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

CAUTION REGARDING FORWARD-LOOKING STATEMENTS



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


· statements of our objectives, intentions and expectations;



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




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



· estimates of our risks and future costs and benefits.


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



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


      ·     conditions relating to the COVID-19 pandemic, including the severity
            and duration of the associated economic slowdown either

nationally

            or in our market areas, that are worse than expected;

Government action in response to the COVID-19 pandemic and its

            effects on our business and operations, including vaccination
            mandates and their effects on our workforce, human capital 

Resources

            and infrastructure;



our ability to manage our operations in the current economic environment

            conditions nationally and in our market area;




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



significant increases in our loan losses, in particular due to

            our inability to resolve classified and non-performing assets 

or

            reduce risks associated with our loans, and management's 

hypotheses

            in determining the adequacy of the allowance for loan losses;

the credit risks of lending activities, including variations in the level

            and trend of loan delinquencies and write-offs and in our 

allocation

            for loan losses and provision for loan losses;




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· competition between deposit taking institutions and other financial institutions;



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



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




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



      ·     inflation and changes in interest rates generally, including changes
            in the relative differences between short-term and long-term
            interest rates and in deposit interest rates, that may affect our
            net interest margin and funding sources;



· fluctuations in demand for loans;

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


  · changes in consumer spending, borrowing and savings habits;



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


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




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


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



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




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



· past due loans and changes in the underlying cash flows of our borrowers;



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


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


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


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


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



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

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Overview

Our business has traditionally focused on originating fixed-rate one- to
four-family residential real estate loans and offering retail deposit accounts.
In September 2019, we hired our current president and chief executive officer,
Janak M. Amin, and under his leadership team we have begun the process of
developing a commercial lending infrastructure, with a particular focus on
expanding our commercial real estate and commercial and industrial loan
portfolios to diversify our balance sheet, improve our interest rate risk
exposure and increase interest income. Our primary market area now consists of
Chester and Lancaster Counties and the surrounding Pennsylvania counties of
Cumberland, Dauphin, and Lebanon. Management has also emphasized the importance
of attracting commercial deposit accounts from its customers. As a result of
these initiatives and the completion of our initial public stock offering on
July 14, 2021, we were able to increase our consolidated assets by $53.4
million, or 17.0%, from $314.9 million at December 31, 2021 to $368.4 million at
March 31, 2022 and increase our deposits by $35.0 million, or 13.9%, from $251.1
million at December 31, 2021 to $286.1 million at March 31, 2022.

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

For the three months ended March 31, 2022, we reported net income of $245,000
compared to net income of $51,000 for the three months ended March 31, 2021.
The period over period increase in earnings of $194,000 was primarily
attributable to an increase in net interest income, partially offset by
increases in noninterest expenses and income tax expense.

Impact of the COVID-19 outbreak

During the first quarter of 2020, global financial markets experienced
significant volatility resulting from the spread of COVID-19. In March 2020, the
World Health Organization declared COVID-19 a global pandemic and the United
States declared a National Public Health Emergency. The COVID-19 pandemic has
impacted the level of economic activity in our market area. In response to the
pandemic, the governments of the Commonwealth of Pennsylvania and of most other
states have taken preventative or protective actions, such as imposing
restrictions on travel and business operations, advising or requiring
individuals to limit or forego time outside of their homes, and ordering
temporary closures of businesses that have been deemed to be non-essential. As
of March 31, 2022, most of these restrictions have been removed and many
businesses have been allowed to re-open.

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

We implemented various consumer and commercial loan modification programs to
provide our borrowers relief from the economic impacts of COVID-19. Based on
guidance in the CARES Act and COVID-19 related legislation, COVID-19 related
modifications to loans that were current as of December 31, 2019 are exempt from
TDR classification under U.S.

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Contents

GAAP through January 1, 2022. In addition, the bank regulatory agencies issued
interagency guidance stating that COVID-19 related short-term modifications
(i.e., six months or less) granted to loans that were current as of the loan
modification program implementation date are not TDRs.

From March 31, 2022we are no longer tracking deferrals related to COVID-19 as all of these loans have returned to normal payment status.

Critical accounting estimates

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

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

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

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

The allowance consists of specific, general and unallocated components. The
specific component relates to loans that are classified as impaired. For loans
that are classified as impaired, an allowance is established when the discounted
cash flows (or collateral value or observable market price) of the impaired loan
is lower than the carrying value of that loan. Large groups of smaller balance
homogeneous loans are collectively evaluated for impairment. The general
component covers pools of loans by loan class including construction and
commercial loans not considered impaired, as well as smaller balance homogeneous
loans, such as residential mortgages and consumer loans. These pools of loans
are evaluated for loss exposure based upon historical loss rates for each of
these categories of loans, adjusted for qualitative factors. These qualitative
risk factors include: (1) lending policies and procedures, including
underwriting standards and collection, charge-off, and recovery practices;
(2) national, regional, and local economic and business conditions as well as
the condition of various market segments, including the value of underlying
collateral for collateral dependent loans; (3) nature and volume of the
portfolio and terms of loans; (4) volume and severity of past due, classified
and nonaccrual loans as well as loan modifications; (5) existence and effect of
any concentrations of credit and changes in the level of such concentrations;
(6) effect of external factors, such as competition and legal and regulatory
requirements; (7) experience,

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Contents

ability, and depth of lending department management and other relevant staff;
and (8) quality of loan review and board of directors oversight. Each factor is
assigned a value to reflect improving, stable or declining conditions based on
management's best judgment using relevant information available at the time of
the evaluation. As a result of the COVID-19 pandemic, we increased certain of
our qualitative loan portfolio risk factors relating to local and national
economic conditions as well as industry conditions and concentrations, which
have experienced deterioration due to the effects of the COVID-19 pandemic. An
unallocated component of the allowance for loan losses is maintained to cover
uncertainties that could affect management's estimate of probable losses. The
unallocated component of the allowance reflects the margin of imprecision
inherent in the underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.

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

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

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

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

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

Comparison of the financial situation at March 31, 2022 and December 31, 2021

Total assets. Total assets increased $53.4 million to $368.4 million at March
31, 2022 from $314.9 million at December 31, 2021. The increase in assets was
primarily due to increases in net loans receivable and cash and cash
equivalents.

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Growth was driven by loan growth and liquidity to fund future loan growth. Gross
loans increased $25.5 million to $278.5 million at March 31, 2022 from December
31, 2021, primarily due to growth in the commercial real estate and construction
portfolios. Debt securities available-for-sale decreased $1.5 million to $24.1
million at March 31, 2022 from $25.6 million at December 31, 2021, primarily due
to a combination of a decrease in the fair market value of debt securities
available-for-sale due to the increase in market interest rates during the first
quarter of 2022 and principal repayments on mortgage-backed securities.

Net loans receivable increased $25.4 million, or 10.2%, to $274.6 million at
March 31, 2022 from $249.2 million at December 31, 2021 primarily due to
increases in commercial real estate and construction loans. Commercial real
estate loans increased $21.6 million, or 18.2%, to $139.8 million at March 31,
2022 from $118.3 million at December 31, 2021. The increase in commercial real
estate loans was primarily due to the continued implementation of our strategy
to expand our commercial loan portfolio to diversify our balance sheet.
Construction loans increased $3.8 million, or 27.8%, to $17.6 million at March
31, 2022 from $13.8 million at December 31, 2021 primarily due to new
construction loans and to a lesser extent draws on existing commitments. One-to
four-family residential real estate loans increased $158,000, or 0.1%, to $106.2
million at March 31, 2022 from $106.0 million at December 31, 2021. All PPP
loans were fully forgiven at March 31, 2022, previously classified as commercial
and industrial loans.

Debt securities available-for-sale decreased $1.5 million, or 6.2%, to $24.1
million at March 31, 2022 from $25.6 million at December 31, 2021 due to a $1.1
million decrease in the fair market value of debt securities available for sale
due to the increase in market interest rates during the quarter and $505,000 of
principal repayments on mortgage-backed securities.

Cash and cash equivalents increased by $27.9 millioni.e. 104.0%, at $54.8 million to March 31, 2022 from $26.9 million to December 31, 2021 due to securing liquidity in the context of rising interest rates to fund future loan originations.

Deposits and borrowings. Total deposits increased $35.0 million, or 13.9%, to
$286.1 million at March 31, 2022 from $251.1 million at December 31, 2021. The
increase in our deposits reflected a $16.9 million increase in certificates of
deposit, a $12.5 million increase in money market accounts, a $3.4 million
increase in interest-bearing demand accounts,  a $2.6 million increase in
interest-bearing demand deposits, partially offset by a $288,000 decrease in
savings accounts. The increase in certificates of deposit was due to offering a
deposit special and increasing listing service deposits. Money market and demand
deposit accounts increased primarily due to management's continuing focus on
increasing the commercial deposit accounts of its customers. The slight decrease
in savings accounts was attributable to movement of funds into other deposit
products.

Total borrowings from the Federal Home Loan Bank of Pittsburgh increased $18.8
million, or 112.6%, to $35.5 million at March 31, 2022 from $16.7 million at
December 31, 2021 due to additional advances to fund future loan originations.

Stockholders' Equity. Stockholders' equity decreased $610,000, or 1.3%, to $45.2
million at March 31, 2022 from $45.8 million at December 31, 2021. The decrease
was due to an increase of $855,000 in accumulated other comprehensive loss as a
result of a decrease in the fair market value of our debt securities
available-for-sale year to date 2022, partially offset by first quarter net
income of $245,000.

Comparison of operating results for the three months ended March 31, 2022 and
March 31, 2021

General. Net income increased $194,000 or 380.4%, to $245,000 for the three
months ended March 31, 2022 from $51,000 for the three months ended March 31,
2021. The $194,000 period over period increase in earnings was attributable to a
$541,000 increase in interest and dividend income, partially offset by a
$236,000 increase in noninterest expenses, a $51,000 increase in income tax
expense, a $31,000 decrease in noninterest income, a $21,000 increase in the
provision for loan losses and a $8,000 increase in interest expense.

Interest and dividend income. Total interest and dividend income increased
$541,000, or 24.1%, to $2.8 million for the three months ended March 31, 2022
from $2.2 million for the three months ended March 31, 2021. The increase in
interest and dividend income was the result of a $67.7 million increase period
over period in the average balance of interest-earning assets, driven by a $70.2
million increase in average loan balances, partially offset by a decrease in the
average balance of debt and equity securities available for sale of $2.3
million.

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Interest income on loans, including fees, increased $559,000, or 26.1%, to $2.7
million for the three months ended March 31, 2022 as compared to $2.1 million
for the three months ended March 31, 2021, reflecting an increase in the average
balance of loans to $264.9 million for the three months ended March 31, 2022
from $194.6 million for the three months ended March 31, 2021 and an 19 basis
points decrease in the average yield on loans. The increase in the average
balance of loans was due primarily to increases in the average balances of
commercial real estate and construction loans reflecting our strategy to grow
commercial lending. The average yield on loans decreased to 4.12% for the three
months ended March 31, 2022 from 4.41% for the three months ended March 31,
2021, as a result of the low interest rate environment. The three months ended
March 31, 2022 included $28,000 of PPP loan income from interest and net fees.

Interest income on securities and restricted stocks decreased $24,000, or 25.8%,
to $69,000 for the three months ended March 31, 2022 from $93,000 for the three
months ended March 31, 2021. The decrease in interest income on debt and equity
securities available for sale was due to a decrease in the average balance of
debt and equity securities available for sale of $2.3 million, or 7.99%, to
$26.0 million for the three months ended March 31, 2022 from $28.3 million for
the three months ended March 31, 2021, and a 19 basis points decrease in the
average yield on debt and equity securities available for sale to 0.93% for the
three months ended March 31, 2022 from 1.12% for the three months ended March
31, 2021. The decrease in the average balance of debt and equity securities
available for sale was primarily due to the decrease in market value. The
average yield on debt and equity securities available for sale decreased due to
calls of higher-yielding securities which were replaced by significantly
lower-yielding investment securities purchased in 2021. Restricted stocks income
is also included in the interest income on securities. Restricted stock income
decreased $4,000 for the three months ended March 31, 2022 from the three months
ended March 31, 2021 due to a 332 basis points decrease in the average yield on
restricted stocks to 2.63% for the three months ended March 31, 2022 from 5.95%
for the three months ended March 31, 2021. The decrease in yield on restricted
stock is due to the Federal Home Loan Bank dividend being paid in arrears and
the average balance increasing $507,000, or 53.71%, to $1.5 million for the
three months ended March 31, 2022 from $1.0 million for the three months ended
March 31, 2021.

Interest income on cash and cash equivalents increased $6,000, or 100.0%, to
$12,000 for the three months ended March 31, 2022, from $6,000 for the three
months ended March 31, 2021. The increase in interest income on cash and cash
equivalents was attributable to an increase in the average yield on cash and
cash equivalents of five basis points to 0.11% for the three months ended March
31, 2022 from 0.06% for the three months ended March 31, 2021. The decrease in
the average balance of cash and cash equivalents of $762,000, or 1.8%, to $42.7
million for the three months ended March 31, 2022 from $43.4 million for the
three months ended March 31, 2021 was due to using liquidity to fund loan
growth.

Interest expense. Interest expense increased $8,000, or 1.4%, to $584,000 for
the three months ended March 31, 2022 20from $576,000 for the three months ended
March 31, 2021 as a result of an increase in interest expense on borrowings,
partially offset by the decrease in the interest expense on deposits. The
increase was due to an increase in the average balances of interest-bearing
liabilities of $41.0 million to $273.0 million for the three months ended March
31, 2022 from $232.0 million for the three months ended March 31, 2021,
partially offset by a 13 basis points decrease in the average cost of
interest-bearing liabilities from 0.99% for the three months ended March 31,
2021 to 0.86% for the three months ended March 31, 2022.

Interest expense on deposits decreased $32,000, or 6.9%, to $435,000 for the
three months ended March 31, 2022 from $467,000 for the three months ended March
31, 2021 as a result of a 14 basis points decrease in the average cost of
interest-bearing deposits, partially offset by an increase in the average
balance of our interest-bearing deposits. The decrease in the average cost of
deposits was primarily due to a 19 basis points decrease in the average cost of
certificates of deposit, traditionally our higher costing deposits, to 1.40% for
the three months ended March 31, 2022 from 1.59% for the three months ended
March 31, 2021. In addition, the average cost of transaction accounts,
traditionally our lower costing deposit accounts, consisting of demand, savings,
and money market accounts decreased by four basis points to 0.36% for the three
months ended March 31, 2022 from 0.40% for the three months ended March 31,
2021, partially offset by the increase in the average balance of
interest-bearing transaction accounts of $28.6 million to $157.0 million for the
three months ended March 31, 2022 from $128.4 million for the three months ended
March 31, 2021.  The weighted average rate paid on deposits, including
non-interest bearing deposits, decreased 15 basis points to 0.66% for the three
months ended March 31, 2022 from 0.81% for the three months ended March 31, 2021
as a result of replacing new certificates of deposit upon the maturing of
existing certificates of deposit at lower rates. The increase in the average
balance of our transaction accounts primarily reflected management's focus on
increasing the commercial deposit accounts of its customers in 2022.

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Interest expense on Federal Home Loan Bank borrowings increased $40,000, or
36.7%, to $149,000 for the three months ended March 31, 2022 from $109,000 for
the three months ended March 31, 2021. The increase in interest expense on
Federal Home Loan Bank borrowings was caused by a $12.6 million increase in our
average balance of Federal Home Loan Bank borrowings to $30.4 million for the
three months ended March 31, 2022 compared to $17.9 million for the three months
ended March 31, 2021 as a result of increasing our liquidity in the rising rate
environment, partially offset by a decrease in the average cost of these funds
of 48 basis points to 1.96% for the three months ended March 31, 2022 from 2.44%
for the three months ended March 31, 2021 as lower cost borrowings were
purchased in the first quarter of 2022.

Net interest income. Net interest income increased $533,000, or 32.0%, to $2.2
million for the three months ended March 31, 2022 as compared to $1.7 million
for the three months ended March 31, 2021. The increase in net interest income
for the three months ended March 31, 2022 compared to the three months ended
March 31, 2021 was primarily due to the increase in interest income on loans and
a decrease in interest expense on deposits. Average net interest-earning assets
increased by $26.8 million to $62.0 million for the three months ended March 31,
2022 from $35.2 million for the three months ended March 31, 2021. Our net
interest margin increased 17 basis points to 2.66% for the three months ended
March 31, 2022 from 2.49% for the three months ended March 31, 2021. Our net
interest rate spread increased 13 basis points to 2.50% for the three months
ended March 31, 2022 from 2.37% for the three months ended March 31, 2021.

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

Based on our evaluation of the above factors, we recorded a $90,000 provision
for loan losses for the three months ended March 31, 2022 compared to a $69,000
provision for loan losses for the three months ended March 31, 2021. The
increase in the provision for loan losses was primarily driven by loan growth.
We have seen a decrease in historical loss factors in the current year driven by
no charge- offs in 2021 and no charge-offs to date in 2022. The allowance for
loan losses was $3.2 million, or 1.16%, of loans outstanding at March 31, 2022
and $3.1 million, or 1.24%, of loans outstanding at December 31, 2021.

To the best of our knowledge, we have recorded all loan losses that are both
probable and reasonable to estimate at March 31, 2022. However, future changes
in the factors described above, including, but not limited to, actual loss
experience with respect to our loan portfolio, could result in material
increases in our provision for loan losses. In addition, the PADOB and the FDIC,
as an integral part of their examination process, will periodically review our
allowance for loan losses, and as a result of such reviews, we may have to
adjust our allowance for loan losses. However, regulatory agencies are not
directly involved in establishing the allowance for loan losses as the process
is our responsibility and any increase or decrease in the allowance is the
responsibility of management.

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Contents

Non-interest income. Information on non-interest income is as follows.

                                         Three Months Ended
                                             March 31,                  Change
                                         2022          2021       Amount     Percent

                                                  (Dollars in thousands)
Service charges on deposit accounts    $      42     $      44    $   (2)      (4.5) %
Loss on equity investments                  (40)          (15)       (25)  

166.7

Bank owned life insurance income              44            41          3  
     7.3
Debit card income                             48            51        (3)      (5.9)
Other service charges                         17            19        (2)     (10.5)
Other income                                  11            13        (2)     (15.4)
Total noninterest income               $     122     $     153    $  (31)     (20.3) %


Noninterest income decreased by $31,000, or 20.3%, to $122,000 for the three
months ended March 31, 2022 from $153,000 for the three months ended March 31,
2021. The decrease in noninterest income resulted primarily from an increase in
the loss on equity investments. The loss on equity investments increased $25,000
as a result of the decrease in fair value of the equity investments.

Non-interest expenses. Information on non-interest charges is as follows.

                                    Three Months Ended
                                        March 31,                 Change
                                     2022         2021      Amount     Percent

                                             (Dollars in thousands)
Salaries and employee benefits    $      981     $   917    $    64        7.0 %
Occupancy and equipment                  150         153        (3)      (2.0)
Data and item processing                 242         243        (1)      (0.4)
Advertising and marketing                 22          11         11      100.0
Professional fees                        167          86         81       94.2
Directors' fees                           61          61          -          -
FDIC insurance premiums                   22          47       (25)     (53.2)
Pennsylvania shares tax                   80           -         80      100.0
Debit card expenses                       34          37        (3)      (8.1)
Other                                    173         141         32       22.7
Total noninterest expenses        $    1,932     $ 1,696    $   236       13.9 %

Noninterest expenses increased $236,000, or 13.9%, to $1.9 million for the three
months ended March 31, 2022 from $1.7 million for the three months ended March
31, 2021. The increase in noninterest expenses was primarily the result of
increases in professional fees of $81,000, Pennsylvania shares tax of $80,000,
salaries and employee benefits expense of $64,000 and other expense of $32,000,
partially offset by a decrease in FDIC insurance premiums of $25,000.
Professional fees increased $81,000 primarily due to ongoing compliance expense
due to becoming an SEC registrant in the third quarter of 2021. Pennsylvania
shares tax increased $80,000 due to the Bank being subject to the tax as part of
the mutual to stock conversion. Salaries and employee benefits expense increased
$64,000 primarily due to ESOP expense beginning in the third quarter of 2021,
the hiring of additional staff and annual salary increases. Other expense
increased $32,000 primarily due to an increase in travel, educational and
training expenses as a result of more COVID-19 restrictions being lifted and an
increase in insurance premiums compared to the prior period. FDIC insurance
premiums decreased $25,000 due to the decrease in the FDIC quarterly multiplier
when comparing the three months ended March 31, 2022 to the three months ended
March 31, 2021.

Income tax expense. Income tax expense increased $51,000, to $55,000 for the
three months ended March 31, 2022 from $4,000 for the three months ended March
31, 2021. The effective tax rates were 18.3% and 7.3% for the three month
periods ended March 31, 2022 and 2021, respectively. The increase in income tax
expense for the three months ended March 31, 2022 as compared to the three
months ended March 31, 2021 was primarily due to an increase in income before
income taxes.

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  Table of Contents
Average balances and yields. The following table sets forth average balance
sheets, average yields and costs, and certain other information for the periods
indicated. No tax-equivalent yield adjustments have been made, as the effects
would be immaterial. All average balances are daily average balances.
Non-accrual loans were included in the computation of average balances. The
yields set forth below include the effect of deferred fees, discounts and
premiums that are amortized or accreted to interest income or interest expense.
Deferred loan fees totaled $69,000 and $55,000 for the three months ended March
31, 2022 and 2021, respectively.

                                                              For the Three Months Ended March 31,
                                                      2022                                             2021
                                     Average                                          Average
                                   Outstanding                      Average         Outstanding                      Average
                                     Balance        Interest     Yield/Rate (4)       Balance        Interest     Yield/Rate (4)

                                                                      (Dollars in thousands)
Interest-earning assets:
Loans                             $     264,856    $    2,703              4.12 %  $     194,611    $    2,144              4.41 %
Debt and equity securities
available for sale                       26,007            59              0.93 %         28,265            79              1.12 %
Restricted stocks                         1,451            10              2.63 %            944            14              5.95 %
Cash and cash equivalents                42,676            12              0.11 %         43,438             6              0.06 %
Total interest-earning assets           334,990         2,784             
3.36 %        267,258         2,243              3.36 %
Noninterest-earning assets                8,943                                            8,657
Total assets                      $     343,933                                    $     275,915

Interest-bearing liabilities:
Interest-bearing demand
deposits                          $      72,342            51              0.28 %  $      64,652            51              0.32 %
Savings deposits                         21,906            19              0.35 %         18,895            16              0.33 %
Money market deposits                    62,757            70              0.45 %         44,879            59              0.52 %
Certificates of deposit                  85,551           295              1.40 %         85,719           341              1.59 %
Total interest-bearing
deposits                                242,556           435              0.73 %        214,145           467              0.87 %
Long-term borrowings                     30,444           149              1.96 %         17,887           109              2.44 %
Total interest-bearing
liabilities                             273,000           584              0.86 %        232,032           576              0.99 %
Noninterest-bearing demand
deposits                                 23,882                                           20,602
Other noninterest-bearing
liabilities                               1,122                                            1,223
Total liabilities                       298,004                                          253,857
Stockholders' equity                     45,929                                           22,058
Total liabilities and
stockholders' equity              $     343,933                                          275,915
Net interest income                                $    2,200                                       $    1,667
Net interest rate spread (1)                                               2.50 %                                           2.37 %
Net interest-earning assets
(2)                               $      61,990                                    $      35,226
Net interest margin (3)                                                    2.66 %                                           2.49 %
Average interest-earning
assets to interest-bearing
liabilities                              122.71 %                                         115.18 %

The net interest rate spread represents the difference between the weighted average yield (1) of interest-bearing assets and the weighted average rate of

interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less

total interest-bearing liabilities.


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


(4) Annualized.


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  Table of Contents

Rate/Volume Analysis

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

                                                                    Three Months Ended
                                                                 March 31, 2022 vs. 2021
                                                        Increase (Decrease) Due to           Total
                                                                                           Increase
                                                        Volume              Rate          (Decrease)

                                                                      (In thousands)
Interest-earning assets:
Loans                                                $      3,098      $       (2,539)    $       559
Debt and equity securities available for sale                (25)          
         5           (20)
Restricted stocks                                              30                 (34)            (4)
Cash and cash equivalents                                       -                    6              6
Total interest-earning assets                               3,103              (2,562)            541

Interest-bearing liabilities:
Interest-bearing demand deposits                               25          
      (25)              -
Savings deposits                                               10                  (7)              3
Money market deposits                                          93                 (82)             11
Certificates of deposit                                       (3)                 (43)           (46)
Total deposits                                                125                (157)           (32)
Borrowings                                                    306                (266)             40
Total interest-bearing liabilities                            431          
     (423)              8
Change in net interest income                        $      2,672      $       (2,139)    $       533

Non-performing assets and allowance for loan losses

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

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

The CARES Act, in addition to providing financial assistance to businesses and consumers, created a federally backed mortgage forbearance program, protects borrowers from negative credit reports due to mortgage-related loans. national emergency and provided financial institutions with the ability to temporarily suspend

                                       37

Contents

certain requirements under U.S. GAAP related to troubled debt restructurings for
a limited period of time to account for the effects of COVID-19. The Federal
banking regulatory agencies have likewise issued guidance encouraging financial
institutions to work prudently with borrowers who are, or may be, unable to meet
their contractual payment obligations because of the effects of COVID-19. That
guidance, with concurrence of the Financial Accounting Standards Board, and
provisions of the CARES Act allow modifications made on a good faith basis in
response to COVID-19 to borrowers who were generally current with their payments
prior to any relief, to not be treated as troubled debt restructurings.
Modifications may include payment deferrals, fee waivers, extensions of
repayment term, or other delays in payment. We have worked with our customers
affected by COVID-19 and accommodated a significant amount of loan modifications
across our loan portfolios. To the extent that additional modifications meet the
criteria previously described, such modifications are not expected to be
classified as troubled debt restructurings. As of March 31, 2022, we are no
longer tracking COVID-19 deferrals as all of these loans have returned to normal
payment status.

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

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  Table of Contents
Non-Performing Assets. The following table sets forth information regarding our
non-performing assets. Non-accrual loans include non-accruing troubled debt
restructurings of $340,000 and $379,000 as of March 31, 2022 and December 31,
2021, respectively.

                                                     March 31,       December 31,
                                                       2022             2021

                                                       (Dollars in thousands)
Non-accrual loans:
Real estate:
One- to four-family residential                    $        629    $       
   659
Commercial                                                  444                453
Construction                                                502                541
Commercial and industrial                                     -                  -
Consumer                                                      -                  -
Total non-accrual loans                                   1,575              1,653

Accruing loans past due 90 days or more
Real estate:
One- to four-family residential                             110            
     -
Commercial                                                    -                  -
Construction                                                  -                  -
Commercial and industrial                                     -                  -
Consumer                                                      -                  -
Total accruing loans past due 90 days or more               110            
     -
Total non-performing loans                         $      1,685    $         1,653
Foreclosed assets                                             -                  -
Total non-performing assets                        $      1,685    $         1,653

Non-accruing troubled debt restructurings:
Real estate:
One- to four-family residential                               -            
     -
Commercial                                                  184                190
Construction                                                156                189
Commercial and industrial                                     -                  -
Consumer                                                      -                  -
Total                                              $        340    $           379

Total Distressed Debt Restructured Loans $564 $

570

Total non-performing loans to total loans                  0.61 %             0.65 %
Total non-accrual loans to total loans                     0.57 %             0.65 %
Total non-performing assets to total assets                0.46 %          

0.52%


Non-performing loans were $1.7 million, or 0.61% of total loans, at March 31,
2022 and $1.7 million, or 0.65% of total loans, at December 31, 2021. During the
three months ended March 31, 2022, payments on non-accrual loans were offset by
a loan becoming greater than 90 days and still accruing that is well secured and
in the process of collection.

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Contents

Allowance for loan losses. The following table shows our loan loss provision activity for the periods indicated.

                                                         At or For the 

Three months completed March, 31st,

                                                              2022                         2021

                                                                    (Dollars in thousands)
Allowance for loan losses at beginning of year        $               3,145
       $               2,854
Provision for loan losses                                                90                           69
Charge-offs:
Real estate:
One- to four-family residential                                           -
                           -
Commercial                                                                -                            -
Construction                                                              -                            -
Commercial and industrial                                                 -                            -
Consumer                                                                  -                            -
Total charge-offs                                                         -                            -

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

Net (charge-offs) recoveries                                              1                            1

Allowance at end of period                            $               3,236        $               2,924
Allowance to non-accrual loans                                       205.46 %                     124.69 %
Allowance to total loans outstanding at the end of
the period                                                             1.16 %                       1.45 %
Net (charge-offs) recoveries to average loans
outstanding during the period                                             - %                          - %


The provision for loan losses increased $21,000, or 30.4%, to $90,000 for the
three months ended March 31, 2022 from $69,000 for the three months ended March
31, 2021. The increase for the three months ended March 31, 2022 was due to loan
growth. We have seen a decrease in historical loss factors driven by no
charge-offs in 2021 and no charge-offs to date in 2022.



Cash and capital resources

Liquidity management. Liquidity describes our ability to meet the financial
obligations that arise in the ordinary course of business. Liquidity is
primarily needed to meet the borrowing and deposit withdrawal requirements of
our customers and to fund current and planned expenditures. Our primary sources
of funds are deposits, principal and interest payments on loans and securities,
and proceeds from sales, maturities and calls of securities. We also have the
ability to borrow from the Federal Home Loan Bank of Pittsburgh. At March 31,
2022, we had the ability to borrow approximately $123.2 million from the Federal
Home Loan Bank of Pittsburgh, of which $35.5 million had been advanced in
addition to $10.2 million held in reserve to secure two letters of credit to
collateralize municipal deposits. Additionally, at March 31, 2022, we had the
ability to borrow $3.0 million from the Atlantic Community Bankers Bank and we
also maintained a line of credit of $2.0 million with the Federal Reserve Bank
of Philadelphia at March 31, 2022. We did not borrow against the credit lines
with the Atlantic Community Bankers Bank or the Federal Reserve Bank of
Philadelphia during the three months ended March 31, 2022 or 2021.

The board of directors is responsible for establishing and monitoring our
liquidity targets and strategies in order to ensure that sufficient liquidity
exists for meeting the borrowing needs and deposit withdrawals of our customers
as well as

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  Table of Contents
unanticipated contingencies. We seek to maintain a liquidity ratio of 5.0% or
greater. For the three months ended March 31, 2022 and 2021, our liquidity ratio
averaged 39.8% and 22.7%, respectively. We believe that we had enough sources of
liquidity to satisfy our short and long-term liquidity needs as of March 31,
2022.

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

While maturities and scheduled amortization of loans and securities are
predictable sources of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions, and competition. Our
most liquid assets are cash and cash equivalents, which include federal funds
sold. The levels of these assets are dependent on our operating, financing,
lending and investing activities during any given period. At March 31, 2022,
cash and cash equivalents totaled $54.8 million. Debt securities classified as
available-for-sale, which provide additional sources of liquidity, totaled $24.1
million at March 31, 2022.

We are committed to maintaining a strong liquidity position. We monitor our
liquidity position on a daily basis. We anticipate that we will have sufficient
funds to meet our current funding commitments. Certificates of deposit due
within one year of March 31, 2022, totaled $39.8 million, or 42.4% of our
certificates of deposit, and 13.9% of total deposits. If these deposits do not
remain with us, we will be required to seek other sources of funds, including
other deposits and Federal Home Loan Bank advances. Depending on market
conditions, we may be required to pay higher rates on such deposits or
borrowings than we currently pay. We believe, however, based on past experience
that a significant portion of such deposits will remain with us. We have the
ability to attract and retain deposits by adjusting the interest rates offered.

Capital management. At March 31, 2022, Presence Bank exceeded all regulatory
capital requirements and was considered "well capitalized" under regulatory
guidelines due to its compliance with the Community Bank Leverage ratio. See
Note 8 of the Notes to the Financial Statements.

Off-balance sheet arrangements and global contractual obligations

Commitments. As a financial services provider, we routinely are a party to
various financial instruments with off-balance-sheet risks, such as commitments
to extend credit and unused lines of credit. While these contractual obligations
represent our future cash requirements, a significant portion of commitments to
extend credit may expire without being drawn upon. Such commitments are subject
to the same credit policies and approval process accorded to loans we make. At
March 31, 2022, we had outstanding commitments to originate loans of $26.4
million, unused lines of credit totaling $10.4 million and $2.6 million in
stand-by letters of credit outstanding. We anticipate that we will have
sufficient funds available to meet our current lending commitments. Certificates
of deposit that are scheduled to mature in less than one year from March 31,
2022 totaled $39.8 million. Management expects that a substantial portion of the
maturing certificates of deposit will be renewed. However, if a substantial
portion of these deposits is not retained, we may utilize Federal Home Loan Bank
advances or raise interest rates on deposits to attract new deposits, which may
result in higher levels of interest expense.

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

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Impact of inflation and price changes

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

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