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 December 31, 2021
	For the quarterly period ended March 31, 2022
	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 ~~January~~May 3111, 2022, 10,819,006 shares were issued and 7,~~769~~776,~~387~~287 shares were outstanding.

Table of Contents

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION:

Item 1.	Consolidated Financial Statements

	Unaudited Consolidated Statements of Financial Condition ~~December~~March 31, ~~2021~~2022 and September 30, 2021	3

	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021	4

	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021	5

	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021	6

	Unaudited Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021	78

	Notes to Unaudited Consolidated Financial Statements	810

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3034

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4247

Item 4.	Controls and Procedures	4247

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	4348

Item 1A.	Risk Factors	4348

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4351

Item 3.	Defaults Upon Senior Securities	4352

Item 4.	Mine Safety Disclosures	4352

Item 5.	Other Information	4452

Item 6.	Exhibits	4452

SIGNATURES			4452

Table of Contents

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	~~December~~March 31,		September 30,
	~~2021~~2022		2021
	(Dollars in Thousands)
ASSETS

Cash and amounts due from depository institutions	$	2,~~822~~729	$	2,233
Interest-bearing deposits		~~111~~67,~~001~~140		80,465
Total cash and cash equivalents		113,823		82,698

Total cash and cash equivalents		69,869		82,698

Certificates of deposit		1,106		1,106
Investment and mortgage-backed securities available for sale at fair value		297,~~524~~149		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
Investment and mortgage-backed securities held to maturity (fair value—March 31, 2022, $18,807; September 30, 2021, $21,161)		18,653		20,074
Equity securities		2221		22
Loans held for sale		406		—
Loans receivable—net of allowance for loan losses (March 31, 2022, $7,922; September 30, 2021, $8,517)		550,502		618,206
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		3,891		4,326
Accrued interest receivable		3,857		4,326
Real estate owned		3,828		4,109
Real estate owned		4,109		4,109
Restricted bank stock—at cost		9,009		10,091
Restricted bank stock—at cost		9,069		10,091
Office properties and equipment—net		6,733		6,850
Office properties and equipment—net		6,807		6,850
Bank owned life insurance (BOLI)		33,398		33,116
Bank owned life insurance (BOLI)		33,260		33,116
Deferred income taxes, net		5,728		3,021
Deferred income taxes, net		2,391		3,021
Goodwill		6,102		6,102
Core deposit intangible		~~224~~205		246
Prepaid expenses and other assets		2,880		4,554
Interest rate swap contracts		10		—
TOTAL ASSETS	$	1,084,172	$	1,100,468
Prepaid expenses and other assets		2,765		4,554
TOTAL ASSETS	$	1,008,969	$	1,100,468

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:
Deposits:
Non-interest-bearing	$	35,~~594~~590	$	37,409
Interest-bearing		~~685~~635,~~090~~186		674,106
Total deposits		~~720~~670,~~684~~776		711,515
Advances from Federal Home Loan Bank - Long Term		207,880		232,025
Advances from Federal Home Loan Bank		206,793		232,025
Accrued interest payable		1,~~398~~575		2,558
Advances from borrowers for taxes and insurance		21,~~790~~706		1,698
Interest rate swap contracts		~~9,031~~—		12,834
Accounts payable and accrued expenses		87,~~799~~989		9,382
Total liabilities		950,582		970,012

Total liabilities		888,839		970,012

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 7,769,387 outstanding at December 31, 2021 and September 30, 2021		108		108
Common stock, $.01 par value, 40,000,000 shares authorized; 10,819,006 issued and 7,776,287 outstanding at March 31, 2022; 10,819,006 issued and 7,769,387 outstanding at September 30, 2021		108		108
Additional paid-in capital		118,~~506~~465		118,424
Treasury stock, at cost: 3,049,619 shares at December 31, 2021 and September 30, 2021		(44,351)		(44,351)
Treasury stock, at cost: 3,042,719 shares at March 31, 2022 and 3,049,619 shares at September 30, 2021		(44,241)		(44,351)
Retained earnings		5952,~~744~~685		58,450
Accumulated other comprehensive loss		(~~417~~6,887)		(2,175)
Total stockholders’ equity		133,590		130,456

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,084,172	$	1,100,468
Total stockholders’ equity		120,130		130,456

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,008,969	$	1,100,468

See notes to unaudited consolidated financial statements.

Table of Contents

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended				Six Months Ended
	~~December~~March 31,				March 31,
	~~2021~~2022		~~2020~~2021		2022		2021

INTEREST INCOME:
Interest and fees on loans	$	65,~~287~~941	$	6,~~275~~388	$	12,228	$	12,663
Interest on mortgage-backed securities		~~1,035~~883		1,~~616~~428		1,918		3,044
Interest and dividends on investments		1,~~763~~823		1,~~714~~643		3,586		3,357
Interest on interest-bearing deposits		~~154~~145		846		299		90
Total interest income		9,239		9,689


Total interest income		8,792		9,465		18,031		19,154
INTEREST EXPENSE:

Interest on deposits		1,948		2,170
INTEREST EXPENSE:
Interest on advances from FHLB - short term		—		25
Interest on deposits		1,762		1,961		3,710		4,131
Interest on advances from FHLB - long term		1,362		1,811
Interest on advances from FHLB - short term		—		14		—		39
Total interest expense		3,310		4,006
Interest on advances from FHLB - long term		1,342		1,765		2,704		3,576
NET INTEREST INCOME		5,929		5,683


Total interest expense		3,104		3,740		6,414		7,746
PROVISION FOR LOAN LOSSES		—		—


NET INTEREST INCOME		5,688		5,725		11,617		11,408
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,929		5,683


PROVISION FOR LOAN LOSSES		2,900		—		2,900		—
NON-INTEREST INCOME:

Fees and other service charges		122		139
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		2,788		5,725		8,717		11,408
Gain on equity securities		—		11

Gain on sale of loans		—		40
NON-INTEREST INCOME:
Swap income		25		103
Fees and other service charges		125		114		247		253
Earnings from BOLI		144		160
Holding (loss) gain on equity securities		(1)		(7)		(1)		3
Other		79		84
Gain on sale of loans		1		18		1		58
Total non-interest income		370		537
Swap (loss) income		(61)		216		(36)		319

Earnings from BOLI		138		152		282		313
NON-INTEREST EXPENSES:
Other		85		82		164		166
Salaries and employee benefits		2,369		2,416

Data processing		226		195
Total non-interest income		287		575		657		1,112
Professional services		421		457

Office occupancy		228		229
NON-INTEREST EXPENSE:
Depreciation		109		111
Salaries and employee benefits		2,386		2,529		4,755		4,945
Director compensation		58		53
Data processing		237		221		463		416
Federal Deposit Insurance Corporation premiums		70		130
Professional services		780		382		1,201		839
Advertising		23		32
Office occupancy		262		276		490		505
Core deposit amortization		22		26
Depreciation		111		108		220		219
Other		681		448
Director compensation		87		54		145		107
Total non-interest expenses		4,207		4,097
Federal Deposit Insurance Corporation premiums		170		220		240		350

Real estate owned expense		285		—		285		—
INCOME BEFORE INCOME TAXES		2,092		2,123
Advertising		21		12		44		44

Litigation expenses		6,423		—		6,423		—
INCOME TAXES:
Merger related expenses		300		—		300		—
Current		91		162
Core deposit amortization		19		23		41		49
Deferred		163		124
Other		375		525		1,056		974
Total		254		286


Total non-interest expense		11,456		4,350		15,663		8,448
NET INCOME	$	1,838	$	1,837


(LOSS) INCOME BEFORE INCOME TAXES		(8,381)		1,950		(6,289)		4,072
BASIC EARNINGS PER SHARE	$	0.24	$	0.23


INCOME TAXES:
DILUTED EARNINGS PER SHARE	$	0.24	$	0.23
Current (benefit) expense		(249)		240		(157)		402

Deferred (benefit) expense		(1,617)		(5)		(1,455)		119
DIVIDENDS PER SHARE	$	0.07	$	0.07

Total income tax (benefit) expense		(1,866)		235		(1,612)		521

NET (LOSS) INCOME	$	(6,515)	$	1,715	$	(4,677)	$	3,551

BASIC (LOSS) EARNINGS PER SHARE	$	(0.84)	$	0.22	$	(0.60)	$	0.44

DILUTED (LOSS) EARNINGS PER SHARE	$	(0.84)	$	0.21	$	(0.60)	$	0.44

See notes to unaudited consolidated financial statements.

Table of Contents

PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME~~(LOSS) INCOME


	Three Months Ended ~~December~~March 31,				Six Months Ended March 31,
	~~2021~~2022		~~2020~~2021		2022		2021


Net income	$	1,838	$	1,837
Net (loss) income	$	(6,515)	$	1,715	$	(4,677)	$	3,551

Unrealized holding (loss) gain on available-for-sale securities		(1,196)		2,082
Unrealized holding loss on available-for-sale securities		(15,868)		(4,874)		(17,064)		(2,792)

Tax effect		~~251~~3,332		~~(446)~~1,032		3,583		586

Unrealized holding gain on interest rate swaps		37,~~421~~679		13,~~395~~164		11,100		4,559

Tax effect		(~~718~~1,613)		(~~295~~664)		(2,331)		(959)

Total other comprehensive income		1,758		2,736
Total other comprehensive (loss) income		(6,470)		(1,342)		(4,712)		1,394

Comprehensive income	$	3,596	$	4,573
Comprehensive (loss) income	$	(12,985)	$	373	$	(9,389)	$	4,945

See notes to unaudited consolidated financial statements.

Table of Contents

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, October 1, 2021	$	108	$	118,424	$	(44,351)	$	58,450	$	(2,175)	$	130,456
BALANCE, January 1, 2022	$	108	$	118,506	$	(44,351)	$	59,744	$	(417)	$	133,590

Net income								1,838				1,838
Net loss								(6,515)				(6,515)

Other comprehensive income										1,758		1,758
Other comprehensive loss										(6,470)		(6,470)

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

Stock option expense				41								41
Purchase of treasury stock (79 shares)						(1)						(1)

Restricted share award expense				41								41
Treasury stock used for employee benefit plan (6,979 shares)				(111)		111						—

BALANCE, December 31, 2021	$	108	$	118,506	$	(44,351)	$	59,744	$	(417)	$	133,590
Stock option expense				39								39

Restricted share award expense				31								31

BALANCE, March 31, 2022	$	108	$	118,465	$	(44,241)	$	52,685	$	(6,887)	$	120,130


									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
BALANCE, January 1, 2021	$	108	$	118,356	$	(41,167)	$	54,155	$	(207)	$	131,245

Net income								1,~~837~~715				1,~~837~~715

Other comprehensive income										2,736		2,736
Other comprehensive loss										(1,342)		(1,342)

Dividends paid ($0.07 per share)								(~~571~~557)				(~~571~~557)

Purchase of treasury stock (141,811 shares)						(1,960)						(1,960)
Purchase of treasury stock (62,500 shares)						(946)						(946)

Stock option expense				43								43
Treasury stock used for employee benefit plan (44,587 shares)				(143)		204						61

Restricted share award expense				43								43
Stock option expense				41								41

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

BALANCE, March 31, 2021	$	108	$	118,295	$	(41,909)	$	55,313	$	(1,549)	$	130,258

Table of Contents


									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 loss								(4,677)				(4,677)

Other comprehensive income										(4,712)		(4,712)

Dividends paid ($0.14 per share)								(1,088)				(1,088)

Purchase of treasury stock (79 shares)						(1)						(1)

Treasury stock used for employee benefit plan (6,979 shares)				(111)		111						—

Stock option expense				80								80

Restricted share award expense				72								72


BALANCE, March 31, 2022	$	108	$	118,465	$	(44,241)	$	52,685	$	(6,887)	$	120,130


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

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

Net income								3,551				3,551

Other comprehensive loss										1,394		1,394

Dividends paid ($0.57 per share)								(1,127)				(1,127)

Purchase of treasury stock (152,009 shares)						(2,906)						(2,906)

Treasury stock used for employee benefit plan (44,587 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

See notes to unaudited consolidated financial statements.

Table of Contents

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


	Six Months Ended March 31,
	2022		2021

	(Dollars in Thousands)
OPERATING ACTIVITIES:
Net (loss) income	$	(4,677)	$	3,551
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		220		219
Net amortization/accretion of premiums/discounts and other amortization		(301)		(372)
Provision for loan losses		2,900		—
Accretion of deferred loan fees and costs		(440)		(70)
Income from bank owned life insurance		(282)		(313)
Write-down on real estate owned		281		—
Gain on sale of loans		(1)		(58)
Proceeds from the sale of loans		1,041		3,820
Originations of loans held for sale		(1,040)		(3,762)
Share-based compensation expense		153		168
Holding losses (gains) on equity securities		1		(3)
Deferred income tax (benefit) expense		(1,455)		119
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		435		(247)
Accrued interest payable		(983)		(1,476)
Other, net		398		399
Net cash (used in) provided by operating activities		(3,750)		1,975
INVESTING ACTIVITIES:
Purchase of investment and mortgage-backed securities available for sale		(39,499)		(19,196)
Purchase of investment and mortgage-backed securities held to maturity		(1,995)		—
Loans originated or acquired		(93,316)		(144,832)
Principal collected on loans		158,737		112,528
Principal payments received on investment and mortgage-backed securities:
Held-to-maturity		3,347		544
Available-for-sale		29,722		81,683
Proceeds from redemption of FHLB stock		1,093		2,541
Purchase of FHLB stock		(10)		(1,021)
Purchases of equipment		(104)		(107)
Net cash provided by investing activities		57,975		32,140

See the notes to the unaudited consolidated financial statements

Table of Contents


	Six Months Ended March 31,
	2022		2021
	(Dollars in thousands)
FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts, and savings accounts		(7,497)		(9,516)
Net (decrease) increase in certificates of deposit		(33,242)		32,311
Net decrease in FHLB advances - short term		—		(25,000)
Repayment of FHLB advances - long term		(25,232)		(8,615)
Increase (decrease) in advances from borrowers for taxes and insurance		8		(1,175)
Cash dividends paid		(1,088)		(1,127)
Treasury stock used for employee benefit plans		(2)		61
Purchase of treasury stock		(1)		(2,906)
Net cash used in financing activities		(67,054)		(15,967)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(12,829)		18,148
CASH AND CASH EQUIVALENTS—Beginning of period		82,698		117,081

CASH AND CASH EQUIVALENTS—End of period	$	69,869	$	135,229
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid on deposits and advances from FHLB	$	7,397	$	9,222

Income taxes paid	$	250	$	60

See the accompany notes to the unaudited consolidated financial statements.

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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 nine additional full-service branch offices. Eight of the branch offices are located in Philadelphia (Philadelphia County), one is in Drexel Hill, Delaware County, and one is in Huntingdon Valley, Montgomery County (both of the latter are 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 ~~December~~March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 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, 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 73 through 78 of the Annual Report on Form 10-K, as amended, for the year ended September 30, 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 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

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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 ~~those used for credit losses. Furthermore,~~ the ~~ASU provides a one-year deferral of the~~ effective ~~dates~~date ofused ~~the ASUs on derivatives and hedging and leases~~ for ~~companies~~credit ~~that are not public business entities~~losses. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

In ~~May~~October 2021, the FASB issued ASU 2021-0408, ~~Earnings~~Business ~~Per~~Combinations ~~Share~~ (Topic ~~260~~805),: ~~Debt~~Accounting –for ~~Modifications~~Contract ~~and~~Assets ~~Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718),~~ and ~~Derivatives~~Contract ~~and~~Liabilities ~~Hedging~~from – Contracts inwith ~~Entity’s Own Equity (Subtopic 815-40)~~Customers, which ~~requires~~addresses anhow ~~entity to treat a modification of~~ an ~~equity-classified~~acquirer ~~warrant~~should ~~that~~recognize ~~does~~and ~~not~~measure ~~cause~~revenue ~~the~~contracts ~~warrant~~acquired toin ~~become liability-classified as an exchange of the original warrant for~~ a ~~new~~business ~~warrant~~combination. ~~This~~For ~~guidance~~public ~~applies~~business ~~whether~~entities, the ~~modification~~ASU is structured as an amendment to the 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 in this Update are effective for ~~all entities for~~ fiscal years beginning after December 15, ~~2021~~2022, including interim periods within those fiscal years. AnFor ~~entity~~all ~~should~~other ~~apply~~entities, the ~~amendments~~ASU ~~prospectively~~is toeffective ~~modifications~~for orfiscal ~~exchanges~~years ~~occurring~~beginning ~~on or~~ after ~~the~~December ~~effective~~15, ~~date of the amendments. Early adoption is permitted for all entities~~2023, including ~~adoption in an~~ interim ~~period.~~periods Ifwithin anthose ~~entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the~~ fiscal ~~year that includes that interim period~~years. ~~The~~This ~~Company~~Update is ~~currently~~not ~~evaluating~~expected ~~the~~to ~~impact~~have ~~the~~a ~~adoption~~significant ofimpact ~~the standard will have~~ on the Company’s financial ~~position and/or results of operations~~statements.

In ~~October~~March ~~2021~~2022, the FASB issued ASU ~~2021~~2022-0701, ~~Stock~~Derivatives ~~Compensation~~and Hedging (~~Topic~~ASC ~~718~~815): ~~Determining~~Fair ~~the~~Value ~~Current~~Hedging ~~Price~~- ofPortfolio anLayer ~~Underlying~~Method. ~~Share~~ASC ~~for~~815 ~~Equity-Classified~~currently ~~Share-Based~~permits ~~Awards,~~only ~~which~~prepayable ~~provides~~financial aassets ~~practical~~and ~~expedient~~one ~~whereby~~or more beneficial interests secured by a ~~nonpublic~~portfolio ~~entity~~of isprepayable ~~allowed~~financial instruments to ~~determine~~be ~~the~~included ~~current~~in ~~price~~a ~~input~~ last-of ~~equity~~-~~classified~~layer ~~share~~closed portfolio. The amendments in this Update allow non-~~based~~prepayable ~~awards~~financial ~~issued~~assets to ~~both~~also ~~employees~~be ~~and~~included ~~nonemployees~~in a closed portfolio hedged using the ~~reasonable~~portfolio ~~application~~layer ofmethod. aThat ~~reasonable~~expanded ~~valuation~~scope permits an entity to apply the same portfolio hedging method. ~~The~~to ~~ASU~~both isprepayable ~~effective~~and ~~prospectively~~non-prepayable financial assets, thereby allowing consistent accounting for ~~all~~similar ~~qualifying~~hedges. ~~awards~~The ~~granted~~guidance oris ~~modified~~effective ~~during~~for ~~fiscal~~public ~~years~~business ~~beginning~~entities ~~after~~for ~~December~~fiscal 15years, ~~2021,~~ and interim periods within those fiscal years, beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

In ~~October~~March ~~2021~~2022, the FASB issued ASU ~~2021~~2022-0802, ~~Business~~Financial ~~Combinations~~Instruments - Credit Losses (~~Topic~~ASC ~~805~~326): ~~Accounting~~Troubled ~~for~~Debt ~~Contract~~Restructurings ~~Assets~~(TDRs) and ~~Contract~~Vintage ~~Liabilities~~Disclosures. ~~from~~The ~~Contracts~~guidance ~~with~~amends ~~Customers~~ASC 326 to eliminate the accounting guidance for TDRs by creditors, ~~which~~while ~~addresses~~enhancing ~~how~~disclosure anrequirements ~~acquirer~~for ~~should~~certain ~~recognize~~loan refinancing and ~~measure~~restructuring ~~revenue~~activities ~~contracts~~by ~~acquired~~creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a ~~business~~new ~~combination~~loan or continuation of existing loan. ~~For~~These ~~public~~amendments ~~business~~are ~~entities~~intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the ~~ASU~~amendments isto ~~effective~~ASC ~~for~~326 require that an entity disclose current-period gross write-offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of

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~~fiscal~~financing ~~years~~receivables ~~beginning~~by ~~after~~credit ~~December~~quality ~~15,~~indicator ~~2022,~~and ~~including~~class ~~interim~~of ~~periods~~financing ~~within~~receivable ~~those~~by ~~fiscal~~year ~~years~~of origination. ~~For~~The ~~all~~guidance ~~other~~is only for entities, that have adopted the ~~ASU~~amendments isin ~~effective~~Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2023~~2022. Early adoption using prospective application, including adoption in an interim ~~periods~~period ~~within~~where ~~those~~the guidance should be applied as of the beginning of the fiscal ~~years~~year. This Update is not expected to have a significant impact on the Company’s financial statements.

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 ~~December~~March 31,
	~~2021~~2022				~~2020~~2021
	(Dollars in Thousands Except Per Share Data)
	Basic		Diluted		Basic		Diluted

Net income	$	1,838	$	1,838	$	1,837	$	1,837
Net (loss) income	$	(6,515)	$	(6,515)	$	1,715	$	1,715

Weighted average common shares outstanding		7,769,095		7,~~765~~769,095		87,~~104~~975,~~713~~683		87,~~104~~975,~~713~~683

Effect of CSEs		—		~~44,253~~—		—		2114,~~077~~671

Adjusted weighted average common shares used in earnings per share computation		7,769,095		7,~~809~~769,~~348~~095		87,~~104~~975,~~713~~683		87,~~125~~990,~~790~~354

Earnings per share	$	0.24	$	0.24	$	0.23	$	0.23
Earnings (loss) per share	$	(0.84)	$	(0.84)	$	0.22	$	0.21


	Six Months Ended March 31,
	2022				2021

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

Net (loss) income	$	(4,677)	$	(4,677)	$	3,551	$	3,551

Weighted average common shares outstanding		7,769,812		7,769,812		8,040,907		8,040,907

Effect of CSEs		—		—		—		4,512

Adjusted weighted average common shares used in earnings per share computation		7,769,812		7,769,812		8,040,907		8,045,419

Earnings (loss) per share	$	(0.60)	$	(0.60)	$	0.44	$	0.44

As of ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, there were 299,728 and ~~282~~267,728 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~~March 31, ~~2021~~2022 and ~~2020~~2021, there ~~were 221,530 and 288,533 shares, respectively, that had exercise prices greater than the then current market value for the common stock and which were considered anti-dilutive at such dates.~~

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~~3. ACCUMULATED~~were ~~OTHER~~221,530 ~~COMPREHENSIVE~~and ~~INCOME~~249,030 ~~(LOSS)~~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.

3. ACCUMULATED OTHER COMPREHENSIVE 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 ~~December~~March 31, 2022						Three Months Ended ~~December~~March 31, 2021
	2021		2021		2021		2020		2020		2020

					Total						Total
					accumulated						accumulated
	Unrealized gain		Unrealized ~~gain~~ (loss) gain		other		Unrealized gain		Unrealized ~~gain~~ (loss) gain		other
	(loss) on AFS		on interest rate swaps		comprehensive		(loss) 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)
Beginning balance, January 1	$	5,153	$	(5,570)	$	(417)	$	12,221	$	(12,428)	$	(207)
Other comprehensive (loss) income before reclassification		(~~945~~12,536)		26,~~703~~066		1(6,~~758~~470)		1(3,~~636~~842)		12,~~100~~500		2(1,~~736~~342)
Total other comprehensive income (loss)		5(7,~~153~~383)		~~(5,570)~~496		(~~417~~6,887)		128,~~221~~379		(129,~~428~~928)		(~~207~~1,549)
Ending balance, December 31	$	5,153	$	(5,570)	$	(417)	$	12,221	$	(12,428)	$	(207)
Ending balance, March 31	$	(7,383)	$	496	$	(6,887)	$	8,379	$	(9,928)	$	(1,549)

(a)

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


	Six Months Ended March 31, 2022						Six Months Ended March 31, 2021

					Total						Total
					accumulated						accumulated
	Unrealized gain		Unrealized (loss) gain		other		Unrealized gain		Unrealized (loss) gain		other
	(loss) on AFS		on interest rate swaps		comprehensive		(loss) 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		(13,481)		8,769		(4,712)		(2,206)		3,600		1,394
Total other comprehensive income (loss)		(7,383)		496		(6,887)		8,379		(9,928)		(1,549)
Ending balance, March 31	$	(7,383)	$	496	$	(6,887)	$	8,379	$	(9,928)	$	(1,549)

(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:


	~~December~~March 31, ~~2021~~2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in Thousands)
Securities Available for Sale:
U.S. government and agency obligations	$	2,~~951~~555	$	7158	$	—	$	32,~~022~~613
State and political subdivisions		7376,~~562~~460		~~2,592~~275		(183,148)		7673,~~136~~587
Mortgage-backed securities - U.S. government agencies		~~114~~122,~~351~~350		~~2,732~~205		(~~836~~4,264)		~~116~~118,~~247~~291
Corporate debt securities		~~100~~105,~~136~~130		~~2,497~~895		(~~514~~3,367)		102,~~119~~658
Total debt securities available for sale	$	~~291~~306,~~000~~495	$	71,~~892~~433	$	(110,~~368~~779)	$	297,~~524~~149

Securities Held to Maturity:
U.S. government and agency obligations	$	12,~~000~~995	$	~~150~~85	$	—(85)	$	12,~~150~~995
State and political subdivisions		1211,~~939~~914		~~659~~222		—		1312,~~598~~136
Mortgage-backed securities - U.S. government agencies		3,~~895~~744		~~163~~80		(29148)		43,~~029~~676
Total securities held to maturity	$	18,653	$	387	$	(233)	$	18,807

Total securities held to maturity	$	17,834	$	972	$	(29)	$	18,777


	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

11The Company recognized holding losses on equity securities of $1,000 for both the three and six months ended March 31, 2022, a holding loss on equity securities of $7,000 and a holding gain on equity securities of $3,000, during the three and six months ended March 31, 2021, respectively.

As of March 31, 2022, the Bank maintained $101.3 million of securities in a safekeeping account at the FHLB of Pittsburgh available to be used for collateral and convenience. As of March 31, 2022, the Bank was only required to hold $16.7 million as specific collateral for its borrowings from the FHLB of Pittsburgh; therefore the $84.6 million of excess securities as of such date were not restricted and could be sold or transferred if needed.

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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 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, 2022:

The Company recognized no 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.


		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		$	(3,148)	$	43,976	$	—	$	—	$	(3,148)	$	43,976
Mortgage-backed securities -U.S. government agencies			(2,241)		76,727		(2,023)		17,932		(4,264)		94,659
Corporate debt securities			(3,184)		38,269		(183)		4,817		(3,367)		43,086

Total securities available for sale		$	(8,573)	$	158,972	$	(2,206)	$	22,749	$	(10,779)	$	181,721

Securities Held to Maturity:
U.S. government and agency obligations		$	(85)	$	1,910	$	—	$	—	$	(85)	$	1,910
Mortgage-backed securities -U.S. government agencies			(148)		2,677		—		—		(148)		2,677

Total securities held to maturity		$	(233)	$	4,587	$	—	$	—	$	(233)	$	4,587

Total		$	(8,806)	$	163,559	$	(2,206)	$	22,749	$	(11,012)	$	186,308

AsThe offollowing ~~December~~table ~~31,~~shows ~~2021,~~ the ~~Bank~~gross ~~maintained~~unrealized ~~$93.9~~losses ~~million~~and ofrelated ~~securities~~fair invalues aof ~~safekeeping account at~~ the ~~FHLB~~Company’s ofinvestment ~~Pittsburgh~~and ~~available~~mortgage-backed tosecurities, beaggregated ~~used~~by ~~for~~investment ~~collateral~~category and ~~convenience.~~length As of ~~December~~time ~~31,~~that ~~2021,~~individual ~~the~~securities ~~Bank~~had ~~was~~been ~~only~~in ~~required~~a tocontinuous ~~hold~~loss ~~$16.7~~position ~~million~~ as ~~specific collateral for its borrowings from the FHLB~~ of ~~Pittsburgh;~~September 30, ~~therefore the $77.2 million of excess securities as of such date were not restricted and could be sold or transferred if needed.~~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)~~	(Dollars in Thousands)
Securities Available for Sale:
State and political subdivisions		$	(1893)	$	214,~~100~~383	$	—(66)	$	—4,417	$	(18159)	$	218,~~100~~800
Mortgage-backed securities -U.S. government agencies			(128)		7,256		(708)		18,292		(836)		25,548
Mortgage-backed securities - U.S. government agencies			(487)		18,493		(269)		7,849		(756)		26,342
Corporate debt securities			(~~514~~187)		2524,~~439~~816		—		—		(~~514~~187)		2524,~~439~~816

Total securities available for sale		$	(~~660~~767)	$	3457,~~795~~692	$	(~~708~~335)	$	1812,~~292~~266	$	(1,~~368~~102)	$	5369,~~087~~958

Securities Held to Maturity:
Mortgage-backed securities -U.S. government agencies		$	(29)	$	1,257	$	—	$	—	$	(29)	$	1,257
Mortgage-backed securities - U.S. government agencies			(24)	$	1,269	$	—	$	—	$	(24)	$	1,269

Total securities held to maturity		$	(2924)	$	1,~~257~~269	$	—	$	—	$	(2924)	$	1,~~257~~269

Total		$	(~~689~~791)	$	3658,~~052~~961	$	(~~708~~335)	$	1812,~~292~~266	$	(1,~~397~~126)	$	5471,~~344~~227

12Management 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

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~~The~~of ~~following~~the ~~table~~securities. ~~shows~~Management ~~the~~also ~~gross~~evaluates ~~unrealized~~other ~~losses~~facts and ~~related~~circumstances ~~fair~~that ~~values~~may be indicative of ~~the~~an ~~Company’s~~OTTI ~~investment~~condition. This ~~securities~~includes, ~~aggregated~~but byis ~~investment~~not ~~category~~limited ~~and~~to, an evaluation of the type of security, the length of time ~~that~~and ~~individual~~extent ~~securities~~to ~~had~~which the fair value of the security has been inless athan ~~continuous~~cost, ~~loss~~and ~~position~~the asnear-term prospects of ~~September 30,~~the ~~2021~~issuer.


	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

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 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 and six months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, the Company did not record any credit losses on investment securities through earnings.

~~Mortgage-Backed~~U.S. ~~Securities~~government and agency obligations – At ~~December~~March 31, ~~2021~~2022, there ~~were~~was ~~eight~~one ~~mortgage-backed~~U.S. ~~security~~government and agency obligation in a gross unrealized loss position for less than 12 months, ~~while~~and ~~there~~no ~~were six~~ securities in a gross unrealized loss position for more than 12 months at such date. These ~~securities~~are ~~represent~~bonds ~~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, 2022.

13Mortgage-Backed Securities – At March 31, 2022, there were 97 mortgage-backed security in a gross unrealized loss position for less than 12 months, while there were seven 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, 2022.

~~Table~~Corporate ofDebt ~~Contents~~Securities – At March 31, 2022, there were ten securities in a gross unrealized loss position for less than 12 months, while there was one security 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, 2022.

UState and political subdivisions – At March 31, 2022, there were 20 securities in a gross unrealized loss position for less than 12 months, while there were no securities in a gross unrealized loss position for more than 12 months at such date.S. ~~Government~~The ~~sponsored~~unrealized ~~agency~~losses oron ~~carry~~these debt securities relate principally to the ~~full~~changes ~~faith~~in ~~and~~market ~~credit~~rates of interest in the ~~United~~financial ~~States~~markets ~~through~~and aare ~~government~~not ~~agency~~as ~~and~~a ~~all~~result of ~~them~~projected ~~are~~cash ~~currently~~flow ~~rated~~shortfalls. ~~AAA~~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 ~~December~~March 31, ~~2021~~2022.

Corporate Debt Securities – At December 31, 2021, there were six securities in a gross unrealized loss for less than 12 months, while there were no securities in a gross unrealized loss position for more than 12 months at such date. These securities were issued by publicly reporting companies each 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 December 31, 2021.

State and political subdivisions – At December 31, 2021, there was one security in a gross unrealized loss for less than 12 months, while there were no securities in a gross unrealized loss position for more than 12 months at such date. The unrealized losses on this debt security 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. 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 did not consider this investment to be other-than-temporarily impaired at December 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.

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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~~March 31, ~~2021~~2022

Held to Maturity

Available for Sale

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

(Dollars in Thousands)

Due within one year

1,035

1,~~043~~036

—1,005

—1,016

Due after one through five years

5,~~421~~399

5,~~889~~565

4554,~~130~~117

4653,~~181~~582

Due after five through ten years

3,448

3,~~515~~479

5856,~~152~~360

5954,~~184~~412

Due after ten years

45,~~035~~027

45,~~301~~051

7372,~~367~~663

7569,~~912~~848

Total

1314,~~939~~909

1415,~~748~~131

~~176~~184,~~649~~145

~~181~~178,~~277~~858

The Company sold no investment securities during the three and six month periods ended ~~December~~March 31, ~~2021~~2022 or ~~2020~~2021.

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5. LOANS RECEIVABLE

Loans receivable consist of the following:


	~~December~~March 31,		September 30,
	~~2021~~2022		2021
	(Dollars in Thousands)
One-to-four family residential	$	~~190~~183,~~269~~080	$	202,330
Multi-family residential		7380,~~069~~391		76,122
Commercial real estate		~~164~~141,~~508~~474		165,992
Construction and land development		~~195~~174,~~751~~970		205,413
Commercial business		6362,~~531~~011		57,236
Consumer		~~516~~561		530

Total loans		~~687~~642,~~644~~487		707,623

Undisbursed portion of loans-in-process		(9483,~~524~~890)		(80,620)
Deferred loan fees		20(173)		(280)
Allowance for loan losses		(87,~~382~~922)		(8,517)

Net loans	$	~~584~~550,~~758~~502	$	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~~March 31, ~~2021~~2022:


	One- to
	four-		Multi-family		Commercial		Construction and		Commercial
	family residential		residential		real estate		land development		business		Consumer		Unallocated		Total
	(Dollars in Thousands)

Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$		$	—
Collectively evaluated for impairment		1,~~656~~600		1,~~053~~159		21,~~300~~990		1,~~648~~507		~~925~~903		1618		~~784~~745		87,~~382~~922
Total ending allowance balance	$	1,~~656~~600	$	1,~~053~~159	$	21,~~300~~990	$	1,~~648~~507	$	~~925~~903	$	1618	$	~~784~~745	$	87,~~382~~922

Loans:
Individually evaluated for impairment	$	32,~~185~~372	$	—	$	~~1,280~~—	$	31,~~593~~963	$	—	$	—			$	84,~~058~~335
Collectively evaluated for impairment		~~187~~180,~~084~~708		7380,~~069~~391		~~163~~141,~~228~~474		~~192~~173,~~158~~007		6362,~~531~~011		~~516~~561				~~679~~638,~~586~~152
Total loans	$	~~190~~183,~~269~~080	$	7380,~~069~~391	$	~~164~~141,~~508~~474	$	~~195~~174,~~751~~970	$	6362,~~531~~011	$	~~516~~561			$	~~687~~642,~~644~~487

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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, 2021:


	One- to
	four-		Multi-family		Commercial		Construction and		Commercial
	family residential		residential		real estate		land development		business		Consumer		Unallocated		Total
	(Dollars in Thousands)

Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,665		1,051		2,220		1,968		799		15		799		8,517
Total ending allowance balance	$	1,665	$	1,051	$	2,220	$	1,968	$	799	$	15	$	799	$	8,517

Loans:
Individually evaluated for impairment	$	3,006	$	—	$	1,280	$	4,093	$	—	$	—			$	8,379
Collectively evaluated for impairment		199,324		76,122		164,712		201,320		57,236		530				699,244
Total loans	$	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 loans 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~~March 31, ~~2021~~2022, 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	$	—	$	—	$	32,~~185~~372	$	32,~~185~~372	$	32,~~483~~721
Commercial real estate		—		—		1,280		1,280		1,457
Construction and land development		—		—		1,963		1,963		2,157
Construction and land development		—		—		3,593		3,593		3,840
Total	$	—	$	—	$	4,335	$	4,335	$	4,878
Total	$	—	$	—	$	8,058	$	8,058	$	8,780

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The following table presents impaired loans by class as of September 30, 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	$	—	$	—	$	3,006	$	3,006	$	3,304
Commercial real estate		—		—		1,280		1,280		1,457
Construction and land development		—		—		4,093		4,093		4,340
Total	$	—	$	—	$	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~~March 31, ~~2021~~2022
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis
	(Dollars in Thousands)
One-to-four family residential	$	32,~~096~~689	$	4	$	510
Commercial real estate		1,280		—		—
Construction and land development		32,~~843~~778		—		—
Total impaired loans	$	86,~~219~~747	$	4	$	510


	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		—		—
Construction and land development		8,338		—		—
Total impaired loans	$	12,948	$	4	$	2

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	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	$	—
Commercial real estate		1,373		—		—
Construction and land development		8,475		—		—
Total impaired loans	$	12,939	$	5	$	—


	Six Months Ended March 31, 2022
	Average				Income
	Recorded		Income Recognized		Recognized on
	Investment		on Accrual Basis		Cash Basis

	(Dollars in Thousands)
One-to-four family residential	$	2,854	$	8	$	15
Commercial real estate		853		—		—
Construction and land development		3,216		—		—
Total impaired loans	$	6,924	$	8	$	15


	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		—		—
Total impaired loans	$	12,977	$	9	$	2

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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~~March 31, ~~2021~~2022

Special

~~Total~~

Pass

Mention

Substandard

~~Loans~~Doubtful

Total

(Dollars in Thousands)

One-to-four residential

~~185~~179,~~552~~502

1,~~532~~206

32,~~185~~372

~~190,269~~—

183,080

Multi-family residential

7380,~~069~~391

—

~~73,069~~—

80,391

Commercial real estate

~~161~~139,~~189~~455

2,~~039~~019

~~1,280~~—

~~164,508~~—

141,474

Construction and land development

~~192~~173,~~158~~007

—

31,~~593~~963

~~195,751~~—

174,970

Commercial business

6362,~~531~~011

—

~~63,531~~—

62,011

Total

~~675~~634,~~499~~366

3,~~571~~225

84,~~058~~335

~~687,128~~—

641,926


	September 30, 2021
			Special				~~Total~~
	Pass		Mention		Substandard		~~Loans~~Doubtful		Total
	(Dollars in Thousands)
One-to-four residential	$	197,920	$	1,404	$	3,006	$	~~202,330~~—	$	202,330
Multi-family residential		71,497		4,625		—		~~76,122~~—		76,122
Commercial real estate		162,657		2,055		1,280		~~165,992~~—		165,992
Construction and land development		201,320		—		4,093		~~205,413~~—		205,413
Commercial business		57,236		—		—		~~57,236~~—		57,236
Total	$	690,630	$	8,084	$	8,379	$	~~707,093~~—	$	707,093

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The Company evaluates the classification of 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 90 days or more past due as to principal and/or interest that do not have a designated risk rating.~~

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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.


	~~December~~March 31, ~~2021~~2022
			Non-		~~Total~~
	Performing		Performing		~~Loans~~Total
	(Dollars in Thousands)
Consumer	$	~~516~~561	$	—	$	~~516~~561
Total	$	~~516~~561	$	—	$	~~516~~561


	September 30, 2021
			Non-		~~Total~~
	Performing		Performing		~~Loans~~Total
	(Dollars in Thousands)
Consumer	$	530	$	—	$	530
Total	$	530	$	—	$	530

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

~~December~~March 31, ~~2021~~2022

90 Days+

30‑89 Days

90 Days +

Total

Non-

Past Due

Current

Past Due

Loans

Accrual

and Accruing

(Dollars in Thousands)

One-to-four family residential

~~186~~181,~~910~~840

~~1,532~~8

1,~~827~~232

31,~~359~~240

~~190~~183,~~269~~080

32,~~185~~372

—

Multi-family residential

7380,~~069~~391

—

7380,~~069~~391

—

Commercial real estate

~~162~~141,~~579~~474

~~649~~—

~~1,280~~—

~~1,929~~—

~~164~~141,~~508~~474

~~1,280~~—

—

Construction and land development

~~192~~173,~~158~~007

—

31,~~593~~963

~~195~~174,~~751~~970

31,~~593~~963

—

Commercial business

6362,~~465~~011

66—

—

66—

6362,~~531~~011

—

Consumer

~~468~~561

48—

—

48—

~~516~~561

—

Total Loans

~~678~~639,~~649~~284

~~2,295~~8

63,~~700~~195

83,~~995~~203

~~687~~642,~~644~~487

84,~~058~~335

—


	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	$	—
Multi-family residential		76,122		—		—		—		76,122		—		—
Commercial real estate		164,712		—		1,280		1,280		165,992		1,280		—
Construction and land development		201,320		—		4,093		4,093		205,413		4,093		—
Commercial business		57,236		—		—		—		57,236		—		—
Consumer		493		37		—		37		530		—		—
Total Loans	$	699,682	$	524	$	7,417	$	7,941	$	707,623	$	8,379	$	—

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

1821

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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 and six months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~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 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 ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021:


	Three Months Ended ~~December~~March 31, ~~2021~~2022
	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	$	—	$	—	$	15	$	799	$	8,517
Charge-offs		—		—		(136)		—		—		—		—		—		—		(136)
Recoveries		1		—		—		—		—		—		—		—		—		1
Provision		(10)		2		216		(320)		126				—		1		(15)		—
ALLL balance at December 31, 2021	$	1,656	$	1,053	$	2,300	$	1,648	$	925	$	—	$	—	$	16	$	784	$	8,382
Charge-offs		(736)		—		(1,289)		(1,270)		(72)		—		—		—		—		(3,367)
Recoveries		7		—		—		—		—		—		—		—		—		7
Provision		673		106		979		1,129		50		—		—		2		(39)		2,900
ALLL balance at March 31, 2022	$	1,600	$	1,159	$	1,990	$	1,507	$	903	$	—	$	—	$	18	$	745	$	7,922


	~~Three~~Six Months Ended ~~December~~March 31, ~~2020~~2022
	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
ALLL balance at September 30, 2021	$	1,665	$	1,051	$	2,220	$	1,968	$	799	$	—	$	—	$	15	$	799	$	8,517
Charge-offs		—(736)		—		—(1,425)		—(1,270)		—(72)		—		—		—		—		—(3,503)
Recoveries		18		—		—		—		14—		—		—		—		—		158
Provision		~~133~~663		~~(3)~~108		~~(54)~~1,195		~~(60)~~809		~~111~~176		~~(89)~~		—		—3		(3854)		—2,900
ALLL balance at December 31, 2020	$	2,011	$	457	$	1,935	$	2,828	$	319	$	—	$	3	$	6	$	759	$	8,318
ALLL balance at March 31, 2022	$	1,600	$	1,159	$	1,990	$	1,507	$	903	$	—	$	—	$	18	$	745	$	7,922

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The Company recorded no provision for loan losses for the three months periods ended December 31, 2021 or 2020. During the quarter ended December 31, 2021, the Company recorded one charge off of $136,000 and recoveries of $1,000. During the quarter ended December 31, 2020, the Company recorded no charge offs and recoveries of $15,000.


	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, 2019	$	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

At December 31, 2021, the Company had three loans totaling $1.6 million that were classified as troubled debt restructurings (“TDRs”). All three TDRs are on non-accrual. Two of the TDRs consist of loans aggregating $898,000 secured by single-family residential properties and are performing in accordance with the restructured terms. The remaining TDR is a $705,000 commercial real estate loan classified as non-accrual and is part of a lending relationship totaling $5.5 million.

The Company restructured one loan aggregating $516,000 as a TDR, during the three months ended December 31, 2021 The loan is on nonaccrual and will remain on nonaccrual until a sufficient payment history under the restructured terms is developed. The Company did not restructure any loans as a TDR during the three months ended December 31, 2020.

No TDRs defaulted during the three month periods ending December 31, 2021 or 2020.


	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

The Company recorded a provision for loan losses of $2.9 million for the three and six months ended March 31, 2022 compared to no provision for loan losses in either of the same periods in fiscal 2021. During the three and six months ending March 31, 2022, the Company recorded eight charge offs totaling $3.5 million while during the same periods the Company recorded recoveries aggregating $7,000 and $8,000, respectively. During the three and six months ending March 31, 2021, the Company recorded no charge offs while during the same periods the Company recorded recoveries aggregating $35,000 and $50,000, respectively. The preponderance of the charge-offs during the quarter ended March 31, 2022 were attributable to the previously disclosed litigation settlements described in Item 1 of Part II below.

At March 31, 2022 the Company had two loans two loans totaling $692,000 that were classified as troubled debt restructurings (“TDRs”). The two TDRs are on non-accrual and consist of loans secured by two single-family residential properties. Both TDRs are performing in accordance with the restructured terms.

As part of the lawsuit settlement described in Item I of Part II, a commercial real estate loan that was a TDR at September 30, 2021 with a balance of $705,000 was forgiven during the quarter ended March 31, 2022.

The Company restructured one loan aggregating $516,000 as a TDR during the six month period ended March 31, 2022. The loan is on nonaccrual and will remain on nonaccrual until a sufficient payment history under the restructured terms is developed. The Company did not restructure any loans as a TDR during the six months ended March 31, 2021.

No TDRs defaulted during the three and six month periods ending March 31, 2022 or 2021, with the exception of the loan forgiveness described above.

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6. DEPOSITS

Deposits consist of the following major classifications:


	~~December~~March 31,				September 30,
	~~2021~~2022				2021
	Amount		Percent		Amount		Percent
	(Dollars in Thousands)
Non-interest-bearing checking accounts	$	35,~~594~~590	45.93	%	$	37,409	5.3	%
Interest-bearing checking accounts		~~107~~82,~~451~~042	1412.92	%		87,752	12.3	%
Money market deposit accounts		~~112~~111,~~224~~751	1516.67	%		111,488	15.7	%
Passbook, club and statement savings		~~230~~229,~~357~~758	3234.02	%		229,989	32.3	%
Certificates maturing in six months or less		~~127~~123,~~557~~757	1718.75	%		143,767	20.2	%
Certificates maturing in more than six months		~~107~~87,~~501~~878	1413.91	%		101,110	14.2	%

Total	$	~~720~~670,~~684~~776	100.0	%	$	711,515	100.0	%

Certificates in the amount of $250,000 and over totaled $9492.94 million as of ~~December~~March 31, ~~2021~~2022 and $95.3 million as of September 30, 2021.

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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 Bank and qualifying fixed-income securities and FHLB stock. The long-term advances outstanding as of ~~December~~March 31, ~~2021~~2022 and September 30, 2021 ~~are~~were as follows:


Lomg-term FHLB advances:	Maturity range		Weighted average			Stated interest rate range				~~December~~March 31,		September 30,
Description	from	to	interest rate			from		to		~~2021~~2022		2021
										(Dollars in Thousands)
Fixed Rate - Amortizing	1‑Oct‑21	30‑Sep‑22		2.99	%	2.94	%	3.05	%	$	~~1,519~~872	$	2,227
Fixed Rate - Amortizing	1‑Oct‑22	30‑Sep‑23		2.5289	%	1.94	%	3.11	%		32,~~115~~675		3,551
Total				2.7692	%						43,~~634~~547		5,778

Fixed Rate - Advances	1‑Oct‑21	30‑Sep‑22		2.1522	%	1.94	%	2.33	%		40,249		63,250
Fixed Rate - Advances	1‑Oct‑22	30‑Sep‑23		2.5752	%	2.00	%	3.22	%		94,999		94,999
Fixed Rate - Advances	1‑Oct‑23	30‑Sep‑24		2.8388	%	2.38	%	3.20	%		67,998		67,998
Total				2.6058	%						203,246		226,247

				2.6259	%			Total		$	~~207~~206,~~880~~793	$	232,025

8. DERIVATIVES

The Bank has contracted with a third party to participate in interest rate swap contracts. There were thirteen cash flow hedges tied to wholesale funding at both ~~December~~March 31, ~~2021~~2022 and September 30, 2021. These interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments. During the quarter ended ~~December~~March 31, 2022 and 2021, no$3,000 of income was recognized as ineffectiveness through earnings. During the six months ended March 31, ~~while~~2022, $23,000 of income was recognized, aswhile ~~ineffectiveness~~$5,000 ~~through~~of ~~earnings~~expense was recognized as ineffectiveness during the comparable period in ~~fiscal~~ 2021. There were nine interest rate swaps designated as fair value hedges involving the receipt of variable-rate payments from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements that were applicable to three loans and seven investment securities as of both ~~December~~March 31, ~~2021~~2022 and September 30, 2021. There was $~~10.1~~400,000 ~~million~~ on deposit with the counterparty as collateral for the hedges at ~~December~~March 31, ~~2021~~2022. ~~The fair value is recorded in the other liabilities section of the Consolidated Statement of Financial Condition.~~

~~Below is a summary of the interest rate swap agreements and their terms as of December 31, 2021.~~24

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Below is a summary of the interest rate swap agreements and their terms as of March 31, 2022.


2021
2022
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~~624)
Commercial loans		23,656	4.10	%	5.74	%	1 Mth Libor +225 to 276 bp	13-Jun-25	1-Aug-26		—
30 day wholesale funding		90,000	1.36	%	2.70	%	1 Mth Libor	15-Feb-24	12-Jun-26		(21,~~181)~~177
90 day wholesale funding		135,000	2.51	%	2.78	%	3 Mth Libor	11-Jan-24	27-Mar-24		(~~4,867~~543)

										$	~~(9,031)~~10

21The increase in the value of the swap agreements during the 2022 periods was due to the expectation of future rate increases.

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


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		—
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 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.25

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910. INCOME TAXES

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


	~~December~~March 31,		September 30,
	~~2021~~2022		2021
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,~~697~~591	$	1,716
Nonaccrual interest		~~408~~238		395
Accrued vacation		14		14
Capital loss carryforward		4		4
Other real estate owned		867		—
Split dollar life insurance		9		9
Post-retirement benefits		6665		67
Unrealized losses on interest rate swaps		1,481		2,199
Unrealized losses on available for sale securities		1,966		—
Deferred compensation		775		767
Unrealized losses on interest rate swaps		—		2,199
Goodwill		44		47
Deferred compensation		748		767
Lease liability		266		256
Net operating loss		1,836		—
Other		25		79
Goodwill		41		47
Employee benefit plans		198		242
Lease liability		236		256
Total deferred tax assets		4,995		5,795
Other		23		79
Employee benefit plans		210		242
Total deferred tax assets		7,048		5,795
Valuation allowance		(4)		(4)
Total deferred tax assets, net of valuation allowance		47,~~991~~044		5,791

Deferred tax liabilities:
Property		~~170~~167		127
Right of Use		~~242~~214		233
Realized gain on equity securities		3		3
Unrealized gains on available for sale securities		~~1,370~~—		1,621
Purchase accounting adjustments		379		394
Unrealized gains on interest rate swaps		132		—
Deferred loan fees		436		392
Purchase accounting adjustments		423		394
Total deferred tax liabilities		2,600		2,770
Deferred loan fees		377		392
Net deferred tax assets	$	2,391	$	3,021
Total deferred tax liabilities		1,316		2,770
Net deferred tax assets	$	5,728	$	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 $4,000 at both ~~December~~March 31, ~~2021~~2022 and September 30, 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~~consolidated ~~Statements~~statements of ~~Operations~~operations as a component of income tax expense. The Company’s federal and state income tax returns for taxable years through September 30, 2017 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

~~10. STOCK COMPENSATION PLANS~~26

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. Grants can no longer be made pursuant to the 2008 RRP even if

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~~previously awarded grants are forfeited~~11. STOCK ~~During~~COMPENSATION 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 March 2019, the Company granted 8,209 shares under the 2008 RRP and 18,291 shares under the 2014 SIP. There were no shares awarded during 2020 and 2021. Shares subject to awards under either plan generally vest at the rate of 20% per year over five years.PLANS

~~Compensation~~The ~~expense~~Company ~~related~~maintains to the ~~shares~~2008 ~~subject~~Recognition toand ~~restricted~~Retention ~~stock~~Plan ~~awards~~(“RRP”) ~~granted~~which is ~~recognized~~administered ~~ratably~~by ~~over~~a committee of the ~~five-year~~Board ~~vesting~~of ~~period~~Directors inof anthe ~~amount~~Company. ~~which~~The ~~totals~~RRP provides for the grant ~~date~~of ~~fair~~shares ~~value~~of ~~multiplied~~common bystock of the ~~number~~Company ofto ~~shares~~officers, ~~subject~~employees toand directors of the ~~grant~~Company. ~~During~~Grants ~~the~~can ~~three~~no ~~months~~longer ~~ended~~be ~~December~~made ~~31,~~pursuant ~~2021,~~to anthe ~~aggregate~~2008 ofRRP ~~$41,000~~even ~~was~~if ~~recognized~~previously inawarded ~~compensation~~grants ~~expense~~are ~~for~~forfeited. ~~the~~During ~~grants~~February 2015, ~~pursuant~~shareholders toapproved the ~~RRP~~2014 ~~and~~Stock Incentive Plan (the “2014 SIP”). ~~During~~As part of the ~~three~~2014 ~~months~~SIP, ~~ended~~a ~~December~~maximum 31of 285,655 ~~2020~~shares of common stock can be awarded as restricted stock awards or units, ~~$43~~of which 233,~~000~~500 ~~was~~shares ~~recognized~~were inawarded ~~compensation~~during ~~expense~~February 2015. ~~for~~In March 2019, the ~~grants~~Company ~~pursuant~~granted to8,209 shares under the 2008 RRP and 18,291 shares under the 2014 SIP. AtThere ~~December~~were ~~31,~~no ~~2021,~~shares ~~approximately~~awarded ~~$113,000~~during in2020 ~~additional~~and ~~compensation~~2021. ~~expense~~Shares ~~for~~subject ~~unvested~~to ~~shares~~awards ~~awarded~~under ~~related~~either toplan generally vest at the ~~RRP~~rate ~~and~~of ~~2014~~20% ~~SIP~~per year ~~remained~~over ~~unrecognized~~five years.

ACompensation ~~summary~~expense ofrelated to the ~~Company’s~~shares ~~non-vested~~subject to restricted stock ~~award~~awards ~~activity~~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, 2022, an aggregate of $31,000 and $72,000, respectively, was recognized in compensation expense for the restricted stock awards pursuant to the RRP and the 2014 SIP. During the three and six months ended ~~December~~March 31, 2021, is$41,000 ~~presented~~and $84,000, respectively, was recognized in compensation expense for the ~~following~~restricted ~~table:~~stock awards pursuant to the RRP and the 2014 SIP. At March 31, 2022, approximately $82,000 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, 2022 is presented in the following table:


	~~Three~~Six Months Ended
	~~December~~March 31, ~~2021~~2022
	Number of	Weighted Average
	Shares	Grant Date Fair Value
Non-vested stock awards at October 1, 2021	2311,~~056~~971	$	1718.7824
Granted	—		—
Forfeited	—		—
Vested	—(7,271)		—16.01
Non-vested stock awards at December 31, 2021	23,056	$	17.78
Non-vested stock awards at March 31, 2022	4,700	$	18.46

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. All options outstanding become fully vested in the event of a change of control. A total of 533,808 shares of common stock were approved for future issuance pursuant to the Option Plan. As of September 30, 2019, all of the options had been awarded under the Option Plan and no grants can be made in the future by the Option Plan even if previously awarded grants are forfeited. The 2014 SIP reserved up to 714,145 shares for issuance pursuant to options. In July 2019, the Company granted options covering 39,702 shares under the 2014 SIP. In September 2020, the Company granted 12,500 shares under the 2014 SIP. In June 2021, the Company granted 4,500 shares under the 2014 SIP.

~~A summary of the status of the Company’s stock options under the Option Plan and the 2014 SIP for the three months ended December 31, 2021 is presented below:~~27

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A summary of the status of the Company’s stock options under the Option Plan and the 2014 SIP as of March 31, 2022 is presented below:


	~~Three~~Six Months Ended
	~~December~~March 31, ~~2021~~2022
	Number of	Weighted Average
	Shares	Exercise Price
Options outstanding at October 1, 2021	521,258	$	14.23
Granted	—		—
Exercised	—		—
Forfeited	—		—
Outstanding at December 31, 2021	521,258	$	14.23
Outstanding at March 31, 2022	521,258	$	14.23
Exercisable at December 31, 2021	418,471	$	13.74
Exercisable at March 31, 2022	452,537	$	14.14

The weighted average remaining contractual term was approximately 4.30 years for options outstanding as of ~~December~~March 31, ~~2021~~2022.

24The estimated fair value of options granted during fiscal 2021 was $3.91 per share. The fair value for grants made in fiscal 2021 was estimated on the date of grant using the Black-Scholes pricing model with the following assumptions: an exercise and fair value of $13.86 per share, term of seven years, volatility rate of 34.46%, interest rate of 1.19% and a yield rate of 2.02%.

~~Table~~During ofthe ~~Contents~~three and six months ended March 31, 2022, $39,000 and $80,000, respectively, was recognized in compensation expense for options granted pursuant to the Option Plan and the 2014 SIP. During the three and six months ended March 31, 2021, $41,000 and $84,000, respectively, was recognized in compensation expense for options granted pursuant to the Option Plan and the 2014 SIP.

~~The~~At ~~estimated~~March ~~fair~~31, ~~value~~2022, ofthere ~~options granted during fiscal 2020~~ was ~~$2.31~~approximately ~~per share and~~ $~~3.91~~190,000 ~~for options granted~~ in ~~fiscal~~additional ~~2021.~~compensation ~~The~~expense ~~fair~~to ~~value~~be recognized for ~~grants~~awarded ~~made~~options inwhich ~~fiscal~~remained ~~2020~~outstanding ~~was estimated on the date of grant using the Black-Scholes pricing model with the following assumptions: an exercise~~ and ~~fair~~unvested ~~value~~at ofsuch ~~$10~~date.~~00,~~ ~~term of seven years, volatility rate of 33.22%, interest rate of 0.41% and a yield rate of 2.80%.~~ The ~~fair~~weighted ~~value~~average ~~for~~period ~~grants~~over ~~made~~which inthis ~~fiscal~~expense ~~2021~~will ~~was~~be ~~estimated~~recognized onis ~~the~~approximately ~~date of grant using the Black-Scholes pricing model with the following assumptions: an exercise and fair value of $13~~1.~~86, term of seven~~ 7 years~~, volatility rate of 34~~.~~46%, interest rate of 1.19% and a yield rate of 2.02%.~~

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

At December 31, 2021, there was approximately $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 1.84 years.

1112. COMMITMENTS AND CONTINGENT LIABILITIES

At ~~December~~March 31, ~~2021~~2022, the Company had $2231.1 million in outstanding commitments to originate loans with market interest rates ranging from 4.25% to 5.00%. At September 30, 2021, the Company had $34.9 million in outstanding commitments to originate loans with market interest rates ranging from 2.99% to 5.00%. The aggregate undisbursed portion of loans-in-process amounted to $9483.59 million at ~~December~~March 31, ~~2021~~2022 and $80.6 million at September 30, 2021.

The Company also had commitments under unused lines of credit of $4347.39 million as of ~~December~~March 31, ~~2021~~2022 and $68.1 million as of September 30, 2021 and letters of credit outstanding of $~~1.2~~60,000 ~~million~~ as of ~~December~~March 31, ~~2021~~2022 and $1.2 million as of September 30, 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~~March 31, ~~2021~~2022, the exposure, which represents a portion of credit risk associated with the interests sold, amounted to $1470,000.0 ~~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. ~~There~~Management of the Company, based on discussions with litigation counsel, believes that such proceedings as are currently outstanding will not have a material adverse effect on the financial condition, operations or cash flows of the Company. However, there 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 interests and not have a material adverse effect on the financial condition and operations of the Company. See Item 1 of Part II below.

~~12. FAIR VALUE MEASUREMENT~~28

~~The~~Table ~~fair value estimates presented herein are based on pertinent information available to management as~~ of December 31, 2021 and September 30, 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.Contents

13. FAIR VALUE MEASUREMENT

The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2022 and September 30, 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 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.

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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 as of ~~December~~March 31, ~~2021~~2022 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	$	—	$	32,~~022~~613	$	—	$	32,~~022~~613
State and political subdivisions		—		7673,~~136~~587		—		7673,~~136~~587
Mortgage-backed securities - U.S. Government agencies		—		~~116~~118,~~247~~291		—		~~116~~118,~~247~~291
Corporate bonds		—		102,~~119~~658		—		102,~~119~~658
Equity securities		2221		—		—		2221
Loans held for sale		406		—		—		406
Interest rate swap contracts		—		1,177		—		1,177
Total	$	~~428~~21	$	~~297~~298,~~524~~326	$	—	$	~~297~~298,~~952~~347

Liabilities:
Interest rate swap contracts	$	—	$	91,~~031~~167	$	—	$	91,~~031~~167
Total	$	—	$	91,~~031~~167	$	—	$	91,~~031~~167

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

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