (to risk-weighted assets)
The Company 23.25 % N/A N/A
The Bank 21.77 % 8.0 % 10.0 %

September 30, 2017:
Tier 1 capital (to average assets)
Company 14.81 % N/A N/A
Bank 13.59 % 4.0 % 5.0 %

Tier 1 common (to risk-weighted assets)
The Company 23.94 % N/A N/A
The Bank 21.97 % 4.5 % 6.5 %

Tier 1 capital (to risk-weighted assets)
Company 23.94 % N/A N/A
Bank 21.97 % 6.0 % 8.0 %

Total capital (to risk-weighted assets)
Company 24.83 % N/A N/A
Bank 22.86 % 8.0 % 10.0 %


						To Be
						Well Capitalized
						Under Prompt
			Required for Capital			Corrective
			Adequacy			Action
	Ratio		Purposes			Provisions


December 31, 2021:
Tier 1 capital (to average assets)
Company	11.87	%		N/A			N/A
Bank	11.73	%		4.00	%		5.0	%
Tier 1 Common (to risk-weighted assets)
Company	17.53	%		N/A			N/A
Bank	17.29	%		4.5	%		6.5	%
Tier 1 capital (to risk-weighted assets)
Company	17.53	%		N/A			N/A
Bank	17.29	%		6.0	%		8.0	%
Total capital (to risk-weighted assets)
Company	18.75	%		N/A			N/A
Bank	18.51	%		8.0	%		10.0	%

September 30, 2021:
Tier 1 capital (to average assets)
Company	11.48	%		N/A			N/A
Bank	11.30	%		4.0	%		5.0	%
Tier 1 Common (to risk-weighted assets)
Company	16.70	%		N/A			N/A
Bank	16.37	%		4.5	%		6.5	%
Tier 1 capital (to risk-weighted assets)
Company	16.70	%		N/A			N/A
Bank	16.37	%		6.0	%		8.0	%
Total capital (to risk-weighted assets)
Company	17.87	%		N/A			N/A
Bank	17.55	%		8.0	%		10.0	%

~~IMPACT OF INFLATION AND CHANGING PRICES~~

~~The financial statements, accompanying notes, and related financial data~~Effective January 1, 2021, qualifying community banking organizations may elect to comply with a greater than 9% community bank leverage ratio (the “CBLR”) requirement in lieu of the ~~Company presented herein~~currently applicable requirements for calculating and reporting risk-based capital ratios. The CBLR is equal to Tier 1 capital divided by average total consolidated assets. In order to qualify for the CBLR election, a community bank must (i) have ~~been prepared~~a leverage capital ratio greater than 9%, (2) have less than $10 billion in ~~accordance with generally accepted accounting principles which require~~average total consolidated assets, (3) not exceed certain levels of off-balance sheet exposure and trading assets plus trading liabilities and (4) not be an advanced approaches banking organization. A community bank that meets the ~~measurement of financial position~~above qualifications and ~~operating results in terms of historical dollars, without considering changes~~elects to utilize the CBLR is considered to have satisfied the risk-based and leverage capital requirements in the ~~relative purchasing power~~generally applicable capital rules and is also considered to be “well capitalized” under the prompt corrective action rules. As of ~~money over time due~~December 31, 2021, the Bank chose to ~~inflation.~~not elect to use the CBLR requirement.

Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services, since such prices are affected by inflation to a larger extent than interest rates. In the current interest rate environment, liquidity and the maturity structure of the Company's assets and liabilities are critical to the maintenance of acceptable performance levels.

EXPOSURE TO CHANGES IN INTEREST RATES

How We Manage Market Risk. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our market risk arises primarily from interest rate risk which is inherent in our lending, investment and deposit gathering activities. To that end, management actively monitors and manages interest rate risk exposure. In addition to market risk, our primary risk is credit risk on our loan portfolio. We attempt to manage credit risk through our loan underwriting and oversight policies.

The principal objective of our interest rate risk management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given our business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with approved guidelines. We seek to manage our exposure to risks from changes in interest rates while at the same time

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trying to improve our net interest spread. We monitor interest rate risk as such risk relates to our operating strategies. We have established an Asset/Liability Committee which is comprised of our President and Chief Executive Officer, Chief Financial Officer, Chief Lending Officer, Treasurer and Controller. The Asset/Liability Committee meets on a regular basis and is responsible for reviewing our asset/liability policies and interest rate risk position. Both the extent and direction of shifts in interest rates are uncertainties that could have ~~a negative~~an adverse impact on future earnings.

In recent years, as a part of our asset/liability management strategy we primarily have reduced our investment in longer term fixed-rate callable agency bonds, increased our origination or purchase of hybrid adjustable-rate single-family residential mortgage loans, commercial real estate and construction loans (which typically bear adjustable rates indexed to the WSJ Prime) and increased our portfolio of step-up callable agency bonds and agency issued ~~collaterized~~collateralized mortgage-backed securities (“CMOs”) with short effective lives. In addition, during the past year we ~~recently~~ implemented ~~two~~ interest rate swaps to reduce funding cost for a five year period. However, notwithstanding the foregoing steps, we remain subject to a significant level of interest rate risk in a low interest rate environment due to the high proportion of our loan portfolio that consists of fixed-rate loans as well as our decision in prior periods to invest a significant amount of our assets in long-term, fixed-rate investment and mortgage-backed securities.

Gap Analysis.The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring athe Company’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to affect adversely net interest income while a positive gap would tend to result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect ~~adversely~~ net interest income.

The following table sets forth the amounts of our interest-earning assets and interest-bearing liabilities outstanding at December 31, ~~2017,~~2021, which we expect, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the “GAP Table”). Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of the term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at December 31, ~~2017,~~2021, on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization, ~~and~~ anticipated prepayments of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans. Annual prepayment rates for variable-rate and fixed-rate single-family and multi-family residential and commercial mortgage loans are assumed to range from ~~5.3%~~10.7% to ~~31.6%~~28.0%. The annual prepayment rate for mortgage-backed securities is assumed to range from ~~0.5%~~0.6% to ~~19.5%~~22.6%. For savings accounts, checking accounts and money markets, the decay rates vary on an annual basis over a ten year period.

More than More than More than
3 Months 3 Months 1 Year 3 Years More than Total
or Less to 1 Year to 3 Years to 5 Years 5 Years Amount
(Dollars in Thousands)
Interest-earning assets(1):
Investment and mortgage-backed securities(2) $ 10,168 $ 17,784 $ 42,915 $ 49,315 $ 157,765 $ 277,947
Loans receivable(3) 109,946 83,668 145,222 105,265 135,886 579,987
Other interest-earning assets(4) 14,182 - 249 1,355 - 15,786
Total interest-earning assets $ 134,296 $ 101,452 $ 188,386 $ 155,935 $ 293,651 $ 873,720

Interest-bearing liabilities:
Savings accounts $ 2,578 $ 7,943 $ 13,214 $ 12,748 $ 66,354 $ 102,837
Money market deposit and NOW accounts 4,100 12,298 20,857 17,153 67,097 121,505
Certificates of deposit 99,968 155,280 115,091 45,773 - 416,112
Advances from FHLB 40,916 31,960 23,232 40,574 234 136,916
Advances from borrowers for taxes and insurance 3,498 - - - - 3,498
Total interest-bearing liabilities $ 151,060 $ 207,481 $ 172,394 $ 116,248 $ 133,685 $ 780,868

Interest-earning assets less interest-bearing liabilities ($ 16,764 ) ($ 106,029 ) $ 15,992 $ 39,687 $ 159,966 $ 92,852

Cumulative interest-rate sensitivity gap (5) ($ 16,764 ) ($ 122,793 ) ($ 106,801 ) ($ 67,114 ) $ 92,852

Cumulative interest-rate gap as a percentage of total assets at December 31, 2017 -1.42 % -12.78 % -11.07 % -6.82 % 9.81 %

Cumulative interest-earning assets as a percentage of cumulative interest- bearing liabilities at December 31, 2017 88.90 % 65.75 % 79.88 % 89.63 % 111.89 %

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				More than			More than			More than
	3 Months			3 Months			1 Year			3 Years			More than			Total
	or Less			to 1 Year			to 3 Years			to 5 Years			5 Years			Amount

	(Dollars in Thousands)
Interest-earning assets(1):
Investment and mortgage-backed securities	$	13,265		$	34,120		$	69,600		$	69,581		$	122,290		$	308,856
Loans receivable(2)		145,937			101,738			169,250			88,446			87,685			593,056
Other interest-earning assets (3)		120,070			249			747			110			—			121,176
Total interest-earning assets	$	279,272		$	136,107		$	239,597		$	158,137		$	209,975		$	1,023,088

Interest-bearing liabilities:
Savings accounts	$	3,562		$	10,447		$	98,396		$	12,488		$	105,464		$	230,357
Checking and money market accounts		7,628			22,884			69,422			30,089			89,652			219,675
Certificate accounts		42,002			60,263			124,508			8,285			—			235,058
Advances from Federal Home Loan Bank		1,159			57,460			149,261			—			—			207,880
Real estate tax escrow accounts		2,790			—			—			—			—			2,790
Total interest-bearing liabilities	$	57,141		$	151,054		$	441,587		$	50,862		$	195,116		$	895,760

Interest-earning assets less interest-bearing liabilities	$	222,131		$	(14,947)		$	(201,990)		$	107,275		$	14,859		$	127,328

Cumulative interest-rate sensitivity gap(4)	$	222,131		$	207,184		$	5,194		$	112,469		$	127,328


Cumulative interest-rate gap as a percentage of total assets at December 31, 2021		20.49	%		19.11	%		0.48	%		10.37	%		11.74	%

Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at December 31, 2021		488.74	%		199.51	%		100.80	%		116.05	%		114.21	%

(1)

Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments and contractual maturities.

(2)

For purposes of the gap analysis, investment securities are reflected at amortized cost.

(3)

For purposes of the gap analysis, loans receivable includes non-performing loans and is gross of the allowance for loan losses and unamortized deferred loan fees, but net of the undisbursed portion of loans-in-process.

(4)

Includes restricted stock in the FHLB ~~stock.~~of Pittsburgh and ACBB.

(5)

Cumulative interest-rate sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities.

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as variable-rate loans, have features which restrict changes in interest rates ~~applicable to the assets~~ both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their variable-rate loans may be adversely affected in the event of an interest rate increase.

Net Portfolio Value Analysis. Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the changes in our net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The “Sensitivity Measure” is the decline in the NPV ratio, in basis points, caused by a 2%0% increase or decrease in rates, whichever produces a larger decline. The following table sets forth our NPV as of

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December 31, ~~2017~~2021 and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.


Change in
Interest Rates							NPV as % of Portfolio
In Basis Points	Net Portfolio Value						Value of Assets
(Rate Shock)	Amount		$Change		% Change		NPV Ratio		Change

	(Dollars in Thousands)

300	$	140,555	$	(24,624)	(14.91)	%	13.90	%	(1.49)	%
200	$	149,711	$	(15,468)	(9.36)	%	14.51	%	(0.88)	%
100	$	158,705	$	(6,474)	(3.92)	%	15.07	%	(0.32)	%
Static	$	165,179	$	—	—		15.39	%	—
(100)	$	165,751	$	572	0.35	%	15.24	%	(0.15)	%
(200)	$	168,177	$	2,997	1.81	%	15.31	%	(0.08)	%
(300)	$	186,311	$	21,131	12.79	%	16.65	%	1.26	%

Change in
Interest Rates NPV as % of Portfolio
In Basis Points Net Portfolio Value Value of Assets
(Rate Shock) Amount $ Change % Change NPV Ratio Change

(Dollars in Thousands)

300 $ 104,840 $ (52,832 ) (33.51 )% 12.69 % (4.32 )%
200 120,918 (36,754 ) (23.31 )% 14.10 % (2.91 )%
100 139,104 (18,568 ) (11.78 )% 15.60 % (1.41 )%
Static 157,672 - - 17.01 % -
(100) 166,236 8,564 5.43 % 17.43 % 0.42 %
(200) 165,762 8,090 5.13 % 17.10 % 0.09 %
(300) 169,234 11,562 7.33 % 17.18 % 0.17 %

At September 30, ~~2017,~~2021, the Company’s NPV was ~~$167.7~~$156.3 million or ~~18.6%~~14.4% of the market value of assets. Following a 200 basis point increase in interest rates, the Company’s “post shock” NPV would be ~~$133.6~~$138.0 million or ~~16.0%~~13.2% of the market value of assets.

Conversely, a 200 basis point decrease in interest rates would result in a post shock NPV of $165.4 million or 14.9% of the market value of assets.

As is the case with the GAP ~~Table,~~table, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV requires the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the models presented assume that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV model provides an indication of interest rate risk exposure at a particular point in time, such model is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~As of~~At December 31, ~~2017,~~2021, there had not been any material change to the market risk disclosure contained in the Company’s Annual Report on Form 10-K, as amended, for the year ended September 30, ~~2017,~~2021, set forth in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation –Exposure to Changes in Interest Rates.”

ITEM 4. CONTROLS AND PROCEDURES

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of period covered by this report, our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II

Item 1. Legal Proceedings

As previously disclosed in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, on March 31, 2016, Island View Properties, Inc., trading as Island View Crossing II, LP, and Renato J. Gualtieri (collectively, the “Gualtieri Parties”) filed suit (the “Philadelphia Litigation”) in the Court of Common Pleas, Philadelphia, Pennsylvania (the “Court”), against the Bank seeking damages in an amount in excess of $27.0 million. The lawsuit asserts allegations related to a loan granted by the Bank to the Gualtieri Parties to develop a 169-unit townhouse and condominium project located in Bristol Borough in Bucks County, Pennsylvania (the “Project”).

In May 2016, the Bank filed a motion with the court seeking to dismiss the majority of claims asserted in the Philadelphia Litigation. In August 2016, the Court dismissed a majority of the Gualtieri Parties’ claims. The Bank has also counterclaimed against the Gualtieri Parties for failure to satisfy the nine loans extended thereto and for failure to complete the Project. In February 2017, the Court stayed the Philadelphia Litigation pending possible resolution of the Litigation. No resolution was obtained and the stay has expired.

Since commencement of the Philadelphia Litigation, the Bank has filed Complaints for Confession against the Gualtieri Parties and certain other entities affiliated with Renato J. Gualtieri (“Gualtieri Parties and Affiliated Entities”) based on the claimed defaults under the nine loans issued by the Bank. These actions have been stayed pending the resolution of the Philadelphia Litigation. The Bank has also filed foreclosure actions with regard to the commercial properties collateralizing the loans issued to the Gualtieri Parties and Affiliated Entities.

Shortly after the Court lifted the stay in the Philadelphia Litigation, four of the Gualtieri Parties and Affiliated Entities (One State Street Associates, LP (“State Street”), Island View Crossing II, L.P. (“Island View”), Calnshire Estates, LLC (“Calnshire”) and Steeple Run, L.P. (“Steeple Run” or collectively with State Street, Island View and Calnshire, the “Debtors”) filed for bankruptcy under Chapter 11. The Bank removed the underlying Philadelphia Litigation from state court to the federal bankruptcy court. As the Philadelphia Litigation is in its early stages, no prediction can be made as to the outcome thereof. However, the Bank believes that it has meritorious defenses to the remaining claims under the Philadelphia Litigation and it intends to vigorously defend the case.

From the outset, the Bank believed that it had meritorious challenges to the Chapter 11 bankruptcies filed by the Debtors and early in the case, the Bank filed a motion to convert the bankruptcy cases to Chapter 7 or to appoint a Chapter 11 Trustee to preserve the assets securing the Bank’s loans with the Gualtieri Parties and Affiliated Entities (the “Conversion Motion”). On December 18, 2017, the Bankruptcy Court Granted the Conversion Motion in part and converted the Chapter 11 cases of Calnshire and Steeple Run to Chapter 7 cases, appointed a Chapter 11 Trustee in the Island View case and left State Street in a Chapter 11.

~~In addition to the lawsuits noted above, the~~ Company is involved in various ~~other~~ legal ~~actions arising~~proceedings occurring in the ordinary course of ~~its~~ business. ~~All such actions in~~There can be no assurance that any of the ~~aggregate involve amounts that are believed by management~~outstanding legal proceedings to which the Company is a party will not be ~~immaterial~~decided adversely to the Company’s interests and have a material adverse effect on the financial condition and ~~results of~~ operations of the Company.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the year ended September 30, ~~2017,~~2021, as such factors could materially affect the Company’s business, financial condition, or future results of operations. As of December 31, ~~2017,~~2021, no material changes have occurred to the risk factors of the Company as reported in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, ~~2017.~~2021 filed in December 2021. The risks described in the ~~2017~~2021 Annual Report on Form 10-K, as amended, are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems to be immaterial, also may have a material adverse impact on the Company’s business, financial conditions, or results of operations.

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

(a)

and (b) Not ~~applicable~~applicable.

(c)

The Company’s repurchases of equity securities for the three months ended December 31, 2021 were as follows:

(c) The Company maintains an active stock repurchase plan but did not have repurchases of equity shares through the plan during the quarter ended December 31, 2017. The shares repurchased during the period primarily were shares repurchased in connection with employee benefit plans.

Period Total Number
of Shares
Purchased Average
Price Paid
Per Share Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1) Maximum Number of
Shares that May Yet
Purchased Under
Plans or Programs (1)
October 1 - 31, 2017 - $ - - 188,159
November 1 - 30, 2017 20,270 $ 18.50 - 188,159
December 1 - 31, 2017 7,100 $ 18.52 - 188,159
27,370 $ 18.51

(1) On July 15, 2015, the Company announced that the Board of Directors had approved a second stock repurchase program authorizing the Company to repurchase up 850,000 shares of common stock, approximately 10% of the Company's then outstanding shares.

Total Number

of Shares

Purchased as

Part of

Maximum Number

Total

Publicly

of Shares that May

Number of

Average

Announced

Yet Be Purchased

Shares

Price Paid

Plans or

Under Plans or
Period

Purchased

Per Share

Programs (1)

Programs (1)
October 1 - 31, 2021

—

$
—

—

367,758
November 1 - 30, 2021
—

—
—
367,758
December 1 - 31, 2021
—

—
—
367,758

—

$
—

—

(1)

On June 18, 2021 the Company announced a new stock repurchase program to repurchase up to 407,600 shares of common stock, approximately 5% of the Company’s outstanding shares of common stock, over a one-year period or such longer period of time as may be necessary to complete such repurchases.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

Item 5. Other Information

Not applicable

Item 6. Exhibits


Exhibit No.		Description
31.1
~~31.1~~	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.0	Section 1350 Certifications
~~101.INS~~ 101	~~XBRL Instance Document.~~ The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, formatted in Inline XBRL: (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document.
104	Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101.

SIGNATURES

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

~~PRUDENTIAL BANCORP, INC.~~


	PRUDENTIAL BANCORP, INC.

Date: February ~~9, 2018~~14, 2022	By: /s/ Dennis Pollack
	Dennis Pollack
	President and Chief Executive Officer

Date: February ~~9, 2018~~14, 2022	By: /s/ Jack E. Rothkopf
	Jack E. Rothkopf
	Senior Vice President, Chief Financial Officer and Treasurer

	¨ For the quarterly period ended December 31, 2021
	OR
☐	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: 000-55084

~~Pennsylvania~~		~~46-2935427~~
Pennsylvania	46-2935427
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1834 West Oregon Avenue Philadelphia, Pennsylvania		19145
~~Philadelphia, Pennsylvania~~		~~Zip Code~~
(Address of Principal Executive Offices)			(Zip Code)

~~(215) 755-1500~~
~~(Registrant’s Telephone Number, Including Area Code)~~ Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	PBIP	Nasdaq Stock Market


Large accelerated filer☐	¨	Accelerated filer x☐
Non-accelerated filer ⌧	¨~~(Do not check if a smaller reporting company)~~	Smaller reporting company	¨⌧
		Emerging growth company	¨☐

	x
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		~~PAGE~~ Page
PART I	FINANCIAL INFORMATION:
~~PART I~~	~~FINANCIAL INFORMATION:~~

Item 1.	Consolidated Financial Statements	1

	Unaudited Consolidated Statements of Financial Condition December 31, ~~2017~~2021 and September 30, ~~2017~~2021	2 3

	Unaudited Consolidated Statements of Operations for the Three Months Ended December 31, ~~2017~~2021 and ~~2016~~2020	3 4

	Unaudited Consolidated Statements of Comprehensive Income ~~(Loss) for~~ for the Three Months Ended December 31, ~~2017~~2021 and ~~2016~~2020	4 5

	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended December 31, ~~2017~~2021 and ~~2016~~2020	5 6

	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended December 31, ~~2017~~2021 and ~~2016~~2020	6 7

	Notes to Unaudited Consolidated Financial Statements	7 8

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	39 30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52 42

Item 4.	Controls and Procedures	52 42

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	53 43

Item 1A.	Risk Factors	53 43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54 43

Item 3.	Defaults Upon Senior Securities	54 43

Item 4.	Mine Safety Disclosures	54 43

Item 5.	Other Information	54 44

Item 6.	Exhibits	55 44

SIGNATURES			55 44

	Three Months Ended December 31,
	2017		2016
	(Dollars in Thousands, Except Per Share Data)
INTEREST INCOME:
Interest on loans	$	6,107	$	3,325
Interest on mortgage-backed securities		842		571
Interest and dividends on investments		949		606
Interest on interest-bearing assets		138		3

Total interest income		8,036		4,505

INTEREST EXPENSE:
Interest on deposits		1,412		691
Interest on advances from Federal Home Loan Bank (short-term)		82		73
Interest on advances from Federal Home Loan Bank (long-term)		406		93

Total interest expense		1,900		857

NET INTEREST INCOME		6,136		3,648

PROVISION FOR LOAN LOSSES		210		185

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,926		3,463

NON-INTEREST INCOME:
Fees and other service charges		167		124
Gain on sale of loans, net		-		44
Income from bank owned life insurance		164		166
Other		84		24

Total non-interest income		415		358

NON-INTEREST EXPENSE:
Salaries and employee benefits		1,974		1,569
Data processing		176		112
Professional services		792		319
Office occupancy		271		170
Depreciation		156		82
Director compensation		59		68
Advertising		60		37
Core deposit amortization		37		-
Other		518		363
Total non-interest expense		4,043		2,720

INCOME BEFORE INCOME TAXES		2,298		1,101

INCOME TAXES:
Current expense		648		470
Deferred tax (benefit)		1,616		(100	)

Total income tax expense		2,264		370

NET INCOME	$	34	$	731

BASIC EARNINGS PER SHARE	$	0.004	$	0.100

DILUTED EARNINGS PER SHARE	$	0.004	$	0.100

DIVIDENDS PER SHARE	$	0.20	$	0.03

	Three months ended December 31,
	2017			2016

	(Dollars in Thousands)
Net income	$	34		$	731

Unrealized holding losses on available-for-sale securities		(1,107	)		(3,456	)
Tax effect		376			1,177
Unrealized holding gain on interest rate swaps		44			733
Tax effect		(15	)		(249	)

Total other comprehensive loss		(702	)		(1,795	)

Comprehensive loss	$	(668	)	$	(1,064	)

													Accumulated
			Additional		Unearned								Other			Total
	Common		Paid-In		ESOP		Treasury			Retained			Comprehensive			Stockholders'
	Stock		Capital		Shares		Stock			Earnings			Loss			Equity
	(Dollars in Thousands, Except Per Share Data)
BALANCE, October 1, 2017	$	108	$	118,751	$	-	$	(26,707	)	$	44,787		$	(760	)	$	136,179

Net income											34						34

Other comprehensive loss														(702	)		(702	)

Dividends paid ($0.20 per share)											(1,796	)					(1,796	)

Purchase of Treasury Stock (48,541 shares)								(898	)								(898	)
Treasury Stock used for employee benefit plans (22,171 shares)								309									309

Stock option expense				169													169

Recognition and Retention Plan expense				119													119

Reclassification due to change in feceral income tax rate											303			(303	)		-

BALANCE, December 31, 2017	$	108	$	119,039	$	-	$	(27,296	)	$	43,328		$	(1,765	)	$	133,414

	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	26,125	$	9	$	(335	)	$	25,799
Mortgage-backed securities - U.S.
government agencies		119,456		146		(1,475	)		118,127
Corporate debt securities		34,500		185		(285	)		34,400
Total debt securities available for sale		180,081		340		(2,095	)		178,326

FHLMC preferred stock		6		70		-			76

Total securities available for sale	$	180,087	$	410	$	(2,095	)	$	178,402

Securities Held to Maturity:
U.S. government and agency obligations	$	33,500	$	229	$	(1,688	)	$	32,041
State and political subdivisions		20,781		165		(104	)		20,842
Mortgage-backed securities - U.S.
government agencies		7,003		304		(11	)		7,296

Total securities held to maturity	$	61,284	$	698	$	(1,803	)	$	60,179

	Less than 12 months					More than 12 months					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
	(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	(19	)	$	4,919	$	(411	)	$	20,578	$	(430	)	$	25,497
Mortgage-backed securities - US government agencies		(1,404	)		80,664		(1,069	)		38,269		(2,473	)		118,933
Corporate bonds		(206	)		25,331		(133	)		3,928		(339	)		29,259

Total securities available for sale	$	(1,629	)	$	110,914	$	(1,613	)	$	62,775	$	(3,242	)	$	173,689

Securities Held to Maturity:
U.S. government and agency obligations	$	(114	)	$	2,886	$	(1,574	)	$	25,927	$	(1,688	)	$	28,813
Mortgage-backed securities - US government agencies		(43	)		1,544		(23	)		1,132		(66	)		2,676
State and political subdivisions		(77	)		8,322		(15	)		1,798		(92	)		10,120

Total securities held to maturity	$	(234	)	$	12,752	$	(1,612	)	$	28,857	$	(1,846	)	$	41,609

	Three Months Ended December 31, 2017
	Average Recorded Investment		Income Recognized on Accrual Basis		Income Recognized on Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	9,690	$	34	$	4
Multi-family residential		315		6		-
Commercial real estate		3,051		29		-
Construction and land development		8,729		-		-
Consumer		10		-		-
Total loans	$	21,795	$	69	$	4

	Three Months Ended December 31, 2016
	Average Recorded Investment		Income Recognized on Accrual Basis		Income Recognized on Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	5,522	$	17	$	24
Multi-family residential		332		6		-
Commercial real estate		2,938		17		11
Construction and land development		10,399		-		-
Total loans	$	19,191	$	40	$	35

	December 31, 2017
			Special				Total
	Pass		Mention		Substandard		Loans
	(Dollars in Thousands)
One-to-four family residential	$	-	$	3,336	$	4,217	$	7,553
Multi-family residential		16,513		-		312		16,825
Commercial real estate		111,468		1,966		1,799		115,233
Construction and land development		143,096		-		8,734		151,830
Commercial business		3,333		-		-		3,333
Total loans	$	274,410	$	5,302	$	15,062	$	294,774

	Three Months Ended December 31, 2017
	One- to four-family residential		Multi- family residential			Commercial real estate			Construction and land development		Commercial business		Leases			Consumer		Unallocated		Total
	(Dollars in Thousands)
ALLL balance at September 30, 2017	$	1,241	$	205		$	1,201		$	1,358	$	4	$	23		$	24	$	410	$	4,466
Charge-offs		-		-			-			-		-		-			-		-		-
Recoveries		-		-			-			-		-		-			-		-		-
Provision		29		(47	)		(137	)		263		22		(3	)		-		83		210
ALLL balance at December 31, 2017	$	1,270	$	158		$	1,064		$	1,621	$	26	$	20		$	24	$	493	$	4,676

	As of and for the Three months Ended December 31, 2017
(Dollars in thousands)	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment

One-to-four family residential		1	$	77	$	77
		1	$	77	$	77

	Notional		Pay			Receive	Maturity	Unrealized
	Amount		Rate			Rate	Date	Gain
						(Dollars in thousands)
Interest rate swap contract	$	10,000		1.15	%	1 Month Libor	6-Apr-21	$	267
Interest rate swap contract		10,000		1.18	%	1 Month Libor	13-Jun-21		279
Interest rate swap contract		1,100		4.10	%	1 Month Libor +276 bp	1-Aug-26		-

								$	546

	Notinal		Pay			Receive	Maturity	Unrealized
	Amount		Rate			Rate	Date	Gain
						(Dollar in thousands)

Interest rate swap contract	$	10,000		1.15	%	1 Mth Libor	6-Apr-21	$	217
Interest rate swap contract		10,000		1.18	%	1 Mth Libor	13-Jun-21		223
Interest rate swap contract		1,100		4.10	%	1 Mth Libor +276 bp	1-Aug-26		62

								$	502

	2017						2016
				Percentage						Percentage
				of Pretax						of Pretax
	Amount			Income			Amount			Income
	(Dollars in Thousands)
Tax at statutory rate	$	557			24.25	%	$	374			34.00	%
Adjustments resulting from:
Write-down of deferred tax asset		1,756			76.41			-			-
Tax exempt income		(33	)		(1.44	)		(6	)		(0.54	)
Income from bank owned life insurance		(40	)		(1.74	)		(57	)		(5.19	)
Employee benefit plans		21			0.91			68			6.17
Other		3			0.13			(9	)		(0.83	)

Income tax expense	$	2,264			98.52	%	$	370			33.61	%

	Three Months Ended December 31, 2016
	Number of Shares		Weighted Average Grant Date Per Share Fair Value

Nonvested stock awards at October 1, 2016		172,788	$	12.03
Granted		-		-
Forfeited		-		-
Vested		-		-
Nonvested stock awards at December 31, 2016		172,788	$	12.03

	Three Months Ended December 31, 2016
	Number of Shares		Weighted Average Exercise Price Per Share

Outstanding at October 1, 2016		921,909	$	11.70
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding at December 31, 2016		921,909	$	11.70
Exercisable at December 31, 2016		467,397	$	11.40

	At December 31, 2017
	(Dollars in Thousands)
	Level 1		Level 2		Level 3		Total
Impaired loans	$	-	$	-	$	23,923	$	23,923
Real estate owned		-		-		363		363
Total	$	-	$	-	$	24,286	$	24,286

	At September 30, 2017
	(Dollars in Thousands)
	Level 1		Level 2		Level 3		Total
Impaired loans	$	-	$	-	$	19,665	$	19,665
Real estate owned		-		-		192		192
Total	$	-	$	-	$	19,857	$	19,857

	At December 31, 2017
	(Dollars in Thousands)
			Valuation		Range/
	Fair Value		Technique	Unobservable Input	Weighted Ave.
Impaired loans	$	23,923	Property appraisals (1) (3)	Management discount for selling costs, property type and market volatility (2)	6% to 57% discount/ 7%
Real estate owned	$	363	Property appraisals (1)(3)	Management discount for selling costs, property type and market volatility (2)	10% discount

					Fair Value Measurements at
	Carrying		Fair		December 31, 2017
	Amount		Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	16,659	$	16,659	$	16,659	$	-	$	-
Certificates of deposit		1,604		1,604		1,604		-		-
Investment and mortgage-backed securities available for sale		214,570		214,570		67		214,503		-
Investment and mortgage-backed securities held to maturity		63,377		62,156		-		62,156		-
Loans receivable, net		579,987		580,226		-		-		580,226
Accrued interest receivable		3,452		3,452		3,452		-		-
Federal Home Loan Bank stock		6,859		6,859		6,859		-		-
Bank owned life insurance		28,212		28,212		28,212		-		-
Interest rate swap contracts		601		601		-		601		-

Liabilities:
Checking accounts		58,336		58,336		58,336		-		-
Money market deposit accounts		71,484		71,484		71,484		-		-
Passbook, club and statement savings accounts		106,146		106,146		106,146		-		-
Certificates of deposit		416,066		420,294		-		-		420,294
Advances from FHLB short-term		30,000		30,000		30,000		-		-
Advances from FHLB long-term		106,916		106,147		-		-		106,147
Accrued interest payable		641		641		641		-		-
Advances from borrowers for taxes and insurance		3,498		3,498		3,498		-		-

	Balance							Balance
	October 1,		Additions/					December 31,		Amortization
	2017		Adjustments		Amortization			2017		Period

Goodwill	$	6,102	$	-	$	-		$	6,102
Core deposit intangible		710		-		(38	)		672	10 years
	$	6,812	$	-	$	(38	)	$	6,774

(In thousands)
2018	$	100
2019		123
2020		108
2021		93
2022		77
Thereafter		171
Total		672

	Three Months
	Ended December 31,
	2017								2016
	Average					Average			Average					Average
	Balance		Interest			Yield/Rate (1)			Balance		Interest			Yield/Rate (1)
	(Dollars in Thousands)
Interest-earning assets:
Investment securities (4)	$	132,530	$	996			2.98	%	$	57,046	$	401			2.79	%
Mortgage-backed securities		132,623		842			2.52			121,288		763			2.50
Loans receivable(2)		576,336		6,107			4.20			346,980		3,325			3.80
Other interest-earning assets		29,488		91			1.22			11,627		16			0.55
Total interest-earning assets		870,977		8,036			3.66			536,941		4,505			3.33
Cash and non interest-bearing balances		2,262								1,574
Other non interest-earning assets		48,811								28,641
Total assets	$	922,050							$	567,156
Interest-bearing liabilities:
Savings accounts	$	103,204		19			0.07		$	68,505		16			0.09
Money market deposit and NOW accounts		127,149		49			0.15			91,570		34			0.15
Certificates of deposit		409,294		1,343			1.30			221,863		640			1.14
Total deposits		639,647		1,411			0.88			381,938		690			0.72
Advances from Federal Home Loan Bank		127,799		488			1.51			50,975		166			1.29
Advances from borrowers for taxes and insurance		2,750		1			0.14			2,065		1			0.19
Total interest-bearing liabilities		770,196		1,900			0.98			434,978		857			0.78
Non interest-bearing liabilities:
Non interest-bearing demand accounts		10,529								3,713
Other liabilities		5,439								15,000
Total liabilities		786,164								453,691
Stockholders' equity		135,886								113,465
Total liabilities and stockholders' equity	$	922,050							$	567,156
Net interest-earning assets	$	100,781							$	101,963
Net interest income; interest rate spread			$	6,136			2.68	%			$	3,648			2.55	%
Net interest margin(3)							2.80	%							2.70	%

Average interest-earning assets to average interest-bearing liabilities				113.09	%							123.44	%

	December 31, 2017			September 30, 2017
	(Dollars in Thousands)
Non-accruing loans:
One-to-four family residential	$	5,892		$	5,107
Commercial real estate		1,563			1,566
Construction and land development		8,734			8,724
Total non-accruing loans		16,189			15,397
Real estate owned, net: (1)		363			192
Total non-performing assets	$	16,552		$	15,589

Total non-performing loans as a percentage of loans, net		2.79	%		2.67	%
Total non-performing loans as a percentage of total assets		1.73	%		1.71	%
Total non-performing assets as a percentage of total assets		1.77	%		1.73	%

							To Be
							Well Capitalized
				Required for			Under Prompt
				Capital Adequacy			Corrective Action
	Actual Ratio			Purposes			Provisions

December 31, 2017:
Tier 1 capital (to average assets)
The Company		14.32	%		N/A			N/A
The Bank		13.19	%		4.0	%		5.0	%

Tier 1 common (to risk-weighted assets)
The Company		22.38	%		N/A			N/A
The Bank		20.90	%		4.5	%		6.5	%

Tier 1 capital (to risk-weighted assets)
The Company		22.38	%		N/A			N/A
The Bank		20.90	%		6.0	%		8.0	%

Total capital (to risk-weighted assets)
The Company		23.25	%		N/A			N/A
The Bank		21.77	%		8.0	%		10.0	%

September 30, 2017:
Tier 1 capital (to average assets)
Company		14.81	%		N/A			N/A
Bank		13.59	%		4.0	%		5.0	%

Tier 1 common (to risk-weighted assets)
The Company		23.94	%		N/A			N/A
The Bank		21.97	%		4.5	%		6.5	%

Tier 1 capital (to risk-weighted assets)
Company		23.94	%		N/A			N/A
Bank		21.97	%		6.0	%		8.0	%

Total capital (to risk-weighted assets)
Company		24.83	%		N/A			N/A
Bank		22.86	%		8.0	%		10.0	%

				More than			More than			More than
	3 Months			3 Months			1 Year			3 Years			More than			Total
	or Less			to 1 Year			to 3 Years			to 5 Years			5 Years			Amount
	(Dollars in Thousands)
Interest-earning assets(1):
Investment and mortgage-backed securities(2)	$	10,168		$	17,784		$	42,915		$	49,315		$	157,765		$	277,947
Loans receivable(3)		109,946			83,668			145,222			105,265			135,886			579,987
Other interest-earning assets(4)		14,182			-			249			1,355			-			15,786
Total interest-earning assets	$	134,296		$	101,452		$	188,386		$	155,935		$	293,651		$	873,720

Interest-bearing liabilities:
Savings accounts	$	2,578		$	7,943		$	13,214		$	12,748		$	66,354		$	102,837
Money market deposit and NOW accounts		4,100			12,298			20,857			17,153			67,097			121,505
Certificates of deposit		99,968			155,280			115,091			45,773			-			416,112
Advances from FHLB		40,916			31,960			23,232			40,574			234			136,916
Advances from borrowers for taxes and insurance		3,498			-			-			-			-			3,498
Total interest-bearing liabilities	$	151,060		$	207,481		$	172,394		$	116,248		$	133,685		$	780,868

Interest-earning assets less interest-bearing liabilities	($	16,764	)	($	106,029	)	$	15,992		$	39,687		$	159,966		$	92,852

Cumulative interest-rate sensitivity gap (5)	($	16,764	)	($	122,793	)	($	106,801	)	($	67,114	)	$	92,852

Cumulative interest-rate gap as a percentage of total assets at December 31, 2017		-1.42	%		-12.78	%		-11.07	%		-6.82	%		9.81	%

Cumulative interest-earning assets as a percentage of cumulative interest- bearing liabilities at December 31, 2017		88.90	%		65.75	%		79.88	%		89.63	%		111.89	%

Change in Interest Rates									NPV as % of Portfolio
In Basis Points	Net Portfolio Value								Value of Assets
(Rate Shock)	Amount		$ Change			% Change			NPV Ratio			Change

	(Dollars in Thousands)

300	$	104,840	$	(52,832	)		(33.51	)%		12.69	%		(4.32	)%
200		120,918		(36,754	)		(23.31	)%		14.10	%		(2.91	)%
100		139,104		(18,568	)		(11.78	)%		15.60	%		(1.41	)%
Static		157,672		-			-			17.01	%		-
(100)		166,236		8,564			5.43	%		17.43	%		0.42	%
(200)		165,762		8,090			5.13	%		17.10	%		0.09	%
(300)		169,234		11,562			7.33	%		17.18	%		0.17	%

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares that May Yet Purchased Under Plans or Programs (1)
October 1 - 31, 2017		-	$	-		-		188,159
November 1 - 30, 2017		20,270	$	18.50		-		188,159
December 1 - 31, 2017		7,100	$	18.52		-		188,159
		27,370	$	18.51


				Total Number
				of Shares
				Purchased as
				Part of	Maximum Number
	Total			Publicly	of Shares that May
	Number of	Average		Announced	Yet Be Purchased
	Shares	Price Paid		Plans or	Under Plans or
Period	Purchased	Per Share		Programs (1)	Programs (1)
October 1 - 31, 2021	—	$	—	—	367,758
November 1 - 30, 2021	—		—	—	367,758
December 1 - 31, 2021	—		—	—	367,758
	—	$	—	—