HANOVER BANCORP, INC. /NY MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

Cautionary Statement Regarding Forward-Looking Statements - This document
contains a number of forward-looking statements, including statements about the
financial condition, results of operations, earnings outlook and prospects of
the Company. Forward-looking statements are typically identified by words such
as "should," "likely," "plan," "believe," "expect," "anticipate," "intend,"
"outlook," "estimate," "forecast," "target," "project," "goal" and other similar
words and expressions. The forward-looking statements involve certain risks and
uncertainties. The ability of the Company to predict results or the actual
effects of its plans and strategies is subject to inherent uncertainty.

Factors that may cause actual results or earnings to differ materially from such
forward-looking statements include those set forth in Part I, Item 1A. Risk
Factors in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2021, as updated by the Company's subsequent filings with the SEC
and, among others, the following:

? Changes in the monetary and fiscal policies of the FRB and the US government,

notably linked to changes in interest rates;

? Changes in general economic conditions;

? The ability to increase revenue through increased market penetration, expansion

lending capacity and product offerings;

Occurrence of natural or man-made disasters or calamities, including health

emergencies, the spread of infectious diseases, pandemics such as COVID-19, or

? outbreaks of hostilities, such as between Russia and Ukraineor the effects of

   climate change, and the ability of the Company to deal effectively with
   disruptions caused by the foregoing;

The effects of COVID-19, including but not limited to the length of time that

the pandemic continues, the effectiveness of the vaccination program and

accompanying vaccination rates, the development of new variants of the virus

and their impact, the possible future imposition of new restrictions on

travel, measures adopted by federal, state and local governments,

? the health of employees and the potential inability of employees to work due to

illness, quarantine or government mandates, the business continuity plans of

customers and suppliers, increased likelihood of cybersecurity risk, data

breaches or fraud by employees working from home, the capacity of borrowers

repay their loans and the effect of the pandemic on the general economy and

borrowers’ businesses;

? Legislative or regulatory changes;

? The decline in demand for loans, deposits and other financial services in the

Company market area;

? Increased competition from other banks and non-bank service providers

services;

? Technological changes and increased costs related to technology; and

? Changes in accounting principles or the application of generally accepted principles

accounting principles.


Because these forward-looking statements are subject to assumptions and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. You are cautioned not to place
undue reliance on these statements, which speak only as of the date of this
document or the date of any document incorporated by reference in this document.
All subsequent written and oral forward-looking statements concerning the merger
or other matters addressed in this document and attributable to the Company or
any person acting on its behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this document. Except to
the
extent required by

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applicable law or regulation, the Company undertakes no obligation to update
these forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events.

Non-GAAP Disclosure - This discussion includes discussions of the Company's
tangible common equity ("TCE") ratio, tangible common equity and tangible
assets, non-GAAP financial measures. A non-GAAP financial measure is a numerical
measure of historical or future financial performance, financial position or
cash flows that excludes or modifies amounts that are required to be disclosed
in the most directly comparable measure calculated and presented in accordance
with U.S. GAAP. The Company believes that these non-GAAP financial measures
provide both management and investors a more complete understanding of the
underlying operational results and trends and the Company's marketplace
performance. The presentation of this additional information is not meant to be
considered in isolation or as a substitute for the numbers prepared in
accordance with U.S. GAAP and may not be comparable to similarly titled measures
used by other financial institutions.

With respect to the calculations and reconciliations of tangible common equity,
tangible assets and the TCE ratio, please see Liquidity and Capital Resources
contained herein for a reconciliation to the most directly comparable GAAP
measure.

Executive Summary -The Company is a one-bank holding company incorporated in
2016. The Company operates as the parent for its wholly owned subsidiary, the
Bank, which commenced operations in 2008. The income of the Company is primarily
derived through the operations of the Bank. Unless the context otherwise
requires, references herein to the Company include the Company and the Bank on a
consolidated basis.

The Bank operates as a locally headquartered, community-oriented bank, serving
customers throughout the New York metro area from offices in Nassau, Queens,
Kings (Brooklyn) and New York (Manhattan) Counties, New York and Freehold in
Monmouth County New Jersey. We principally focus our lending activities on loans
that we originate to borrowers located in our market areas. We seek to be the
premier provider of lending products and services in our market area, meeting
the credit needs of business and individual borrowers in the communities that we
serve. We offer personal and commercial business loans on a secured and
unsecured basis, SBA and USDA guaranteed loans, revolving lines of credit,
commercial mortgage loans, and one- to four-family non-qualified mortgages
secured by primary and secondary residences that may be owner occupied or
investment properties, home equity loans, bridge loans and other personal
purpose loans.

The Bank works to provide more direct, personal attention than management
believes is offered by competing financial institutions, the majority of which
are branch offices of banks headquartered outside of the Bank's primary trade
area. By striving to employ professional, responsive and knowledgeable staff,
the Bank believes it offers a superior level of service to its customers. As of
result of senior management's availability for consultation on a daily basis,
the Bank believes it offers customers a quicker response on loan applications
and other banking transactions, as well as greater certainty that these
transactions will actually close, than competitors, whose decisions may be made
in distant headquarters.

The COVID-19 pandemic has caused widespread economic disruption in the Bank's
metropolitan New York trade area. The Company has actively participated in state
and local programs designed to mitigate the impacts of the COVID-19 pandemic on
individuals and small businesses and it continues to prudently work with
borrowers negatively impacted by the COVID-19 pandemic while managing credit
risks and recognizing an appropriate allowance for loan losses on its loan
portfolio. Although the local economy has continued to recover, management
continues to cautiously consider opportunities to expand the loan portfolio.

The Bank has historically been able to generate additional income by
strategically originating and selling its primary lending products to other
financial institutions at premiums. In December 2021, the SBA approved the
Bank's application to process loans under the SBA's Preferred Lender Program,
enabling the Bank to process SBA applications under delegated authority from the
SBA and enhancing the Bank's ability to compete more effectively for SBA lending
opportunities. The Bank expects that it will continue to originate loans, for
its own portfolio and for sale, which will result in continued growth in
interest income while also realizing gains on the sale of loans to others.

The Bank finances most of its activities through a combination of deposits, including non-interest bearing demand deposits, savings deposits, NOW and money market deposits as well as term deposits and borrowings. short and long term. the

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The Company’s primary competition includes local banks in its market area, as well as New York City monetary central banks and regional banks, as well as non-bank lenders, including fintech lenders.

On May 26, 2021, the acquisition of Savoy was completed. Historical financial
information prior to the June 30, 2021 quarter includes only the operations of
Hanover.

                         Financial Performance Summary

      As of or for the three and six months ended March 31, 2022 and 2021

                 (dollars in thousands, except per share data)

                                                  Three months ended          Six months ended
                                                      March 31,                  March 31,
                                                   2022         2021          2022        2021
Revenue (1)                                     $    17,416    $ 8,494      $ 35,061    $ 16,107
Non-interest expense                                  9,357      5,725        17,622      11,315
Provision for loan losses                               500        200         1,400         300
Net income                                            5,860      2,055        12,397       3,574
Net income per common share - diluted                  1.00       0.48          2.15        0.84
Return on average assets                               1.63 %     0.97 %        1.72 %      0.84 %
Return on average common stockholders'
equity                                                17.83 %    10.28 %       19.16 %      8.95 %
Tier 1 leverage ratio                                 10.06 %    12.00 %       10.06 %     12.00 %
Common equity tier 1 risk-based capital
ratio                                                 14.76 %    21.23 %       14.76 %     21.23 %
Tier 1 risk-based capital ratio                       14.76 %    21.23 %       14.76 %     21.23 %
Total risk-based capital ratio                        15.85 %    22.49 %       15.85 %     22.49 %
Tangible common equity ratio (non-GAAP)                7.90 %     9.06 %        7.90 %      9.06 %
Total common stockholders' equity/total
assets (2)                                             9.13 %     9.24 %   

9.13% 9.24%

(1) Represents net interest income plus total non-interest income.

(2) The ratio between total equity and total assets is the highest

GAAP measure comparable to tangible non-GAAP common equity ratio

presented here.

At March 31, 2022 the Company, on a consolidated basis, had total assets of $1.5
billion, total deposits of $1.2 billion and total stockholders' equity of $134.8
million. The Company recorded net income of $5.9 million, or $1.00 per diluted
common share, for the three months ended March 31, 2022 compared to net income
of $2.1 million, or $0.48 per diluted common share, for the same period in 2021
and $12.4 million, or $2.15 per diluted share, for the six months ended
March 31, 2022 compared to net income of $3.6 million, or $0.84 per diluted
share, for the same period in 2021.

The $3.8 million increase in earnings for the three months ended March 31, 2022
versus the comparable 2021 period was primarily due to a $6.9 million increase
in net interest income coupled with a $2.0 million improvement in non-interest
income. Partially offsetting these positive factors was a $3.7 million increase
in total operating expenses, principally resulting from growth in compensation
and benefits due largely to an increase in personnel from the acquisition of
Savoy in May 2021, a $1.1 million increase in the provision for income taxes,
coupled with a $300 thousand increase in the provision for loan losses expense
due to growth in the loan portfolio in the quarter ended March 31, 2022.

The $8.8 million increase in net income for the six months ended March 31, 2022
versus the year ago was primarily due to a $14.9 million increase in net
interest income coupled with a $4.0 million improvement in non-interest income.
Partially offsetting these positive factors was a $6.3 million increase in total
operating expenses, principally resulting from growth in compensation and
benefits due largely to an increase in personnel from the acquisition of Savoy
in May 2021, a $2.7 million increase in provision for income taxes, coupled with
an $1.1 million increase in the provision for loan losses expense due to growth
in the loan portfolio.

The Company's return on average assets and return on average common
stockholders' equity were 1.63% and 17.83%, respectively, for the three months
ended March 31, 2022 versus 0.97% and 10.28%, respectively, for the comparable
2021

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period, and 1.72% and 19.16% for the six months ended March 31, 2022compared to 0.84% ​​and 8.95%, respectively, for the prior year period.

Total non-accrual loans at March 31, 2022 were $10.5 million, or 0.81% of total
loans, compared to $7.0 million, or 0.56% of total loans at September 30, 2021
and $9.4 million, or 1.22% of total loans, at March 31, 2021. Management
believes all of the Company's non-accrual loans at March 31, 2022 are well
collateralized and no specific reserves have been taken with regard to these
loans. The allowance for loan losses as a percentage of total non-accrual loans
amounted to 94%, 122% and 87% at March 31, 2022, September 30, 2021 and
March 31, 2021, respectively.

The Company's operating efficiency ratio was 54.1% for the three months ended
March 31, 2022 versus 69.4% a year ago. The significant improvement in the
operating efficiency ratio was due to a $6.9 million increase in net interest
income and $2.0 million increase in non-interest income (primarily gain on sale
of loans held-for-sale) partially offset by a $3.6 million increase in operating
expenses (primarily compensation and benefits).

Critical Accounting Policies, Judgments and Estimates - To prepare financial
statements in conformity with U.S. GAAP, the Company's management makes
estimates and assumptions based on available information. These estimates and
assumptions affect the amounts reported in the financial statements and the
disclosures provided, and actual results could differ. Critical accounting
estimates are accounting estimates where (a) the nature of the estimate is
material due to levels of subjectivity and judgment necessary to account for
highly uncertain matters or the susceptibility of such matters to change, and
(b) the impact of the estimate on financial condition or operating performance
is material.

The Company considers the determination of the allowance for loan losses its
most critical accounting policy, practice and use of estimates. The Company uses
available information to recognize probable and reasonably estimable losses on
loans. Future additions to the allowance may be necessary based upon changes in
economic, market or other conditions. Changes in estimates could result in a
material change in the allowance. The allowance for loan losses is increased by
a provision for loan losses charged against income and is decreased by
charge-offs, net of recoveries. Loan losses are recognized in the period the
loans, or portion thereof, are deemed uncollectible. The adequacy of the
allowance to cover any inherent loan losses in the portfolio is evaluated on a
quarterly basis.

Financial Condition - Total assets of the Company were $1.5 billion at March 31,
2022 and September 30, 2021. Total loans at March 31, 2022 were $1.3 billion,
compared to total loans of $1.2 billion at September 30, 2021. Total deposits
were $1.2 billion at March 31, 2022 and September 30, 2021. Total borrowings at
March 31, 2022 were $100.4 million, including $37.9 million of outstanding FHLB
advances.

For the six months ended March 31, 2022, the Company's loan portfolio, net of
sales, grew by $40.6 million to $1.3 billion. At March 31, 2022, the residential
loan portfolio amounted to $424.5 million, or 32.9% of total loans. Commercial
real estate loans, including multi-family loans and construction and land
development loans, totaled $792.0 million or 61.4% of total loans at March 31,
2022. Commercial loans, including PPP loans, totaled $72.5 million or 5.6% of
total loans.

Total deposits were $1.2 billion at March 31, 2022 and September 30, 2021. Core
deposit balances, which consist of demand, NOW, savings and money market
deposits, represented 76.7% and 67.6% of total deposits at March 31, 2022 and
September 30, 2021, respectively. At those dates, demand deposit balances
represented 16.0% and 16.4% of total deposits. Beginning in late 2020, we began
a municipal deposit program. The program is based upon relationships of our
management team, rather than bid based transactions. At March 31, 2022, total
municipal deposits were $405.0 million, representing 19 separate governmental
clients, compared to $350.5 million at September 30, 2021, representing 18
separate governmental clients. The average rate on the municipal deposit
portfolio was 0.18% at March 31, 2022.

Borrowings at March 31, 2022 were $75.8 million, including $37.9 million in
PPPLF funding, versus $159.6 million at September 30, 2021. At March 31, 2022,
the Company had $37.9 million of outstanding FHLB advances as compared to $42.0
million at September 30, 2021. At September 30, 2021, the Company's borrowings
from the PPPLF were $117.7 million, and have declined as PPP loans are forgiven
by the SBA.

Liquidity and Capital Resources – Liquidity management is defined as the ability of the Company and the Bank to meet their financial obligations on an ongoing basis without material loss or disruption of normal operations. these

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obligations include the withdrawal of deposits on demand or at their contractual
maturity, the repayment of borrowings as they mature, funding new and existing
loan commitments and the ability to take advantage of business opportunities as
they arise. Asset liquidity is provided by short-term investments, such as fed
funds sold, the marketability of securities available for sale and
interest-bearing deposits due from the Federal Reserve, FHLB and correspondent
banks, which totaled $127.1 million and $166.5 million at March 31, 2022 and
September 30, 2021, respectively. These liquid assets may include assets that
have been pledged primarily against municipal deposits or borrowings. Liquidity
is also provided by the maintenance of a base of core deposits, cash and
non-interest-bearing deposits due from banks, the ability to sell or pledge
marketable assets and access to lines of credit.

Liquidity is continuously monitored, thereby allowing management to better
understand and react to emerging balance sheet trends, including temporary
mismatches with regard to sources and uses of funds. After assessing actual and
projected cash flow needs, management seeks to obtain funding at the most
economical cost. These funds can be obtained by converting liquid assets to cash
or by attracting new deposits or other sources of funding. Many factors affect
the Company's ability to meet liquidity needs, including variations in the
markets served, loan demand, its asset/liability mix, its reputation and credit
standing in its markets and general economic conditions. Borrowings and the
scheduled amortization of investment securities and loans are more predictable
funding sources. Deposit flows and securities prepayments are somewhat less
predictable as they are often subject to external factors. Among these are
changes in the local and national economies, competition from other financial
institutions and changes in market interest rates.

The Company's primary sources of funds are cash provided by deposits, which may
include brokered and listing service deposits, and borrowings, proceeds from
maturities and sales of securities and cash provided by operating activities. At
March 31, 2022, total deposits were $1.2 billion, of which $203.9 million were
time deposits scheduled to mature within the next 12 months. Based on historical
experience, the Company expects to be able to replace a substantial portion of
those maturing deposits with comparable deposit products. At March 31, 2022 and
September 30, 2021, the Company had $75.8 million and $159.6 million,
respectively, in borrowings used to fund the growth in the Company's loan
portfolio.

The Liquidity and Wholesale Funding Policy of the Bank establishes specific
policies and operating procedures governing liquidity levels to assist
management in developing plans to address future and current liquidity needs.
Management monitors the rates and cash flows from the loan and investment
portfolios while also examining the maturity structure and volatility
characteristics of liabilities to develop an optimum asset/liability mix.
Available funding sources include retail, commercial and municipal deposits,
purchased liabilities and stockholders' equity. At March 31, 2022, the Bank had
access to approximately $622.5 million in FHLB lines of credit for overnight or
term borrowings, of which $418.7 million of municipal letters of credit and
$37.9 million in term borrowings were outstanding. At March 31, 2022, the Bank
had access to approximately $55 million in unsecured lines of credit extended by
correspondent banks, if needed, for short-term funding purposes. No borrowings
were outstanding under lines of credit with correspondent banks at March 31,
2022.

The Company strives to maintain an efficient level of capital, commensurate with
its risk profile, on which a competitive rate of return to stockholders will be
realized over both the short and long term. Capital is managed to enhance
stockholder value while providing flexibility for management to act
opportunistically in a changing marketplace. Management continually evaluates
the Company's capital position in light of current and future growth objectives
and regulatory guidelines. Total stockholders' equity increased to $134.8
million at March 31, 2022 from $122.5 million at September 30, 2021, primarily
due to net income recorded during the six months ended March 31, 2022.

The Bank is subject to regulatory capital requirements. The Bank's tier 1
leverage, common equity tier 1 risk-based, tier 1 risk-based and total
risk-based capital ratios were 10.06%, 14.76%, 14.76% and 15.85%, respectively,
at March 31, 2022, exceeding all the regulatory guidelines for a
well-capitalized institution, the highest regulatory capital category. Moreover,
capital rules also place limits on capital distributions and certain
discretionary bonus payments if a banking organization does not maintain a
buffer of common equity tier 1 capital above minimum capital requirements. At
March 31, 2022, the Bank's capital buffer was in excess of requirements.

The Company did not repurchase any shares of its common stock during the six months ended March 31, 2022.

The Company's total stockholders' equity to total assets ratio and the Company's
tangible common equity to tangible assets ratio ("TCE ratio") were 9.13% and
7.90%, respectively, at March 31, 2022 versus 8.25% and 7.02%, respectively,

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at September 30, 2021 and 9.24% and 9.06%, respectively, at March 31, 2021. The
ratio of total stockholders' equity to total assets is the most comparable U.S.
GAAP measure to the non-GAAP TCE ratio presented herein. The ratio of tangible
common equity to tangible assets, or TCE ratio, is calculated by dividing total
common stockholders' equity by total assets, after reducing both amounts by
intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable
bank regulatory requirements, but is a metric used by management to evaluate the
adequacy of our capital levels. Since there is no authoritative requirement to
calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar
capital measures disclosed or used by other companies in the financial services
industry. Tangible common equity and tangible assets are non-GAAP financial
measures and should be considered in addition to, not as a substitute for or
superior to, financial measures determined in accordance with U.S. GAAP. Set
forth below are the reconciliations of tangible common equity to U.S. GAAP total
common stockholders' equity and tangible assets to U.S. GAAP total assets at
March 31, 2022 (in thousands). (See also Non-GAAP Disclosure contained herein.)

                                                                                                Ratios
Total common stockholders' equity    $  134,768    Total assets                     $ 1,476,681  9.13% (1)
Less: goodwill                         (19,168)    Less: goodwill                      (19,168)
Less: core deposit intangible             (438)    Less: core deposit intangible          (438)
Tangible common equity               $  115,162    Tangible assets         

$1,457,075 7.90% (2)

(1) The ratio between total equity and total assets is the highest

GAAP measure comparable to tangible non-GAAP common equity ratio

    presented herein.


(2) TCE ratio


All dividends must conform to applicable statutory requirements. The Company's
ability to pay dividends to stockholders depends on the Bank's ability to pay
dividends to the Company. Additionally, the ability of the Bank to pay dividends
to the Company is subject to certain regulatory restrictions. Under New York
law, a bank may pay a dividend on its common stock only out of net profits, and
must obtain the approval of the Superintendent of the DFS if the total of all
dividends declared by a bank or trust company in any calendar year exceeds the
total of its net profits for that year combined with its retained net profits of
the preceding two years, less any required transfer to surplus or a fund for the
retirement of any preferred stock.

No cash dividends were declared by the Company during the six months ended
March 31, 2021. On January 25, 2022 the Company's Board of Directors approved
the payment of a $0.10 per common share cash dividend payable on February 15,
2022, to stockholders of record on February 8, 2022. This was the Company's
first cash dividend.

Off-Balance Sheet Arrangements - The Bank is a party to financial instruments
with off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit and letters of credit. Those instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized
in the consolidated financial statements. The Bank uses the same credit policies
in making commitments and conditional obligations as it does for on-balance
sheet instruments.

Commitments to extend credit are agreements to lend to a customer provided there
is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the customer. Collateral required varies, but may include
accounts receivable, inventory, equipment, real estate and income-producing
commercial properties. At March 31, 2022 and September 30, 2021, commitments to
originate loans and commitments under unused lines of credit for which the Bank
is obligated amounted to approximately $71 million and $106 million,
respectively.

Letters of credit are conditional commitments guaranteeing payments of drafts in
accordance with the terms of the letter of credit agreements. Commercial letters
of credit are used primarily to facilitate trade or commerce and are also issued
to support public and private borrowing arrangements, bond financing and similar
transactions. Collateral may be required to support letters of credit based upon
management's evaluation of the creditworthiness of each customer. The credit
risk

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involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. At March 31, 2022 and September 30,
2021, letters of credit outstanding were approximately $1.4 million and $786
thousand, respectively.

Results of Operations - Comparison of the Three Months Ended March 31, 2022 and
2021 - The Company recorded net income of $5.9 million during the three months
ended March 31, 2022 versus net income of $2.1 million in the comparable
three month period a year ago. The increase in earnings for the three months
ended March 31, 2022 versus the comparable 2021 period was primarily due to a
$6.9 million, or 89.0%, increase in net interest income coupled with a $2.0
million improvement in non-interest income. Partially offsetting these positive
factors was a $3.7 million increase in total operating expenses, principally
resulting from growth in compensation and benefits due largely to an increase in
personnel from the acquisition of Savoy in May 2021, coupled with an $300
thousand increase in the provision for loan losses expense due to growth in the
loan portfolio in the second fiscal quarter of 2022.

Net interest income and margin

The $6.9 million improvement in net interest income was largely attributable to
growth in average interest-earning assets of 68.5%, primarily loans, and a 47
basis point increase in the net interest margin to 4.26% in 2022 from 3.79% in
the year ago period. The wider net interest margin was largely due to a 52 basis
point reduction in the average cost of interest-bearing liabilities to 0.44% in
the 2022 period. Included in net interest income was accretion and amortization
of purchase accounting adjustments of $1.3 million during the three months ended
March 31, 2022 arising from the acquisition of Savoy. Excluding these purchase
accounting adjustments, the adjusted net interest margin was 3.86% and 3.80% in
the quarter ended March 31, 2022 and 2021, respectively.

The lower cost of average interest-bearing liabilities in 2022 resulted from an
improved deposit mix. Lower cost core deposits (demand, NOW, savings and money
market accounts) increased by $531.0 million while higher cost certificates of
deposit declined by $18.9 million compared to the year ago period.

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                          NET INTEREST INCOME ANALYSIS

               For the Three Months Ended March 31, 2022 and 2021

                             (dollars in thousands)

                                                       2022                                 2021
                                           Average                 Average     Average                 Average
(in thousands)                             Balance     Interest     Rate       Balance     Interest     Rate
Assets:
Interest-earning assets
Loans                                    $ 1,274,485   $  15,749      5.01 %  $ 742,004   $    9,133      4.99 %
Investment securities                         11,547         106      3.72

% 17,595,182 4.20% Interest-bearing and other balances 114,889 45 0.16% 70,465

           19      0.11 %
FHLB stock and other investments               4,062          41      4.09        3,714           46      5.02
Total interest-earning assets              1,404,983      15,941      4.60 %    833,778        9,380      4.56 %
Non interest-earning assets:
Cash and due from banks                        8,405                              5,576
Other assets                                  47,243                             23,797
Total assets                             $ 1,460,631                          $ 863,151

Liabilities and stockholders' equity:
Interest-bearing liabilities
Savings, NOW and money market deposits   $   696,240   $     345      0.20 %  $ 247,336   $      157      0.26 %
Time deposits                                306,363         401      0.53 %    334,804          915      1.11 %
Total interest-bearing deposits            1,002,603         746      0.30 %    582,140        1,072      0.75 %
Fed funds purchased & FHLB & FRB
advances                                      87,948         117                 58,807          180      1.24
Subordinated debentures                       24,527         334      5.52 %     24,476          326      5.40 %
Total interest-bearing liabilities         1,115,078       1,197      0.44
%    665,423        1,578      0.96 %
Demand deposits                              199,630                            107,884
Other liabilities                             12,662                              8,764
Total liabilities                          1,327,370                            782,071
Stockholders' equity                         133,261                             81,080
Total liabilities and stockholders'
equity                                   $ 1,460,631                          $ 863,151
Net interest income and interest rate
spread                                                                4.16 %                              3.60 %
Net interest margin                                    $  14,744      4.26 %              $    7,802      3.79 %

Allowance and provision for loan losses

The Company recorded a $500 thousand provision for loan losses expense for the
three months ended March 31, 2022 versus a $200 thousand expense recorded for
the comparable period in 2021. The adequacy of the provision and the resulting
allowance for loan losses, which was $9.9 million at March 31, 2022, is
determined by management's ongoing review of the loan portfolio including, among
other things, impaired loans, past loan loss experience, known and inherent
risks in the portfolio, existing adverse situations that may affect the
borrower's ability to repay and estimated fair value of any underlying
collateral securing loans. Moreover, management evaluates changes, if any, in
underwriting standards, collection, charge-off and recovery practices, the
nature or volume of the portfolio, lending staff, concentration of loans, as
well as current economic conditions and other relevant factors. Management
believes the allowance for loan losses is adequate to provide for probable and
reasonably estimable losses at March 31, 2022. (See also Critical Accounting
Policies, Judgments and Estimates and Asset Quality contained herein.)

Non-interest income

Non-interest income increased by $2.0 million for the three months ended
March 31, 2022 versus 2021. This increase was largely driven by increases in net
gain on sale of loans and loan servicing and fee income. For the three months
ended March 31, 2022 and 2021, the Company sold loans totaling approximately
$16.2 million and $9.4 million, respectively, recognizing net gains of $1.6
million and $295 thousand, respectively. The increase in loan fees and deposit
service charges was primarily driven by increases in loan and deposit balances,
primarily as a result of the acquisition of Savoy. The increase in income
related to loan servicing rights was due to growth in the volume of loans
serviced by the Company, primarily due to the acquisition of Savoy.

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                              Non-Interest Income

           For the three and six months ended March 31, 2022 and 2021

                             (dollars in thousands)

                                                         Three months ended          Six months ended
                                                             March 31,                  March 31,
                                                         2022           2021         2022         2021
Loan servicing and fee income                         $       734     $    139    $    1,424     $   222
Service charges on deposit accounts                            46           17           109          32
Net gain on sale of investments available-for-sale            105          240           105         240
Net gain on sale of loans held for sale                     1,575          295         3,067         476
Other income                                                  212            1           343           8
Total non-interest income                             $     2,672     $   
692    $    5,048     $   978


Non-interest Expense

Total non-interest expense increased by $3.6 million for the three months ended
March 31, 2022 versus 2021. The overall increase in non-interest expenses was
primarily driven by the additional headcount, facilities and transaction volume
associated with the acquisition of Savoy. The increase in other non-interest
expenses is primarily due to increased assessment charges and correspondent
banking fees due to the increased size of the Company.

                              Non-Interest Expense

           For the three and six months ended March 31, 2022 and 2021

                             (dollars in thousands)

                                    Three months ended        Six months ended
                                        March 31,                March 31,
                                     2022         2021        2022        2021
Salaries and employee benefits    $    5,618     $ 3,268    $ 10,557    $  6,376
Occupancy and equipment                1,370       1,209       2,783       2,380
Data processing                          392         270         759         515
Advertising and promotion                153          19         186          67
Acquisition costs                          -         151           -         296
Professional fees                        640         308       1,139         720
Other expenses                         1,184         500       2,198         961
Total non-interest expense        $    9,357     $ 5,725    $ 17,622    $ 11,315


The Company recorded income tax expense of $1.7 million for an effective tax
rate of 22.5% for the three months ended March 31, 2022 versus income tax
expense of $514 thousand for an effective tax rate of 20.0% in the comparable
2021 period.

Results of Operations - Comparison of the Six Months Ended March 31, 2022 and
2021 -The Company recorded net income of $12.4 million during the six months
ended March 31, 2022 versus $3.6 million in the comparable six months a year
ago. The $8.8 million increase in earnings for the six months ended March 31,
2022 versus the comparable 2021 period was primarily due to a $14.9 million or
98.4% increase in net interest income and a $4.1 million increase in
non-interest income, partially offset by a $1.1 million increase in the
provision for loan losses, a $6.3 million increase in non-interest expense and a
$3.6 million increase in provision for income taxes versus the comparable 2021
period. The Company's effective tax rate increased to 22.7% in 2022 from 20.4% a
year ago.

The $14.9 million or 98.4% improvement in net interest income was largely
attributable to growth in average interest-earning assets of $564.1 million,
primarily in loans and a 66-basis point reduction in the yield on average total
interest-bearing liabilities to 0.46% from 1.12% a year ago, largely due to a
58-basis point decline in the average cost of savings and time deposits.
Reflecting the improvement in net interest income, the Company's net interest
margin widened to 4.32% for the six months ended March 31, 2022 versus 3.66% for
the same period a year ago.

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The lower cost of interest-bearing liabilities in 2022 was also the result of a
$36.8 million reduction in average time deposit balances, coupled with increases
in lower cost average savings deposits and non-interest-bearing demand deposit
balances of $17.3 million and $100.2 million, respectively.

                          NET INTEREST INCOME ANALYSIS

                For the Six Months Ended March 31, 2022 and 2021

                             (dollars in thousands)

                                                              2022                                     2021
                                               Average                    Average       Average                   Average
                                               Balance      Interest     Yield/Cost     Balance     Interest     Yield/Cost
Assets:
Interest-earning assets:
Loans                                        $ 1,264,043    $  32,130          5.10 %  $ 733,283    $  18,391          5.03 %
Investment securities                             13,613          260          3.83 %     17,052          355          4.18 %
Interest-earning cash                            110,729           84          0.15 %     74,758           40          0.11 %
FHLB stock and other investments                   4,664           83          3.57 %      3,819           91          4.78 %
Total interest-earning assets                  1,393,049       32,557          4.69 %    828,912       18,877          4.57 %
Non interest-earning assets:
Cash and due from banks                            8,334                                   5,138
Other assets                                      48,136                                  24,051
Total assets                                 $ 1,449,519                               $ 858,101

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings, NOW and money market deposits       $   652,268    $     711          0.22 %  $ 216,783    $     274          0.25 %
Time deposits                                    326,626          892          0.55 %    363,434        2,369          1.31 %
Total savings and time deposits                  978,894        1,603          0.33 %    580,217        2,643          0.91 %
Fed funds purchased & FHLB & FRB advances        107,213          277      
   0.52 %     68,983          401          1.17 %
Note payable                                           -            -             - %        659           73         22.22 % (1)
Subordinated debentures                           24,513          664          5.43 %     23,678          631          5.34 %
Total interest-bearing liabilities             1,110,620        2,544      
   0.46 %    673,537        3,748          1.12 %
Demand deposits                                  195,854                                  95,659
Other liabilities                                 13,254                                   8,844
Total liabilities                              1,319,728                                 778,040
Stockholders' equity                             129,791                                  80,061
Total liabilities & stockholders' equity     $ 1,449,519                               $ 858,101
Net interest rate spread                                                       4.23 %                                  3.45 %
Net interest income/margin                                  $  30,013          4.32 %               $  15,129          3.66 %


(1) Includes the impact of debt extinguishment costs. Excluding the impact of these

expenses, the average rate was 5.78%.


The Company recorded a $1.4 million expense to the provision for loan losses for
the six months ended March 31, 2022 versus a $300 thousand expense recorded for
the comparable period in 2021. (See also Critical Accounting Policies, Judgments
and Estimates and Asset Quality contained herein.)

Non-interest income increased by $4.0 million for the six months ended March 31,
2022 versus 2021. This increase was principally due to a $2.6 million increase
in net gain on sale of loans held for sale and a $1.2 million increase in loan
servicing and fee income. For the six months ended March 31, 2022 and 2021, the
Company sold loans totaling approximately $51.4 million and $17.8 million,
respectively, recognizing net gains of $3.1 million and $476 thousand,
respectively.

Total non-interest expense increased by $6.3 million or 55.7% for the six months
ended March 31, 2022 versus 2021, principally resulting from higher salaries and
employee benefits of $4.2 million as the Company continued to grow and a  $1.2
million increase in other expenses. The operating efficiency ratio, defined as
total non-interest expense as a percentage of total revenue, was 50.4% for the
six months ended March 31, 2022 compared to 71.3% in the comparable period
of
2021.

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The Company recorded income tax expense of $3.6 million for the six months ended
March 31, 2022 resulting in an effective tax rate of 22.7%, versus income tax
expense of $918 thousand and an effective tax rate of 20.4% in the comparable
2021 period.

Asset Quality - Total non-accrual loans at March 31, 2022 were $10.5 million, or
0.81% of total loans, compared to $7.0 million, or 0.56% of total loans at
September 30, 2021 and $9.4 million, or 1.22% of total loans, at March 31, 2021.
Management believes all of the Company's non-accrual loans at March 31, 2022 are
well collateralized and no specific reserves have been taken with regard to
these loans. The allowance for loan losses as a percentage of total non-accrual
loans amounted to 94%, 122% and 87% at March 31, 2022, September 30, 2021 and
March 31, 2021, respectively.

Total outstanding loans, excluding credit-impaired purchased loans, past due for 30 days or more was $3.3 million, $8.2 million and $1.3 million to
March 31, 2022, September 30, 2021 and March 31, 2021respectively.

Total loans having credit risk ratings of Special Mention or Substandard were
$36.0 million at March 31, 2022 versus $51.9 million at September 30, 2021.
These were mainly from the acquired loan portfolio of Savoy Bank. The acquired
portfolio has a large component of SBA loans, which have been supported through
the COVID-pandemic with assistance from the SBA. The high level of criticized
loans in the Savoy portfolio results in part from a conservative view of these
borrowers' ability to perform once government assistance ends, as well as
specific instances of borrowers seeking assistance/deferrals/modifications due
to the impact to their business. The Company's Special Mention and Substandard
loans were comprised of residential real estate, multi-family, commercial real
estate loans and commercial and industrial loans (including SBA facilities) at
March 31, 2022. The Company had no loans with a credit risk rating of Doubtful
for the periods presented. All loans not having credit risk ratings of Special
Mention, Substandard or Doubtful are considered pass loans.

At March 31, 2022, the Company had $1.3 million in troubled debt restructurings
("TDRs"), consisting of residential real estate loans. The Company had TDRs
amounting to $1.6 million and $1.7 million at September 30, 2021 and March 31,
2021, respectively.

At March 31, 2022, the Company's allowance for loan losses amounted to $9.9
million or 0.77% of period-end total loans outstanding. The allowance as
a percentage of loans outstanding was 0.69% at September 30, 2021 and 1.07% at
March 31, 2021. The Company recorded no loan charge-offs or recoveries during
the three months ended March 31, 2022, September 30, 2021 and March 31, 2021.

The Company recorded a $500 thousand provision for loan losses expense for the
three months ended March 31, 2022 versus a $200 thousand expense recorded for
the comparable period in 2021. Adjustments to the Company's loss experience is
based on management's evaluation of several environmental factors, including:
changes in local, regional, national, and international economic and business
conditions and developments that affect the collectability of the loan
portfolio, including the condition of various market segments; changes in the
nature and volume of the Company's portfolio and in the terms of the Company's
loans; changes in the experience, ability, and depth of lending management and
other relevant staff; changes in the volume and severity of past due loans, the
volume of nonaccrual loans and the volume and severity of adversely classified
or graded loans; changes in the quality of the Company's loan review system;
changes in lending policies, procedures and strategies; changes in the value of
underlying collateral for collateral-dependent loans; the existence and effect
of any concentrations of credit and changes in the level of such concentrations;
and the effect of other external factors such as competition and legal and
regulatory requirements on the level of estimated credit losses in the Company's
existing portfolio.

Management has determined that the current level of the allowance for loan
losses is adequate in relation to the probable and reasonably estimable losses
present in the portfolio. While management uses available information to
recognize probable and reasonably estimable losses on loans, future additions to
the allowance may be necessary and management may need to record loan
charge-offs in future periods. Changes in estimates could result in a material
change in the allowance. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowance for loan losses and may require the Company to recognize additions to
the allowance based on

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their judgments on the information available to them at the time of their review. (See also critical accounting policies, judgments and estimates contained herein).

                                 ASSET QUALITY

          March 31, 2022 versus September 30, 2021 and March 31, 2021

                             (dollars in thousands)

                                                                As of or for the three months ended
                                                                3/31/2022      9/30/2021      3/31/2021
Non-accrual loans                                            $     10,470    $     7,028    $     9,350
Non-accrual loans held for sale                                         -              -              -
Other real estate owned                                                 -              -              -
Total non-performing assets (1)                              $     10,470  

$7,028 $9,350

Purchased credit-impaired loans 90 days or more past due
and still accruing                                           $      1,483    $     2,519    $       322
Performing TDRs                                                     1,336            455            455

Loans held for sale                                                     -              -            893
Loans held for investment                                       1,289,041  

1,247,125,763,596

Allowance for loan losses:
Beginning balance                                            $      9,386    $     7,852    $     7,979
Provision                                                             500            700            200
Charge-offs                                                             -              -              -
Recoveries                                                              -              -              -
Ending balance                                               $      9,886    $     8,552    $     8,179
Allowance for loan losses as a % of total loans (2)                  0.77 %

0.69% 1.07%

Allowance for loan losses as a % of non-accrual loans (2)              94 %          122 %           87 %

Non-accrual loans as a % of total loans (2)                          0.81 %

0.56% 1.22%

Non-performing assets as % of total loans, loans held for sale and other real estate held

                                 0.81 % 

0.56% 1.22%

Non-performing assets as a % of total assets                         0.71 %

0.47% 1.05%

Non-Performing Assets, Purchased Impaired Loans 90 Days or More Past Due and Still Outstanding, and Performing TDRs, Total Loans Held for Sale and Investment

                    1.03 % 

0.80% 1.32%

(1) Non-performing assets defined as non-current loans, non-current loans held

for sale and other real estate owned.

(2) Excluding loans held for sale.

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