Prudential Bancorp (PBIP) 10-Q 2021 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 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

Prudential Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	46-2935427
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1834 West Oregon Avenue Philadelphia, Pennsylvania	19145
(Address of Principal Executive Offices)	(Zip Code)

(215) 755-1500

(Registrant’s Telephone Number, Including Area Code)

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

Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	PBIP	Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

Yes   ⌧   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes   ⌧    No  ☐

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

Large accelerated filer ☐	Accelerated filer  ☐
Non-accelerated filer  ⌧	Smaller reporting company   ⌧
	Emerging growth company   ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ☐ No  ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practical date: as of May 7, 2021, 10,819,006 shares were issued and 7,858,818 shares were outstanding.

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION:
Item 1.	Consolidated Financial Statements
	Unaudited Consolidated Statements of Financial Condition March 31, 2021 and September 30, 2020	3
	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2021 and 2020	4
	Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended March 31, 2021 and 2020	5
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended March 31, 2021 and 2020	6
	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2021 and 2020	8
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	46
SIGNATURES			47

2

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	March 31,		September 30,
	2021		2020
	(Dollars in Thousands)
ASSETS
Cash and amounts due from depository institutions	$	2,125	$	2,781
Interest-bearing deposits		133,104		114,300
Total cash and cash equivalents		135,229		117,081
Certificates of deposit		2,102		2,102
Investment and mortgage-backed securities available for sale at fair value		353,807		420,364
Investment and mortgage-backed securities held to maturity (fair value—March 31, 2021, $23,460; September 30, 2020, $24,330)		22,270		22,860
Equity securities		54		51
Loans receivable—net of allowance for loan losses (March 31, 2021, $8,353; September 30, 2020, $8,303)		620,875		588,300
Accrued interest receivable		4,946		4,699
Restricted bank stock—at cost		11,012		12,532
Office properties and equipment—net		7,017		7,129
Bank owned life insurance (BOLI)		32,812		32,498
Deferred income taxes, net		3,413		3,902
Goodwill		6,102		6,102
Core deposit intangible		291		340
Prepaid expenses and other assets		4,102		5,393
TOTAL ASSETS	$	1,204,032	$	1,223,353
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest-bearing	$	32,253	$	30,002
Interest-bearing		761,492		740,947
Total deposits		793,745		770,949
Advances from Federal Home Loan Bank - short term		—		25,000
Advances from Federal Home Loan Bank - long term		251,639		260,253
Accrued interest payable		1,898		3,374
Advances from borrowers for taxes and insurance		1,623		2,798
Interest rate swap contracts		14,881		20,960
Accounts payable and accrued expenses		9,988		10,902
Total liabilities		1,073,774		1,094,236
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 7,944,002 outstanding at March 31, 2021; 10,819,006 issued and 8,138,675 outstanding  at September 30, 2020		108		108
Additional paid-in capital		118,295		118,270
Treasury stock, at cost: 2,875,004 shares  at March 31, 2021 and 2,680,331 shares at September 30, 2020		(41,909)		(39,207)
Retained earnings		55,313		52,889
Accumulated other comprehensive loss		(1,549)		(2,943)
Total stockholders’ equity		130,258		129,117
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,204,032	$	1,223,353

See notes to unaudited consolidated financial statements.

3

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2021		2020			2021		2020
INTEREST INCOME:
Interest and fees on loans	$	6,388	$	6,333		$	12,663	$	13,163
Interest on mortgage-backed securities		1,428		2,563			3,044		5,356
Interest and dividends on investments		1,643		1,764			3,357		3,566
Interest on interest-bearing deposits		6		350			90		752
Total interest income		9,465		11,010			19,154		22,837
INTEREST EXPENSE:
Interest on deposits		1,961		2,866			4,131		5,991
Interest on advances from FHLB - short term		14		425			39		965
Interest on advances from FHLB - long term		1,765		1,931			3,576		3,750
Total interest expense		3,740		5,222			7,746		10,706
NET INTEREST INCOME		5,725		5,788			11,408		12,131
PROVISION FOR LOAN LOSSES		—		500			—		625
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,725		5,288			11,408		11,506
NON-INTEREST INCOME:
Fees and other service charges		114		150			253		315
Gain on sale of mortgage-backed securities available for sale		—		2,364			—		2,682
Holding (loss) gain on equity securities		(7)		(39)			3		(58)
Gain on sale of loans		18		239			58		265
Swap income (loss)		216		(333)			319		(300)
Earnings from BOLI		152		164			313		334
Other		82		123			166		262
Total non-interest income		575		2,668			1,112		3,500
NON-INTEREST EXPENSES:
Salaries and employee benefits		2,529		2,624			4,945		4,922
Data processing		221		234			416		426
Professional services		382		308			839		712
Office occupancy		276		218			505		422
Depreciation		108		113			219		268
Director compensation		54		74			107		133
Federal Deposit Insurance Corporation premiums		220		195			350		376
Real estate owned expense		—		93	��		—		140
Advertising		12		53			44		92
Core deposit amortization		23		26			49		56
Other		525		522			974		934
Total non-interest expenses		4,350		4,460			8,448		8,481
INCOME BEFORE INCOME TAXES		1,950		3,496			4,072		6,525
INCOME TAXES:
Current		240		419			402		985
Deferred (benefit) expense		(5)		153			119		153
Total		235		572			521		1,138
NET INCOME	$	1,715	$	2,924		$	3,551	$	5,387
BASIC EARNINGS PER SHARE	$	0.22	$	0.33		$	0.44	$	0.61
DILUTED EARNINGS PER SHARE	$	0.21	$	0.32		$	0.44	$	0.60

See notes to unaudited consolidated financial statements.

4

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020		2021		2020
Net income	$	1,715	$	2,924	$	3,551	$	5,387
Unrealized holding gain (loss) on available-for-sale securities		(4,874)		4,825		(2,792)		3,652
Tax effect		1,032		(1,013)		586		(767)
Reclassification adjustment for net gains recorded in net income		—		(2,364)		—		(2,682)
Tax effect		—		496		—		563
Unrealized holding gain (loss) on interest rate swaps		3,164		(10,914)		4,559		(8,622)
Tax effect		(664)		2,292		(959)		1,811
Total other comprehensive (loss) income		(1,342)		(6,678)		1,394		(6,045)
Comprehensive income (loss)	$	373	$	(3,754)	$	4,945	$	(658)

See notes to unaudited consolidated financial statements.

5

PRUDENTIAL 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, January 1, 2021	$	108	$	118,356	$	(41,167)	$	54,155	$	(207)	$	131,245
Net income								1,715				1,715
Other comprehensive loss										(1,342)		(1,342)
Dividends paid ($0.07 per share)								(557)				(557)
Purchase of treasury stock (62,500 shares)						(946)						(946)
Treasury stock used for employee benefit plan (14,638 shares)				(143)		204						61
Stock option expense				41								41
Restricted share award expense				41								41
BALANCE, March 31, 2021	$	108	$	118,295	$	(41,909)	$	55,313	$	(1,549)	$	130,258

									Accumulated
			Additional						Other		Total
	Common		Paid-In		Treasury		Retained		Comprehensive		Stockholders’
	Stock		Capital		Stock		Earnings		Income		Equity
	(Dollars in Thousands, Except Per Share Data)
BALANCE, January 1, 2020	$	108	$	118,673	$	(29,698)	$	51,391	$	1,825	$	142,299
Net income								2,924				2,924
Other comprehensive loss										(6,678)		(6,678)
Dividends paid ($0.50 per share)								(4,453)				(4,453)
Purchase of treasury stock (152,009 shares)						(1,999)						(1,999)
Treasury stock used for employee benefit plan (44,587 shares)				(787)		703						(84)
Stock option expense				117								117
Restricted share award expense				120								120
BALANCE, March 31, 2020	$	108	$	118,123	$	(30,994)	$	49,862	$	(4,853)	$	132,246

6

									Accumulated
			Additional						Other		Total
	Common		Paid-In		Treasury		Retained		Comprehensive		Stockholders’
	Stock		Capital		Stock		Earnings		Income (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								3,551				3,551
Other comprehensive income										1,394		1,394
Dividends paid ($0.14 per share)								(1,127)				(1,127)
Purchase of treasury stock (209,311 shares)						(2,906)						(2,906)
Treasury stock used for employee benefit plan (14,638 shares)				(143)		204						61
Stock option expense				84								84
Restricted share award expense				84								84
BALANCE, March 31, 2021	$	108	$	118,295	$	(41,909)	$	55,313	$	(1,549)	$	130,258

									Accumulated
			Additional						Other		Total
	Common		Paid-In		Treasury		Retained		Comprehensive		Stockholders’
	Stock		Capital		Stock		Earnings		Income (Loss)		Equity
	(Dollars in Thousands)
BALANCE, October 1, 2019	$	108	$	118,384	$	(29,698)	$	49,625	$	1,192	$	139,611
Net income								5,387				5,387
Other comprehensive loss										(6,045)		(6,045)
Dividends paid ($0.57 per share)								(5,075)				(5,075)
Purchase of treasury stock (152,009 shares)						(1,999)						(1,999)
Treasury stock used for employee benefit plan (44,587 shares)				(787)		703						(84)
Stock option expense				270								270
Restricted share award expense				256								256
Reclassification for adoption of ASC topic 842								(75)				(75)
BALANCE, March 31, 2020	$	108	$	118,123	$	(30,994)	$	49,862	$	(4,853)	$	132,246

See notes to unaudited consolidated financial statements.

7

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended March 31,
	2021		2020
	(Dollars in Thousands)
OPERATING ACTIVITIES:
Net income	$	3,551	$	5,387
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		219		268
Net amortization/accretion of premiums/discounts and other amortization		(372)		(877)
Provision for loan losses		—		625
Accretion of deferred loan fees and costs		(70)		(35)
Income from bank owned life insurance		(313)		(334)
Gain on sale of investment and mortgage-backed securities		—		(2,682)
Gain on sale of loans		(58)		(265)
Proceeds from the sale of loans		3,820		20,713
Originations of loans held for sale		(3,762)		(6,186)
Share-based compensation expense		168		526
Holding (gains) losses on equity securities		(3)		58
Deferred income tax expense (benefit)		119		(153)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		(247)		137
Accrued interest payable		(1,476)		(1,481)
Other, net		399		106
Net cash provided by operating activities		1,975		15,807
INVESTING ACTIVITIES:
Purchase of investment and mortgage-backed securities available for sale		(19,196)		(130,257)
Purchase of investment and mortgage-backed securities held to maturity		—		(2,500)
Loans originated or acquired		(144,832)		(55,211)
Principal collected on loans		112,528		53,750
Principal payments received on investment and mortgage-backed securities:
Held-to-maturity		544		42,179
Available-for-sale		81,683		65,441
Proceeds from sale of investment and mortgage-backed securities		—		81,953
Proceeds from redemption of FHLB stock		2,541		5,489
Purchase of FHLB stock		(1,021)		(4,635)
Purchases of equipment		(107)		(233)
Net cash provided by investing activities		32,140		55,976

8

	Six Months Ended March 31,
	2021		2020
	(Dollars in thousands)
FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, NOW accounts, and savings accounts		(9,516)		45,814
Net increase (decrease) in certificates of deposit		32,311		(59,774)
Net decrease in FHLB advances - short term		(25,000)		(10,000)
Repayment of FHLB advances - long term		(8,615)		(12,280)
(Decrease) increase in advances from borrowers for taxes and insurance		(1,175)		335
Cash dividends paid		(1,127)		(5,075)
Treasury stock used for employee benefit plans		61		(84)
Purchase of treasury stock		(2,906)		(1,999)
Net cash used in financing activities		(15,967)		(43,063)
NET INCREASE IN CASH AND CASH EQUIVALENTS		18,148		28,720
CASH AND CASH EQUIVALENTS—Beginning of period		117,081		47,968
CASH AND CASH EQUIVALENTS—End of period	$	135,229	$	76,688
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid on deposits and advances from FHLB	$	9,222	$	12,187
Income taxes paid	$	60	$	1,195
SUPPLEMENTAL DISCLOSURES OF NONCASH ITEMS:
Loans transferred to other real estate owned	$	—	$	183
Lease adoption:
Right of use lease asset	$	—	$	1,415
Lease liability	$	—	$	1,536

See the accompany notes to the unaudited consolidated financial statements.

9

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 includes a branch office), an administrative office, and 9 additional full-service branch offices. NaN of the branch offices are located in Philadelphia (Philadelphia County), 1 is in Drexel Hill, Delaware County, and 1 is in Huntingdon Valley, Montgomery County (both Pennsylvania counties). The Bank maintains ATMs at all 10 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.

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 and six months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2021, 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 for the fiscal year ended September 30, 2020. 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 72 through 76 of the Annual Report on Form 10-K for the year ended September 30, 2020.

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 reflected in the allowance for loan losses, deferred income taxes, other-than-temporary impairment, interest rate Swap Contracts and the fair value measurement for financial instruments. Actual results could differ from those estimates.

Recent Accounting Pronouncements 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 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. This

10

Update 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. 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 May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain 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 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 fair value option, the difference between the carrying amount and the fair value of the 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 fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in 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 November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ 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 (Topic 350): Simplifying the Test for Goodwill Impairment (Goodwill), to align with the effective date 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 January 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through March 31, 2022. 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 January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from LIBOR and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to December 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for

11

certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. 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.

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 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 March 31,
	2021				2020
	(Dollars in Thousands Except Per Share Data)
	Basic		Diluted		Basic		Diluted
Net income	$	1,715	$	1,715	$	2,924	$	2,924
Weighted average common shares outstanding		7,975,683		7,975,683		8,884,760		8,884,760
Effect of CSEs		0		14,671		0		117,342
Adjusted weighted average common shares used in earnings per share computation		7,975,683		7,990,354		8,884,760		9,002,102
Earnings per share	$	0.22	$	0.21	$	0.33	$	0.32

	Six Months Ended March 31,
	2021				2020
	(Dollars in Thousands, Except Share and Per Share Data)
	Basic		Diluted		Basic		Diluted
Net income	$	3,551	$	3,551	$	5,387	$	5,387
Weighted average common shares outstanding		8,040,907		8,040,907		8,885,972		8,885,972
Effect of CSEs		—		4,512		—		133,815
Adjusted weighted average common shares used in earnings per share computation		8,040,907		8,045,419		8,885,972		9,019,787
Earnings per share	$	0.44	$	0.44	$	0.61	$	0.60

As of March 31, 2021 and 2020, there were 267,728 and 528,004 shares of common stock, respectively, subject to options with exercise prices less than the then current market and which were included in the computation of diluted earnings per share. At March 31, 2021 and 2020, there were 249,030 and 265,030 shares of common stock, respectively, subject to options that had exercise prices greater than the then current market value and were considered anti-dilutive at such dates.

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3.    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

	Three Months Ended March 31, 2021						Three Months Ended March 31, 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		(loss) on AFS		on interest rate swaps		comprehensive
	securities (a)		(a)		income (loss)		securities (a)		(a)		income (loss)
Beginning balance, January 1	$	12,221	$	(12,428)	$	(207)	$	6,920	$	(5,096)	$	1,824
Other comprehensive (loss) income before reclassification		(3,842)		2,500		(1,342)		3,812		(8,621)		(4,809)
Total other comprehensive income (loss)		8,379		(9,928)		(1,549)		10,732		(13,717)		(2,985)
Reclassification for net gains recorded in net income		0		0		0		(1,868)		0		(1,868)
Ending balance, March 31	$	8,379	$	(9,928)	$	(1,549)	$	8,864	$	(13,717)	$	(4,853)

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

	Six Months Ended March 31, 2021						Six Months Ended March 31, 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		(loss) on AFS		on interest rate swaps		comprehensive
	securities (a)		(a)		income (loss)		securities (a)		(a)		income (loss)
Beginning balance, October 1	$	10,585	$	(13,528)	$	(2,943)	$	8,098	$	(6,906)	$	1,192
Other comprehensive (loss) income before reclassification		(2,206)		3,600		1,394		2,885		(6,811)		(3,926)
Total other comprehensive income (loss)		8,379		(9,928)		(1,549)		10,983		(13,717)		(2,734)
Reclassification for net gains recorded in net income		—		—		—		(2,119)		—		(2,119)
Ending balance, March 31	$	8,379	$	(9,928)	$	(1,549)	$	8,864	$	(13,717)	$	(4,853)

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

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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:

	March 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	10,811	$	82	$	0	$	10,893
State and political subdivisions		77,437		2,560		(646)		79,351
Mortgage-backed securities - U.S. government agencies		174,243		6,387		(929)		179,701
Corporate debt securities		80,709		3,337		(184)		83,862
Total debt securities available for sale	$	343,200	$	12,366	$	(1,759)	$	353,807
Securities Held to Maturity:
U.S. government and agency obligations	$	1,000	$	185	$	0	$	1,185
State and political subdivisions		18,022		738		0		18,760
Mortgage-backed securities - U.S. government agencies		3,248		267		0		3,515
Total securities held to maturity	$	22,270	$	1,190	$	0	$	23,460

	September 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	22,241	$	153	$	—	$	22,394
State and political subdivisions		79,099		1,940		(1,418)		79,621
Mortgage-backed securities - U.S. government agencies		226,863		9,774		(71)		236,566
Corporate debt securities		78,764		3,564		(545)		81,783
Total debt securities	$	406,967	$	15,431	$	(2,034)	$	420,364
Securities Held to Maturity:
U.S. government and agency obligations	$	1,000	$	236	$	—	$	1,236
State and political subdivisions		18,076		925		—		19,001
Mortgage-backed securities - U.S. government agencies		3,784		309		—		4,093
Total securities held to maturity	$	22,860	$	1,470	$	—	$	24,330

The Company recognized a holding loss on equity securities of $7,000 for the three months ended March 31, 2021, and a holding gain on equity securities of $3,000 for the six months ended March 31, 2021 and holding losses on equity securities of $39,000 and $58,000, respectively, during the three and six months ended March 31, 2020.

As of March 31, 2021, the Bank maintained $151.5 million of securities in a safekeeping account at the FHLB of Pittsburgh available to be used for collateral and convenience. As of March 31, 2021, the Bank was only required to hold $39.0 million as specific collateral for its borrowings from the FHLB of Pittsburgh; therefore the $112.5 million of excess securities as of such date were not restricted and could be sold or transferred if needed.

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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 March 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		$	(136)	$	10,686	$	(510)	$	6,838	$	(646)	$	17,524
Mortgage-backed securities -U.S. government agencies			(929)		25,777		—		—		(929)		25,777
Corporate debt securities			(184)		11,816		—		—		(184)		11,816
						���
Total securities available for sale		$	(1,249)	$	48,279	$	(510)	$	6,838	$	(1,759)	$	55,117

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 September 30, 2020:

	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	$	(126)	$	10,735	$	(1,292)	$	24,510	$	(1,418)	$	35,245
Mortgage-backed securities - US government agencies		(66)		10,025		(5)		584		(71)		10,609
Corporate debt securities		(545)		16,472		—		—		(545)		16,472
Total securities available for sale	$	(737)	$	37,232	$	(1,297)	$	25,094	$	(2,034)	$	62,326

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, 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 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

15

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 and six months ended March 31, 2021 and 2020, the Company did not record any credit losses on investment securities through earnings.

Mortgage-Backed Securities – At March 31, 2021, there were 15 mortgage-backed security in a gross unrealized loss position for less than 12 months, while there were 0 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 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 did not consider these investments to be other-than-temporarily impaired at March 31, 2021.

Corporate Debt Securities – At March 31, 2021, there were 3 securities in a gross unrealized loss for less than 12 months, while there were 0 securities in a gross unrealized loss position for more than 12 months at such date. These securities were issued by publicly reporting companies with an investment grade rating by at least one bond credit rating agency. As a result, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2021.

State and political subdivisions – At March 31, 2021, there were 4 securities in a gross unrealized loss for less than 12 months, while there were 3 securities in a gross unrealized loss position for more than 12 months at such date. The unrealized losses on these debt securities relate principally to the changes in market rates of interest in the financial markets and are not as a result of projected shortfall of cash flows. These securities were issued by local municipalities/school districts with an investment grade rating by at least one bond credit rating agency. As a result, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 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.

	March 31, 2021
	Held to Maturity				Available for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in Thousands)
Due after one through five years	$	5,693	$	6,085	$	31,190	$	32,832
Due after five through ten years		9,284		9,594		50,705		52,297
Due after ten years		4,045		4,266		87,062		88,977
Total	$	19,022	$	19,945	$	168,957	$	174,106

During the three and six month period ended March 31, 2021, the Company sold no securities. During the three month period ended March 31, 2020, the Company sold securities with an aggregate amortized cost of $44.6 million, for a recognized aggregate gain of $2.4 million (pre-tax). For the six month period ended March 31, 2020, the Company sold securities with an aggregate amortized cost of $62.1 million, for a recognized gain of $2.7 million (pre-tax).

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5.    LOANS RECEIVABLE

Loans receivable consist of the following:

	March 31,		September 30,
	2021		2020
	(Dollars in Thousands)
One-to-four family residential	$	210,569	$	233,872
Multi-family residential		52,657		31,100
Commercial real estate		149,385		139,943
Construction and land development		264,618		260,648
Loans to financial institutions		—		6,000
Commercial business		41,882		12,916
Leases		117		176
Consumer		515		604
Total loans		719,743		685,259
Undisbursed portion of loans-in-process		(89,912)		(86,862)
Deferred loan fees		(603)		(1,794)
Allowance for loan losses		(8,353)		(8,303)
Net loans	$	620,875	$	588,300

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 March 31, 2021:

	One- to								Loans to
	four-		Multi-family		Commercial		Construction and		financial		Commercial
	family residential		residential		real estate		land development		institutions		business		Leases		Consumer		Unallocated		Total
	(Dollars in Thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$		$	0
Collectively evaluated for impairment		1,583		720		1,969		2,710		0		580		3		5		783		8,353
Total ending allowance balance	$	1,583	$	720	$	1,969	$	2,710	$	—	$	580	$	3	$	5	$	783	$	8,353
Loans:
Individually evaluated for impairment	$	3,475	$	0	$	1,328	$	8,250	$	0	$	0	$	0	$	0			$	13,053
Collectively evaluated for impairment		207,094		52,657		148,057		256,368		0		41,882		117		515				706,690
Total loans	$	210,569	$	52,657	$	149,385	$	264,618	$	—	$	41,882	$	117	$	515			$	719,743

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 September 30, 2020:

	One- to								Loans to
	four-		Multi-family		Commercial		Construction and		financial		Commercial
	family residential		residential		real estate		land development		institutions		business		Leases		Consumer		Unallocated		Total
	(Dollars in Thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$		$	0
Collectively evaluated for impairment		1,877		460		1,989		2,888		89		194		3		6		797		8,303
Total ending allowance balance	$	1,877	$	460	$	1,989	$	2,888	$	89	$	194	$	3	$	6	$	797	$	8,303
Loans:
Individually evaluated for impairment	$	3,095	$	0	$	1,417	$	8,525	$	0	$	0	$	0	$	0			$	13,037
Collectively evaluated for impairment		230,777		31,100		138,526		252,123		6,000		12,916		176		604				672,222
Total loans	$	233,872	$	31,100	$	139,943	$	260,648	$	6,000	$	12,916	$	176	$	604			$	685,259

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, loans to financial institutions, 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

17

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.

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 March 31, 2021, segregated by those for which a specific allowance was required and those for which no specific allowance was 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	$	3,475	$	3,475	$	3,792
Commercial real estate		0		0		1,328		1,328		1,505
Construction and land development		0		0		8,250		8,250		10,631
Total	$	0	$	0	$	13,053	$	13,053	$	15,928

The following table presents impaired loans by class as of September 30, 2020, segregated by those for which a specific allowance was required and those for which no specific allowance was 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	$	3,095	$	3,095	$	3,482
Commercial real estate		0		0		1,417		1,417		1,600
Construction and land development		0		0		8,525		8,525		10,906
Total	$	0	$	0	$	13,037	$	13,037	$	15,988

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

	Three Months Ended March 31, 2021
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	3,281	$	4	$	2
Commercial real estate		1,329		0		0
Construction and land development		8,338		0		0
Total impaired loans	$	12,947	$	4	$	2

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	Three Months Ended March 31, 2020
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	4,195	$	0	$	8
Multi-family residential		74		0		0
Commercial real estate		1,593		0		0
Construction and land development		8,726		0		0
Consumer		16		0		0
Total impaired loans	$	14,604	$	0	$	8

	Six Months Ended March 31, 2021
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	3,219	$	9	$	2
Commercial real estate		1,358		—		—
Construction and land development		8,400		—		—
Consumer		—		—		—
Total impaired loans	$	12,977	$	9	$	2

	Six Months Ended March 31, 2020
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	4,195	$	3	$	17
Multi-family residential		74		—		—
Commercial real estate		1,593		—		1
Construction and land development		8,725		—		—
Commercial business		4		—		1
Consumer		16		—		—
Total impaired loans	$	14,607	$	3	$	19

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

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“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.

	March 31, 2021
			Special
	Pass		Mention		Substandard		Doubtful		Total
	(Dollars in Thousands)
One-to-four residential	$	205,653	$	1,441	$	3,475	$	—	$	210,569
Multi-family residential		52,657		—		—		—		52,657
Commercial real estate		138,307		9,750		1,328		—		149,385
Construction and land development		256,368		—		8,250		—		264,618
Commercial business		41,882		—		—		—		41,882
Total	$	694,867	$	11,191	$	13,053	$	—	$	719,111

	September 30, 2020
			Special
	Pass		Mention		Substandard		Doubtful		Total
	(Dollars in Thousands)
One-to-four residential	$	229,361	$	1,416	$	3,095	$	0	$	233,872
Multi-family residential		31,100		0		0		0		31,100
Commercial real estate		128,527		9,999		1,417		0		139,943
Construction and land development		252,123		0		8,525		0		260,648
Loans to financial institutions		6,000		0		0		0		6,000
Commercial business		12,916		0		0		0		12,916
Total	$	660,027	$	11,415	$	13,037	$	0	$	684,479

The Company evaluates the classification of one-to-four family residential, leases and consumer loans primarily on a pooled basis. If the Company becomes aware that adverse or distressed conditions exist that may affect a particular 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 past due as to principal and/or interest that do not have a designated risk rating.

	March 31, 2021
			Non-
	Performing		Performing		Total
	(Dollars in Thousands)
Leases	$	117	$	0	$	117
Consumer		515		0		515
Total	$	632	$	0	$	632

	September 30, 2020
			Non-
	Performing		Performing		Total
	(Dollars in Thousands)
Leases	$	176	$	—	$	176
Consumer		604		—		604
Total	$	780	$	—	$	780

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

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tables present the loan categories of the loan portfolio summarized by the aging categories of performing loans, delinquent loans and nonaccrual loans:

	March 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
	(Dollars in Thousands)
One-to-four family residential	$	206,656	$	671	$	3,242	$	3,913	$	210,569	$	3,475	$	0
Multi-family residential		52,657		0		0		0		52,657		0		0
Commercial real estate		145,673		2,384		1,328		3,712		149,385		1,328		0
Construction and land development		256,368		0		8,250		8,250		264,618		8,250		0
Commercial business		41,882		0		0		0		41,882		0		0
Leases		117		0		0		0		117		0
Consumer		458		57		0		57		515		0		0
Total Loans	$	703,811	$	3,112	$	12,820	$	15,932	$	719,743	$	13,053	$	0

	September 30, 2020
													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	$	231,196	$	523	$	2,153	$	2,676	$	233,872	$	3,095	$	0
Multi-family residential		31,100		0		0		0		31,100		0		0
Commercial real estate		136,225		2,301		1,417		3,718		139,943		1,417		0
Construction and land development		252,123		0		8,525		8,525		260,648		8,525		0
Commercial business		12,916		0		0		0		12,916		0		0
Loans to financial institutions		6,000		0		0		0		6,000		0		0
Leases		176		0		0		0		176		0
Consumer		604		0		0		0		604		0		0
Total Loans	$	670,340	$	2,824	$	12,095	$	14,919	$	685,259	$	13,037	$	0

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 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 March 31, 2021 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 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

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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 both the three and six month periods ended March 31, 2021 and 2020:

	Three Months Ended March 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 December 31, 2020	$	2,011	$	457	$	1,935	$	2,828	$	319	$	—	$	3	$	6	$	759	$	8,318
Charge-offs		—		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—		35		—		35
Provision		(428)		263		34		(118)		261		—		—		(36)		24		—
ALLL balance at March 31, 2021	$	1,583	$	720	$	1,969	$	2,710	$	580	$	—	$	3	$	5	$	783	$	8,353

	Six Months Ended March 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, 2020	$	1,877	$	460	$	1,989	$	2,888	$	194	$	89	$	3	$	6	$	797	$	8,303
Charge-offs		—		—		—		—		—		—		—		—		—		—
Recoveries		1		—		—		—		14		—		—		35		—		50
Provision		(295)		260		(20)		(178)		372		(89)		—		(36)		(14)		—
ALLL balance at March 31, 2021	$	1,583	$	720	$	1,969	$	2,710	$	580	$	—	$	3	$	5	$	783	$	8,353

	Three Months Ended March 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 December 31, 2019	$	999	$	255	$	1,281	$	2,205	$	201	$	63	$	4	$	12	$	508	$	5,528
Charge-offs		(3)		-		-		-		(15)		—		—		(56)		—		(74)
Recoveries		1		-		-		-		-		—		—		6		—		7
Provision		304		40		84		-115		71		7		—		41		68		500
ALLL balance at March 31, 2020	$	1,301	$	295	$	1,365	$	2,090	$	257	$	70	$	4	$	3	$	576	$	5,961

	Six Months Ended March 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, 2019	$	1,002	$	315	$	1,257	$	2,034	$	206	$	63	$	5	$	13	$	498	$	5,393
Charge-offs		(3)		—		—		—		(15)		—		—		(56)		—		(74)
Recoveries		1		—		—		—		—		—		10		6		—		17
Provision		301		(20)		108		56		66		7		(11)		40		78		625
ALLL balance at March 31, 2020	$	1,301	$	295	$	1,365	$	2,090	$	257	$	70	$	4	$	3	$	576	$	5,961

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The Company recorded 0 provision for loan losses for the three and six month periods ended March 31, 2021, compared to a provision of $500,000 and $625,000 for loan losses for the three and six month periods in fiscal 2020. During the quarter ended March 31, 2021, the Company recorded 0 charge offs and recoveries of $35,000. During the six months ended March 31, 2021, the Company recorded 0 charge offs and recoveries of $50,000. During the quarter ended March 31, 2020, the Company recorded $74,000 in charge offs and recoveries of $7,000. During the six months ended March 31, 2020, the Company recorded charge offs of $74,000 and recoveries of $17,000.

At March 31, 2021, the Company had 4 loans aggregating $4.9 million that were classified as TDRs. NaN of the TDRs, totaling $4.5 million, which are on non-accrual, are a part of a troubled lending relationship totaling $10.1 million. The remaining TDR is also on non-accrual and consists of a $399,000 loan secured by a single-family property; the loan is performing in accordance with the restructured terms.

The Company did 0t restructure any loans, as a TDR, during the three and six months ended March 31, 2021, or during the three and six months ending March 31, 2020.

NaN TDRs defaulted during the three and six month periods ending March 31, 2021 or 2020.

6.    DEPOSITS

Deposits consist of the following major classifications:

	March 31,				September 30,
	2021				2020
	Amount		Percent		Amount		Percent
	(Dollars in Thousands)
Non-interest-bearing checking accounts	$	32,253	4.1	%	$	30,002	3.9	%
Interest-bearing checking accounts		112,752	14.2	%		135,797	17.6	%
Money market deposit accounts		116,882	14.7	%		111,105	14.4	%
Passbook, club and statement savings		229,936	29.0	%		224,435	29.1	%
Certificates maturing in six months or less		162,045	20.4	%		125,165	16.2	%
Certificates maturing in more than six months		139,877	17.6	%		144,445	18.8	%
Total	$	793,745	100.0	%	$	770,949	100.0	%

Certificates in the amount of $250,000 and over totaled $99.7 million as of March 31, 2021 and $76.6 million as of September 30, 2020.

7.    ADVANCES FROM FEDERAL HOME LOAN BANK – SHORT TERM

As of March 31, 2021 and September 30, 2020 outstanding balances and related information regarding short-term borrowings from the FHLB are summarized as follows:

	March 31,			September 30,
(Dollar Amounts in Thousands)	2021			2020
Balance at year-end	$	—		$	25,000
Weight-average rate at period-end		—	%		0.39	%

As September 30, 2020, the $25.0 million of borrowings consisted of 1 90-day FHLB advance associated with an interest rate swap contract.

The Bank maintains borrowing facilities with the FHLB of Pittsburgh, Atlantic Community Bankers Bank (“ACBB”) and the Federal Reserve Bank of Philadelphia, the terms and interest rates of which are subject to change on the date of execution of borrowings. Available borrowings are based on collateral with the facility. The Bank also maintains unsecured borrowing facilities with ACBB and PNC for $12.5 million and $10.0 million, respectively. There were  0 draws on either facility as of March 31, 2021.

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8.    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 Bank and qualifying fixed-income securities and FHLB stock. The long-term advances outstanding as of March 31, 2021 and September 30, 2020 are as follows:

Lomg-term FHLB advances:	Maturity range		Weighted average			Stated interest rate range				March 31,		September 30,
Description	from	to	interest rate			from		to		2021		2020
										(Dollars in Thousands)
Fixed Rate - Amortizing	1‑Oct‑20	30‑Sep‑21		2.80	%	2.72	%	2.83	%	$	1,074	$	5,179
Fixed Rate - Amortizing	1‑Oct‑21	30‑Sep‑22		2.88	%	1.99	%	3.05	%		3,886		5,523
Fixed Rate - Amortizing	1‑Oct‑22	30‑Sep‑23		2.89	%	1.94	%	3.11	%		4,414		5,265
Total				2.87	%						9,374		15,967
Fixed Rate - Advances	1‑Oct‑20	30‑Sep‑21		2.30	%	1.42	%	2.35	%		15,996		17,996
Fixed Rate - Advances	1‑Oct‑21	30‑Sep‑22		2.31	%	1.94	%	3.23	%		63,272		63,293
Fixed Rate - Advances	1‑Oct‑22	30‑Sep‑23		2.52	%	2.00	%	3.22	%		94,999		94,999
Fixed Rate - Advances	1‑Oct‑23	30‑Sep‑24		2.88	%	2.38	%	3.20	%		67,998		67,998
Total				2.55	%						242,265		244,286
				2.57	%			Total		$	251,639	$	260,253

9.    INTEREST RATE SWAPS

The Bank has contracted with a third party to participate in interest rate swap contracts. There were 13 cash flow hedges tied to wholesale funding at both March 31, 2021 and September 30, 2020. These interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Bank making fixed-rate payments. During the quarter ended March 31, 2021, $3,000 of income was recognized as ineffectiveness through earnings, while $4,000 of expense was recognized as ineffectiveness through earnings during the comparable period in fiscal 2020. During the six months ended March 31, 2020, $5,000 of expense was recognized as ineffectiveness through earnings, while $3,000 of expense was recognized as ineffectiveness through earnings during the comparable period in 2020. There were 9 interest rate swaps designated as fair value hedges involving the receipt of variable-rate payments from a counterparty in exchange for the Bank making fixed-rate payments over the life of the agreements that were applicable to 3 loans and 7 investment securities as of both March 31, 2021 and September 30, 2020. There was $26.3 million on deposit with the counterparty as collateral for the hedges at March 31, 2021. The fair value is recorded in the other liabilities section of the consolidated statements of financial condition.

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

2021
Hedged	Notional		Pay Rate				Receive	Maturity Date		Unrealized
Item	Amount		from		to		Rate	from	to	Loss
(Dollars in Thousands)
State and political subdivisions	$	21,570	3.06	%	3.07	%	3 Mth Libor	1-Feb-27	1-May-28	$	(2,316)
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		(4,099)
90 day wholesale funding		135,000	2.51	%	2.78	%	3 Mth Libor	11-Jan-24	27-Mar-24		(8,466)
										$	(14,881)

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Below is a summary of the interest rate swap agreements and their terms as of September 30, 2020.

2021
Hedged	Notional		Pay Rate				Receive	Maturity Date		Unrealized
Item	Amount		from		to		Rate	from	to	Loss
(Dollars in Thousands)
State and political subdivisions	$	21,570	3.06	%	3.07	%	3 Mth Libor	1-Feb-27	1-May-28	$	(3,834)
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		(6,157)
90 day wholesale funding		135,000	2.51	%	2.78	%	3 Mth Libor	11-Jan-24	27-Mar-24		(10,969)
										$	(20,960)

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

10.  INCOME TAXES

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

	March 31,		September 30,
	2021		2020
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	2,074	$	2,071
Nonaccrual interest		625		561
Accrued vacation		16		16
Capital loss carryforward		4		4
Split dollar life insurance		9		9
Post-retirement benefits		70		72
Realized loss on equity securities		—		3
Unrealized losses on interest rate swaps		2,637		3,596
Deferred compensation		756		781
Goodwill		52		58
Lease liability		276		0
Other		104		48
Employee benefit plans		214		187
Total deferred tax assets		6,837		7,406
Valuation allowance		(4)		(4)
Total deferred tax assets, net of valuation allowance		6,833		7,402
Deferred tax liabilities:
Property		173		137
Right of Use		251		0
Realized gain on equity securities		9		0
Unrealized gains on available for sale securities		2,227		2,813
Purchase accounting adjustments		359		321
Deferred loan fees		401		229
Total deferred tax liabilities		3,420		3,500
Net deferred tax assets	$	3,413	$	3,902

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

25

period, resulting in the establishment of a valuation allowance for the carryforward period. The  valuation allowance totaled $4,000 at both March 31, 2021 and September 30, 2020.

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. The Company’s federal and state income tax returns for taxable years through September 30, 2016 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

11.  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 purchased 213,528 shares (on a converted basis) of the Company’s common stock in the open market for an aggregating cost of approximately $2.5 million, at an average purchase price per share of $11.49. The Company made sufficient contributions to the RRP to fund these purchases. 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 233,500 shares were awarded during February 2015. In August 2016, the Company granted 7,473 awards covering shares under the RRP and 3,027 shares under the 2014 SIP. In March 2017, the Company granted awards covering 17,128 shares under the 2014 SIP. In March 2018, the Company granted awards covering 8,209 shares under the RRP and 18,291 shares under the 2014 SIP. Shares subject to awards under either plan generally vest at the rate of 20% per year over five years. No further grants may be made pursuant to the RRP in accordance with its terms.

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 and six months ended March 31, 2021, an aggregate of $41,000 and $84,000, respectively, was recognized in compensation expense for the grants pursuant to the RRP and the 2014 SIP. During the three and six months ended March 31, 2020, $120,000 and $256,000, respectively, was recognized in compensation expense for the grants pursuant to the RRP and the 2014 SIP. At March 31, 2021, approximately $239,000 in additional compensation expense for unvested shares awarded related to the RRP and 2014 SIP remained unrecognized.

A summary of the Company’s non-vested stock award activity for the six months ended March 31, 2021 is presented in the following table:

	Six Months Ended
	March 31, 2021
	Number of	Weighted Average
	Shares	Grant Date Fair Value
Non-vested stock awards at October 1, 2020	23,056	$	17.78
Granted	0		0
Forfeited	0		0
Vested	(8,128)		18.03
Non-vested stock awards at March 31, 2021	14,928	$	17.66

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 (on a converted basis) of common stock were approved for future issuance pursuant to the Option Plan. As of September 30, 2018, all of the options had been awarded under the Option Plan. 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 pursuant to the 2014 SIP. During August 2016, the Company granted options covering 18,866

26