GRANDSOUTH BANCORPORATION Rapport de gestion et analyse de la situation financière et des résultats d’exploitation (formulaire 10-K)

GRANDSOUTH BANCORPORATION Rapport de gestion et analyse de la situation financière et des résultats d’exploitation (formulaire 10-K)
The following discussion and analysis is presented on a consolidated basis and
focuses on the major components of our operations and significant changes in our
results of operations for the periods presented. We encourage you to read this
discussion and analysis in conjunction with the financial statements and the
related notes and the other statistical information included elsewhere in this
Annual Report on Form 10-K. Historical results of operations and the percentage
relationships among any amounts included, and any trends that may appear, may
not indicate trends in our operations or results of operations for any future
periods.


We have made, and will continue to make, various forward-looking statements with
respect to financial and business matters. Comments regarding our business that
are not historical facts are considered forward-looking statements that involve
inherent risks and uncertainties. Actual results may differ materially from
those contained in these forward-looking statements. For additional information
regarding our cautionary disclosures, see the "Cautionary Note Regarding
Forward-Looking Statements" at the beginning of this Annual Report on Form
10-K.



Overview



The Company was incorporated in 2000 under the laws of South Carolina and is a
bank holding company registered under the Bank Holding Company Act of 1956. The
Company's primary purpose is to serve as the holding company for the Bank. On
October 2, 2000, pursuant to a Plan of Exchange approved by the shareholders of
the Bank, all of the outstanding shares of capital stock of the Bank were
exchanged for shares of the Company, and the Company became the owner of all of
the outstanding capital stock of the Bank. The Company presently engages in no
business other than that of owning the Bank and has no employees.



The Company has one non-bank subsidiary, the GrandSouth Capital Trust I, a
Delaware statutory trust, formed to facilitate the issuance of trust preferred
securities. The GrandSouth Trust is not consolidated in the Company's financial
statements.


Nous fournissons une gamme complète de services financiers par l’intermédiaire de bureaux situés dans
Caroline du Sud. Nous fournissons des produits bancaires de détail et commerciaux à service complet.




COVID-19 Pandemic



The COVID-19 pandemic and variants of the virus continue to create disruptions
to the global economy and financial markets and to businesses and the lives of
individuals throughout the world. The impact of the COVID-19 pandemic and its
related variants is fluid and continues to evolve, adversely affecting many of
our customers. Our business, financial condition and results of operations
generally rely upon the ability of our borrowers to repay their loans, the value
of collateral underlying our secured loans, and demand for loans and other
products and services we offer, which are highly dependent on the business
environment in our primary markets where we operate and in the United States as
a whole. The unprecedented and rapid spread of COVID-19 and its variants and
their associated impacts on trade (including supply chains and export levels),
travel, employee productivity, unemployment, consumer spending, and other
economic activities have resulted and continue to result in less economic
activity, and volatility and disruption in financial markets.



The ultimate extent of the impact of the COVID-19 pandemic on our business,
financial condition and results of operations remains uncertain and will depend
on various developments and other factors, including the effect of governmental
and private sector initiatives, the effect of the continued rollout of
vaccinations for the virus, whether such vaccinations will be effective against
another resurgence of the virus, including any new strains, and the ability for
customers and businesses to return to, and remain in, their pre-pandemic
routine.



Opérations de prêt et hébergement aux clients




We are focused on serving the needs of our commercial and consumer customers and
have offered flexible loan payment arrangements, including short-term loan
modifications or forbearance payments, and reduced or waived certain fees on
deposit accounts. During 2020, we granted short-term deferrals related to the
COVID-19 crisis for $93.0 million of loans, which as of December 31, 2020 had
all resumed payments or had been paid off. During 2021, the Bank did not grant
any deferrals related to the COVID-19 crisis.

49





We also participated in the Small Business Administration's Paycheck Protection
Program ("PPP"). During 2020 and 2021, we secured funding of 272 loans and 95
loans, respectively, through the PPP totaling approximately $37.4 million and
$12.0 million, net of deferred lending fees for the same periods, respectively.
PPP loans totaled $1.3 million and $22.5 million as of December 31, 2021 and
December 31, 2020, respectively.



Impact sur les résultats d’exploitation et la situation financière

We are monitoring the impact of the COVID-19 pandemic on the operations and
value of our investments. We mark to market our AFS investments and review our
investment portfolio for impairment at each period end. Because of changing
economic and market conditions affecting issuers, we may be required to
recognize impairments on the securities we hold as well as reductions in other
comprehensive income. We cannot currently determine the ultimate impact of the
pandemic on the long-term value of our investment portfolio.



As of December 31, 2021, we had $0.7 million of goodwill. At each quarter end in
2021, we have considered whether a quantitative assessment of our goodwill was
required because of the significant economic disruption caused by the COVID-19
pandemic. At December 31, 2021, we determined no goodwill impairment was
required. However, further delayed recovery or further deterioration in market
conditions related to the general economy, financial markets, and the associated
impacts on our customers, employees and vendors, among other factors, could
significantly impact the impairment analysis and may result in future goodwill
impairment charges that, if incurred, could have an adverse effect on our
results of operations and financial condition.



Capital and Liquidity



As of December 31, 2021, all of our capital ratios were in excess of all
regulatory requirements. While we believe that we have sufficient capital to
withstand an extended economic recession brought about by the COVID-19 pandemic,
our reported and regulatory capital ratios could be adversely impacted by loan
losses.


We continue to monitor unfunded commitments through the pandemic, including home
equity lines of credit, for evidence of increased credit exposure as borrowers
utilize these lines for liquidity purposes. As clients manage their own
liquidity stress, we could experience an increase in the utilization of existing
lines of credit. We believe that we have ample liquidity to meet the needs of
our customers through our low cost deposits, our ability to borrow against
approved lines of credit (federal funds purchased) from correspondent banks, and
our ability to obtain advances secured by certain securities and loans from the
Federal Home Loan Bank ("FHLB").



Critical Accounting Estimates



Our accounting and reporting policies conform to GAAP and conform to general
practices within the industry in which we operate. To prepare financial
statements in conformity with GAAP, management makes estimates, assumptions and
judgments based on available information. These estimates, assumptions and
judgments affect the amounts reported in the financial statements and
accompanying notes. These estimates, assumptions and judgments are based on
information available as of the date of the financial statements and, as this
information changes, actual results could differ from the estimates, assumptions
and judgments reflected in the financial statements, which could have a material
impact on our future financial condition and results of operations.



Certain policies inherently have a greater reliance on the use of estimates,
assumptions and judgments and, as such, have a greater possibility of producing
results that could be materially different than originally reported. We have
identified the determination of the allowance for loan losses to be an
accounting area that requires the most subjective or complex judgments and, as
such, could be most subject to revision as new or additional information becomes
available or circumstances change, including overall changes in the economic
climate. Therefore, we consider this policy, discussed below, to be a critical
accounting policy and estimate and discuss it directly with the Audit Committee
of our board of directors.



Additional information about our critical and significant accounting policies
can be found in Note 1 of our audited consolidated financial statements as of
December 31, 2021, included in Item 8 of this Annual Report on Form 10-K.

50





Allowance for Loan Losses ("ALL") - The ALL reflects our estimates of probable
losses inherent in the loan portfolio at the balance sheet date. Our management
evaluates the ALL on a regular basis. It is based on the collectability of our
loans in light of historical experience, the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and prevailing economic conditions.
This evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available and
such revisions can materially affect our financial results.

La méthodologie de détermination de l’ALL comporte deux volets principaux : l’évaluation des prêts individuels pour dépréciation et l’évaluation de certains groupes de prêts homogènes présentant des caractéristiques de risque similaires.

A loan is considered impaired when it is probable that we will be unable to
collect all principal and interest payments due according to the original
contractual terms of the loan agreement. We individually evaluate loans, or
relationships, greater than $200,000 for impairment that are classified as
nonaccrual, TDRs, or performing substandard loans. If the impaired loan is
considered collateral dependent, a charge-off is taken based upon the appraised
value of the property (less an estimate of selling costs if foreclosure is
anticipated) compared to the loan's carrying value, if necessary. If the
impaired loan is not collateral dependent, a specific reserve is established
based upon an estimate of the future discounted cash flows after consideration
of modifications and the likelihood of future default and prepayment.

The allowance for non-impaired loans consists of a base historical loss reserve
and a qualitative reserve. The loss rates for the base loss reserve, segmented
into seven loan categories, contain average net loss rates ranging from
approximately 0.00% to 0.56%.

La réserve qualitative ajuste les taux de perte moyens utilisés dans la réserve de base pour les pertes en fonction des tendances des facteurs internes et externes suivants :

· Modifications des politiques de prêt et d’examen des prêts ;

· Conditions économiques – y compris les taux de chômage, les données macroéconomiques fédérales,

les prix et les ventes de logements et les perspectives économiques régionales;

· Changements dans la nature et le volume du portefeuille et dans les conditions de

prêts;

· Expérience, capacité et profondeur de la gestion des prêts ;

· Volume et sévérité des prêts en souffrance, non courus et classifiés ;

· Changements dans la qualité du système d’examen des prêts de l’institution ;

· Valeurs collatérales ;

· Concentrations de prêts et croissance des prêts ; et

· L’effet d’autres facteurs externes tels que la concurrence, la législation et la réglementation

   requirements on the level of estimated credit losses.




Qualitative reserve adjustment factors are decreased for favorable trends and
increased for unfavorable trends. There is no certainty that our ALL will be
appropriate over time to cover losses in our portfolio as economic and market
conditions may ultimately differ from our reasonable and supportable forecast;
however, we believe our estimate has been reasonably accurate in determining ALL
adequacy.



Financial Highlights


The following table sets forth certain financial highlights (in thousands,
except per share data) concerning the Company and its wholly-owned subsidiary.
The information was derived from audited consolidated financial statements. The
information should be read in conjunction with the audited consolidated
financial statements and notes, which are presented elsewhere in this report.

51





                                                         As of and for the year ended December 31,
                                                         2021                 2020              2019
Income Statement Data:
Net interest income                                 $       49,890       $       41,714      $    39,566
Provision for loan losses                                    1,270                3,073            2,768
Noninterest income                                           3,809                2,552            1,786
Noninterest expense                                         31,141               30,046           27,958
Income before taxes                                         21,288               11,147           10,626
Provision for income taxes                                   5,174                2,502            2,562
Net income                                          $       16,114       $        8,645      $     8,064

Per Common Share Data:
Weighted average shares of common stock
outstanding, basic                                       5,157,858            5,215,182        5,041,420
Weighted average shares of common stock
outstanding, diluted                                     5,287,413            5,273,350        5,111,577
Total shares of common stock outstanding                 5,168,681            5,271,971        5,201,951
Basic income per common share                       $         2.95       $         1.57      $      1.51
Diluted income per common share                     $         2.88       $         1.55      $      1.49
Dividends declared per common share                 $         0.40       $         0.32      $      0.08
Dividend payout ratio                                        13.56 %              20.60 %           5.54 %
Book value (at end of period)                       $        18.61       $ 
      16.17      $     14.49

Balance Sheet Data:
Total loans                                         $      933,475       $      878,545      $   756,389
Allowance for loan losses                           $      (13,723 )     $ 
    (12,572 )    $   (10,287 )
Total assets                                        $    1,203,722       $    1,089,779      $   911,645
Total Deposits                                      $    1,059,041       $      946,480      $   812,501
Total shareholders' equity                          $       97,405       $       86,525      $    76,650
Common shareholders' equity                         $       96,201       $ 

85 227 75 352 $


Performance Ratios:
Return on average assets                                      1.39 %               0.88 %           0.94 %
Return on average equity                                     17.78 %              10.59 %          11.45 %
Net interest rate spread(1)                                   4.27 %               4.13 %           4.39 %
Net interest margin(2)                                        4.44 %               4.42 %           4.78 %
Efficiency ratio(3)                                          57.99 %       

68,51 % 67,71 %


Asset Quality Data (at Period End):
Net charge-offs to average loans                              0.01 %               0.10 %           0.24 %
Nonperforming assets to total loans                           0.19 %               0.28 %           0.50 %
Allowance for loan losses to nonperforming loans           1017.27 %            2358.72 %         542.56 %
Allowance for loan losses to total loans                      1.47 %               1.43 %           1.36 %

Balance Sheet and Capital Ratios(4):
Total loans to total deposits                                88.14 %              92.82 %          93.09 %
Tangible common equity to tangible assets                     7.94 %               7.88 %           8.33 %
Leverage ratio                                                8.59 %               8.72 %           9.34 %
Tier 1 risk-based capital ratio                              10.29 %              10.17 %          10.62 %
Total risk-based capital ratio                               14.28 %       
      14.46 %          13.11 %



(1) L’écart de taux d’intérêt représente la différence entre le taux entièrement imposable

rendement moyen pondéré équivalent sur les actifs productifs d’intérêts et le

coût moyen pondéré des passifs portant intérêt pour la période.

(2) La marge nette d’intérêts représente l’équivalent net d’intérêts pleinement imposable

revenu en pourcentage de la moyenne des actifs productifs d’intérêts pour la période.

(3) Le ratio d’efficience représente les frais autres que d’intérêts en pourcentage du

somme des revenus nets d’intérêts sur une base d’équivalence pleinement imposable et

revenus hors intérêts.

(4) Les ratios de capital sont pour GrandSouth Bancorporation, Inc. sur une base consolidée

     basis.


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Comparaison de la situation financière au 31 décembre 2021 et 2020



General



Total assets increased $113.9 million, or 10.5%, to $1.2 billion at December 31,
2021 from $1.1 billion at December 31, 2020. This increase in assets was
primarily due to increases in interest-earnings deposits of $69.5 million, or
135.8%, from $51.1 million at December 31, 2020 to $120.6 million at December
31, 2021, and loans, which increased $54.9 million, or 6.3%, from $878.5 million
at December 31, 2020 to $933.5 million at December 31, 2021.



Total liabilities increased $103.1 million, or 10.3%, to $1.1 billion at
December 31, 2021 from $1.0 billion at December 31, 2020, due primarily to the
$112.6 million increase in total deposits, which was partially offset by the
$11.0 million decrease in FHLB advances.



Total shareholders' equity increased $10.9 million to $97.4 million at December
31, 2021 compared to $86.5 million at December 31, 2020. This increase was
primarily attributable to $16.1 million of net income and $1.4 million from the
exercise of stock options, partially offset by the repurchases of $3.9 million
of our common stock and $0.1 million of our preferred stock and dividends
declared of $2.2 million. Tangible book value per common share, a non-GAAP
measure, increased $2.44 to $18.47 at December 31, 2021 from $16.03 at December
31, 2020.



Cash and Cash Equivalents

Total cash and cash equivalents increased $61.1 million to $124.1 million at
December 31, 2021 from $63.0 million at December 31, 2020, primarily due to the
increase of total deposits, partially offset by the increase in loans. We
continue to hold adequate levels of liquid and short-term assets.

Sécurité d’investissement


Our investment securities portfolio is classified as AFS. AFS securities are
carried at fair value. The following table shows the amortized cost and fair
value for our AFS investment portfolio at the dates indicated (in thousands).



                                              December 31, 2021              December 31, 2020
                                          Amortized         Fair         Amortized         Fair
                                             Cost           Value           Cost           Value
U.S. government agencies                  $    9,479      $   9,439      $        -      $       -
State and municipal obligations               26,011         26,677          16,684         17,820
Mortgage-backed securities - agency           33,191         33,418          31,056         31,487
Collateralized mortgage obligations -
agency                                        26,968         27,435          49,441         50,560
Asset-backed securities                        2,599          2,590           6,268          6,235
Corporate bonds                               12,200         12,403           4,500          4,605
                                          $  110,448      $ 111,962      $  107,949      $ 110,707




AFS investment securities increased $1.3 million, or 1.1%, to $112.0 million at
December 31, 2021 from $110.7 million at December 31, 2020. Corporate bonds,
which increased $7.8 million, or 169.3%, to $12.4 million at December 31, 2021
from $4.6 million at December 31, 2020, include subordinated debt issued by
community banks that are within and outside of our footprint. We continue to
look for opportunities to re-deploy funds from investment securities to higher
yielding loans.



During 2021, we decided to sell $28.2 million of our AFS investment securities
that were below market rates and as a result in an unrealized loss position.
While this resulted in a $0.8 million loss on sale, we believe making this
balance sheet change will assist in positioning us for better earnings in the
future.

53





We believe the number of securities in an unrealized loss position is due
entirely to interest rate fluctuation from the time that many of these
securities were originally purchased. We regularly review our investment
portfolio for impairment that is other than temporary ("OTTI") and concluded
that no OTTI existed during the years ended December 31, 2021 and December 31,
2020. In addition, we do not currently intend to sell the securities, nor do we
believe it is more likely than not that we would be required to sell these
securities before their anticipated recovery of amortized cost. The number and
dollar amount of securities in an unrealized loss position decreased between
December 31, 2020 and December 31, 2021, as indicated in the table below (in
thousands).



                                        12 Months or Less                                  More Than 12 Months                                       Total
                           Number of                         Unrealized       Number of                          Unrealized       Number of                         Unrealized
                           Securities       Fair Value         Losses       

Pertes de juste valeur des titres Pertes de juste valeur des titres Au 31 décembre 2021

             33     $     52,348     $        647               2       $      2,590     $          9               35     $     54,938     $        656
As of December 31, 2020             10     $     28,374     $        129   
           2       $      2,808     $         38               12     $     31,182     $        167



We closely monitor the financial condition of the issuers of our municipal
securities. As of December 31, 2021, the fair value of our municipal securities
portfolio balance consists of approximately 34.1% of general obligation bonds
and 65.9% of revenue bonds. As of December 30, 2021, and December 31, 2020, all
of our municipal securities were performing and rated A or better by either
Moody's or Standard and Poor's.



The composition and maturities of the available-for-sale investment securities
portfolio at December 31, 2021 are summarized in the following table (in
thousands). Maturities are based on the final contractual payment dates, and do
not reflect the impact of prepayments or early redemptions that may occur. The
composition and maturity distribution of the securities portfolio is subject to
change depending on rate sensitivity, capital, and liquidity needs. The weighted
average yield was calculated using net income (interest accrual plus or minus
accretion/amortization) divided by ending book value.



                                                                More than one year               More than five years
                            Less than one year                  through five years                 through ten years                 More than ten years                Total securities
                                           Weighted                           Weighted                           Weighted                           Weighted                        Weighted
                        Amortized           Average         Amortized         Average         Amortized          Average         Amortized          Average        Amortized        Average
                          Cost               Yield            Cost             Yield             Cost             Yield             Cost             Yield            Cost           Yield
U.S. government
agencies              $           -                 -      $         -                -      $      9,479             1.36 %    $          -             0.00 %    $    9,479            1.36 %
State and
municipal
obligations                       -                 -      $         -                -      $      6,890             2.01 %    $     19,121             2.30 %        26,011            2.22 %

adossé à une hypothèque

securities -
agency                            -                 -              187             3.80 %           9,221             0.87 %          23,783             1.18 %        33,191            1.11 %
Collateralized
mortgage
obligations -
agency                            -                 -                -                -            12,269             2.01 %          14,699           
 0.86 %        26,968            1.38 %
Asset-backed
securities                        -                 -                -                -               665             0.30 %           1,934             0.66 %         2,599            0.57 %
Corporate bonds                   -                 -                -                -            10,200             4.25 %           2,000             3.66 %        12,200            4.15 %
Total securities
available-for-sale    $           -              0.00 %    $       187             3.80 %    $     48,724             2.11 %    $     61,537             1.52 %    $  110,448            1.78 %



(1) Les obligations communales exonérées d’impôt sont présentées en équivalent d’impôt à l’aide d’un

     21% federal tax rate.




Other Investments



As of December 31, 2021, we held $3.0 million in other investments accounted for
at cost which was a decrease of $3.3 million, or 52.3%, compared to $6.3 million
at December 31, 2020. The following table summarizes other investments as of the
dates indicated (in thousands):



                                              December 31,
                                            2021        2020
FHLB stock                                 $   733     $ 1,501
CRA qualified preferred stock                  500         500

Certificats de dépôt auprès d’autres banques 1 504 4 004 Placements en titres privilégiés de fiducie 247 247 Total des autres placements

                    $ 2,984     $ 6,252




The amount of FHLB stock required to be owned by the Bank is determined by the
amount of FHLB advances outstanding. The decrease in our FHLB stock of $0.8
million to $0.7 million at December 31, 2021, compared to $1.5 million at
December 31, 2020 was the result of decreased FHLB borrowings. FHLB advances
totaled $5.0 million and $16.0 million as of December 31, 2021 and 2020,
respectively.

54





Loans

The following table presents our loan portfolio composition and the
corresponding percentage of total loans as of the dates indicated (in
thousands). Other construction and land loans include residential acquisition
and development loans and loans on commercial undeveloped land and one-to-four
family improved and unimproved lots. Commercial real estate loans include loans
on non-residential owner-occupied and non-owner-occupied real estate,
multi-family, and owner-occupied investment property. Commercial loans include
unsecured commercial loans and commercial loans secured by business assets.


                                                       December 31,
                              2021                         2020                         2019
                      Balance       Percent        Balance       Percent        Balance       Percent
Real estate
mortgage loans:
One-to
four-family
residential          $ 132,836         14.22      $ 114,119         12.98      $ 101,071         13.37
Commercial real
estate                 423,552         45.36        369,706         42.03        306,802         40.55
Home equity loans
and lines of
credit                  21,568          2.31         17,174          1.95         17,811          2.35
Residential
construction            38,881          4.16         30,989          3.52          8,375          1.11
Other
construction and
land                    75,682          8.10         68,611          7.80         55,505          7.34
Commercial             234,355         25.09        243,617         27.70        225,629         29.82
Consumer                 7,129          0.76         35,362          4.02         41,335          5.46
Loans receivable,
gross                  934,003        100.00        879,578        100.00        756,528        100.00

Net deferred loan
costs (fees)              (528 )                       (956 )                        (73 )
Unamortized
discount                     -                         (274 )                       (304 )
Unamortized
premium                      -                          197                          238

Loans receivable,
net of deferred
fees                 $ 933,475                    $ 878,545                    $ 756,389

Loans receivable, net of deferred fees increased $54.9 million, or 6.3%, to
$933.5 million at December 31, 2021, compared to $878.5 million at December 31,
2020. Most of our loan growth in concentrated in One-to-four family residential
and Commercial real estate with increases of $18.7 million, or 16.4% and $53.8
million, or 14.6%, respectively, as compared to relative balances as of December
31, 2020. This growth was partially offset by a decrease in our Consumer loan
portfolio, which contracted by $28.2 million, or 79.8%, as compared to the
relative balance as of December 31, 2020.



In 2021, we processed 95 loans under the PPP for a total of $12.0 million in
loans funded and $0.6 million of lender fees collected. As of December 31, 2021,
83 of these loans totaling $10.8 million had been forgiven and lender fee income
totaling $0.5 million had been recognized and is included in Interest and fees
on loans in the Consolidated Statements of Income.



In 2020, we processed 272 loans under the PPP for a total of $39.0 million in
loans funded and $1.6 million of lender fees collected. As of December 31, 2020,
80 of these loans totaling $15.9 million had been forgiven and lender fee income
totaling $1.0 million had been recognized and is included in Interest and fees
on loans in the Consolidated Statements of Income. As of December 31, 2021, 271
of the loans originated under the PPP in 2020 totaling $38.9 million had been
forgiven and lender fees income totaling $1.6 million had been recognized and is
included in Interest and fees on loans in the Consolidated Statements of Income.



In 2021, $24.6 million of the purchased student loan portfolio was sold which,
along with the continued paydowns, decreased the balance as of December 31, 2021
to $0.7 million from $25.6 million at December 31, 2020. The sale resulted
in a
net gain of $1.2 million.

55




Échéances et sensibilité des prêts aux variations des taux d’intérêt


Renewal of loans is subject to the same credit approval and underwriting
standards as new loans, the terms of which may be modified upon renewal. The
information in the following table is based on the contractual maturities of
individual loans, including loans which may be subject to renewal at their
contractual maturity (in thousands).



                                                                   December 31, 2021
                                                  Over one             Over five
                                One year        year to five       years to fifteen            Over
                                 or less           years                 years             fifteen years         Total
Real estate loans:
One-to-four family
residential                     $  12,572      $       61,168      $          14,866      $        43,999      $ 132,605
Commercial                         37,814             264,229                120,834                    -        422,877
Home equity loans and lines
of credit                           1,640               4,384                 15,543                   34         21,601
Residential construction           29,260               6,304                  1,828                1,358         38,750
Other construction and land        16,186              53,376              
   5,787                    -         75,349
Commercial                         46,762             167,011                 21,261                   22        235,056
Consumer                            1,364               4,756                  1,092                   25          7,237
Loans receivable, net of
deferred fees                   $ 145,598      $      561,228      $       
 181,211      $        45,438      $ 933,475



Les remboursements réels des prêts peuvent différer des échéances indiquées ci-dessous, car les emprunteurs ont le droit de rembourser par anticipation leurs obligations avec ou sans pénalités de remboursement anticipé.




Longer term One-to-four family residential, Residential construction, Commercial
real estate, and Home equity loans and lines of credit typically carry interest
rates which adjust to certain LIBOR indexes or The Wall Street Journal Prime
Rate. Longer term One-to-four family residential construction loans represent
construction-to-permanent loans which, upon completion of the construction
phase, become One-to-four family residential loans.



The following table sets forth the recorded investment of all loans maturing
after one year that have either fixed interest rates or floating or adjustable
interest rates (in thousands).



                                                    December 31, 2021
                                                       Floating or
                                          Fixed        adjustable         Total
Real estate loans:
One-to-four family residential          $  70,124     $      49,909     $ 120,033
Commercial                                304,432            80,631       

385 063

Home equity loans and lines of credit       2,663            17,298       
19,961
Residential construction                    8,104             1,386         9,490
Other construction and land                34,841            24,322        59,163
Commercial                                179,642             8,652       188,294
Consumer                                    5,873                 -         5,873
Total                                   $ 605,679     $     182,198     $ 787,877


56





Delinquent Loans


When a loan becomes 15 days past due, we contact the borrower to inquire as to
the status of the loan payment. When a loan becomes 30 days or more past due, we
increase collection efforts to include all available forms of communication.
Once a loan becomes 45 days past due, we generally issue a demand letter and
further explore the reasons for non-repayment, discuss repayment options, and
inspect the collateral. In the event the loan officer or collections staff has
reason to believe restructuring will be mutually beneficial to the borrower and
the Bank, the borrower is referred to the Bank's Credit Administration staff to
explore restructuring alternatives to foreclosure. Once the demand period has
expired and it has been determined that restructuring is not a viable option,
the Bank's counsel is instructed to pursue foreclosure.



The accrual of interest on loans is discontinued at the time a loan becomes 90
days delinquent or when it becomes impaired, whichever occurs first, unless the
loan is well secured and in the process of collection. All interest accrued but
not collected for loans that are placed on nonaccrual is reversed. Interest
payments received on nonaccrual loans are generally applied as a direct
reduction to the principal outstanding until the loan is returned to accrual
status. Interest payments received on nonaccrual loans may be recognized as
income on a cash basis if recovery of the remaining principal is reasonably
assured. Loans are returned to accrual status when all the principal and
interest amounts contractually due are brought current and future payments are
reasonably assured. Interest payments applied to principal while the loan was on
nonaccrual may be recognized in income over the remaining life of the loan after
the loan is returned to accrual status.



Si un prêt est modifié dans un TDR, le prêt est généralement placé en non-comptabilisation jusqu’à ce qu’il y ait une période de performance de paiement satisfaisante par l’emprunteur (soit immédiatement avant ou après la restructuration), généralement six mois consécutifs, et la recouvrabilité ultime de tous les montants contractuellement dus ne fait aucun doute. Pour une discussion sur les TDR, voir la section intitulée « Restructurations de la dette en difficulté » ci-dessous.




We had one loan 90 days or more past due that was still accruing interest as of
December 31, 2021 for $50.0 thousand that was not 98% guaranteed by the issuing
agency. We had no loans 90 days or more past due that are still accruing
interest as of December 31, 2020 that are not 98% guaranteed by the issuing
agency.

57





                                                     Delinquent loans
                                                                    90 Days
(In thousands)                    30-59 Days       60-89 Days       and over       Total
December, 2021
Real estate loans:
One-to-four family residential   $          -     $          -     $      
50     $     50
Commercial                                 54                -              -           54
Consumer                                    -                -            590          590
Total delinquent loans           $         54     $          -     $      640     $    694
% of total loans, net                    0.01 %           0.00 %         0.07 %       0.07 %

December, 2020
Real estate loans:
One-to-four family residential   $          -     $          -     $      
15     $     15
Commercial                                  6                -              2            8
Consumer                                1,840              727          2,549        5,116
Total delinquent loans           $      1,846     $        727     $    2,566     $  5,139
% of total loans, net                    0.21 %           0.08 %         0.29 %       0.58 %

December 31, 2019
Real estate loans:
One-to-four family residential   $        107     $         15     $       
-     $    122
Commercial                                570                -              -          570
Residential construction                    -                -            296          296
Other construction and land                 -              172              -          172
Commercial                                242                -              2          244
Consumer                                1,999              642          3,122        5,763
Total delinquent loans           $      2,918     $        829     $    3,420     $  7,167
% of total loans, net                    0.39 %           0.11 %         0.45 %       0.95 %

December 31, 2018
Real estate loans:
One-to-four family residential   $        324     $      1,265     $       
-     $  1,589
Commercial                                554                -              -          554
Other construction and land               972                -              -          972
Commercial                                208                -              1          209
Consumer                                2,029            1,121          4,281        7,431
Total delinquent loans           $      4,087     $      2,386     $    4,282     $ 10,755
% of total loans, net                    0.62 %           0.36 %         0.65 %       1.62 %

December 31, 2017
Real estate loans:
One-to-four family residential   $        145     $         66     $      552     $    763
Commercial                                  -                -            510          510
Other construction and land               122                -              -          122
Commercial                                 55               58            157          270
Consumer                                1,360            1,597          3,418        6,375
Total delinquent loans           $      1,682     $      1,721     $    4,637     $  8,040
% of total loans, net                    0.31 %           0.31 %         0.84 %       1.46 %


58





Total delinquencies as a percentage of loans have decreased from 0.58% at
December 31, 2020 to 0.07% at December 31, 2021, representing a decrease of
87.29% over the period. Delinquent loans decreased $4.4 million, or 86.50%, to
$0.7 million at December 31, 2021 from $5.1 million at December 31, 2020. The
decrease in 30-59 days delinquencies of $1.8 million, or 97.07%, from December
31, 2020 to December 31, 2021 is concentrated primarily in consumer loans. The
sale of $24.6 million of the purchased student loan portfolio in 2021 drove the
past due consumer balances lower. As of December 31, 2020, purchased student
loans made up 99.6% of the $5.1 million total consumer past due balance. We
continue to focus on collection efforts and favorable resolutions.



Actifs non performants


Nonperforming loans include all loans past due 90 days and over that are not 98%
guaranteed by the issuing agency, certain impaired loans, and TDR loans that
have not yet established a satisfactory period of payment performance (some of
which may be contractually current). Nonperforming assets include nonperforming
loans and real estate owned ("REO"). The table below sets forth the amounts and
categories of our nonperforming assets at the dates indicated (in thousands).



                                                 December 31,
                                         2021        2020        2019
Nonaccrual loans:
Real estate loans:
One-to-four family residential          $   107     $    39     $    29
Commercial                                  767          31         573
Home equity loans and lines of credit         -           -           -
Residential construction                      -           -         296
Other construction and land                   -         126         313
Commercial                                  473         324         667
Consumer                                      2          13          18
Total nonperforming loans(1)              1,349         533       1,896

REO:
One-to-four family residential                -           -           -
Commercial real estate                        -         513           -
Other construction and land                 842       1,419       1,855
Total foreclosed real estate                842       1,932       1,855
Total nonperforming assets              $ 2,191     $ 2,465     $ 3,751

TDRs still accruing                     $ 1,780     $ 1,254     $ 1,459

Ratios:

Prêts improductifs par rapport au total des prêts 0,14 % 0,06 % 0,25 % Actifs improductifs par rapport au total des actifs 0,18 % 0,23 % 0,41 %

(1) À 31 décembre 2021le total des prêts improductifs ne comprenait que

     nonaccrual loans.



Nonperforming loans as a percentage of total loans increased from 0.06% at
December 31, 2020, to 0.14% at December 31, 2021, representing an increase of
133.3% over the period. Nonperforming assets as a percentage of total assets
decreased from 0.23% at December 31, 2020, to 0.18% at December 31, 2021, or a
decrease of 21.7% over the period. The gross interest income that would have
been recorded under the original terms of the nonaccrual loans was $0.1 million
as of December 31, 2021 and $0.2 million as of December 31, 2020. The changes in
nonperforming loans and nonperforming assets is the result of the resolution and
disposal of nonperforming loans and nonperforming assets by means of
restructure, foreclosure, deed in lieu of foreclosure and short sales for less
than the indebtedness, in which cases the deficiency is charged-off.



REO était 0,8 million de dollars et 1,9 million de dollars dès 31 décembre 2021 et 2020, respectivement, mais a diminué 5,8 millions de dollarssoit 87,4 % depuis 31 décembre 2017.




Troubled Debt Restructurings



In situations where, for economic or legal reasons related to a borrower's
financial difficulties, we grant a concession that we would not otherwise
consider, for other than an insignificant period of time, the related loan is
classified as a TDR. We strive to identify borrowers in financial difficulty
early so that we may work with them to modify their loans before they reach
nonaccrual status. Modified terms generally include extensions of maturity dates
at a stated interest rate lower than the current market rate for a new loan with
similar risk characteristics, reductions in contractual interest rates, periods
of interest-only payments, and principal deferments. A restructuring that
results in only a delay in payments that is insignificant is not considered an
economic concession. While unusual, there may be instances of forgiveness of
loan principal. We individually evaluate all substandard loans that experience a
modification of terms to determine if a TDR has occurred.

59




All TDRs over $200,000 are considered to be impaired loans and are reported as
such for the remaining life of the loan, unless the restructuring agreement
specifies an interest rate equal to or greater than the rate that would be
accepted at the time of the restructuring for a new loan with comparable risk
and the ultimate collectability of all amounts contractually due is not in
doubt. We may also remove a loan from TDR and impaired status if the loan is
subsequently restructured and at the time of the subsequent restructuring the
borrower is not experiencing financial difficulties and, under the terms of the
subsequent restructuring agreement, no concession has been granted to the
borrower.



The following table presents our TDRs by accrual status as of the dates
indicated (in thousands).



                                  December 31,
                                2021        2020
TDRs still accruing interest   $ 1,780     $ 1,254
TDRs not accruing interest         112         308
Total TDRs                     $ 1,892     $ 1,562




As noted in the above table, the majority of our borrowers with restructured
loans have been able to comply with the revised payment terms for at least six
consecutive months, resulting in their respective loans being restored to
accrual status.



The following table presents details of TDRs made in each of the periods
indicated (in thousands):



                                                                           Pre-Modification     Post-Modification
                                                            Number of          Recorded             Recorded
                                  Modification Type         TDR Loans         Investment           Investment
Year ended December 31, 2021
                                Extended payment terms             4       $             398   $               398

Year ended December 31, 2020
                                Extended payment terms             3       $             173   $                61


En 2021, nous avons continué d’être proactifs en travaillant avec les emprunteurs pour identifier les problèmes potentiels et restructurer certains prêts afin d’éviter des pertes futures.

À partir de 31 décembre 2020, tous les prêts avec report à court terme liés à la pandémie de COVID-19 avaient repris leurs paiements ou avaient été remboursés. Au cours de l’année 2021, la Banque n’a accordé aucun report lié à la crise du COVID-19.

Classification des prêts


The following table sets forth amounts of classified and criticized loans at the
dates indicated. As indicated in the table, loans classified as "doubtful" or
"loss" are charged off immediately (in thousands).



                                                              December 31,
                                                     2021         2020         2019
Classified loans:
Substandard                                        $  4,304     $  3,701     $ 10,295
Doubtful                                                  -            -            -
Loss                                                      -            -            -
Total classified loans:                               4,304        3,701       10,295
Special mention                                       9,647        7,777        3,153
Total criticized loans                             $ 13,951     $ 11,478     $ 13,448

Total des prêts classés en % du total des prêts, net 0,46 % 0,42 %

      1.36 %
Total criticized loans as a% of total loans, net       1.49 %       1.31 % 
     1.78 %




Total classified loans to total loans increased to 0.46% at December 31, 2021,
from 0.42% at December 31, 2020. Total criticized loans to total loans increased
to 1.48% at December 31, 2021, from 1.31% at December 31, 2020. Management
continues to dedicate resources to monitoring and resolving classified and
criticized loans.

60





Allowance for Loan Losses



The allowance for loan losses reflects our estimates of probable losses inherent
in our loan portfolio at the balance sheet date. The allowance for loan losses
is evaluated on a regular basis by management and is based upon management's
periodic review of the collectability of our loans in light of historical
experience, the nature and volume of our loan portfolio, adverse situations that
may affect our borrowers' abilities to repay, the estimated value of any
underlying collateral and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available. The methodology for
determining the allowance for loan losses has two main components: the
evaluation of individual loans for impairment and the evaluation of certain
groups of homogeneous loans with similar risk characteristics.



A loan is considered impaired when it is probable that we will be unable to
collect all principal and interest payments due according to the original
contractual terms of the loan. We individually evaluate loans, or relationships,
greater than $200,000 for impairment that are classified as nonaccrual, TDRs, or
performing substandard loans. If the impaired loan is considered collateral
dependent, a charge-off is taken based upon the appraised value of the property
less an estimate of selling costs if foreclosure or sale of the property is
anticipated. If the impaired loan is not collateral dependent, a specific
reserve is established based upon an estimate of the future discounted cash
flows after consideration of modifications and the likelihood of future default
and prepayment.

The allowance for homogenous loans consists of a base loss reserve and a
qualitative reserve. The loss rates for the base loss reserve, segmented into
seven loan categories, contain average net loss/(recovery) rates ranging from
approximately 0.0% to 0.6%.

La réserve qualitative ajuste les taux de perte moyens utilisés dans la réserve de base pour les pertes en fonction des tendances des facteurs internes et externes suivants :

· Modifications des politiques de prêt et d’examen des prêts ;

· Conditions économiques – y compris les taux de chômage, les données macroéconomiques fédérales,

les prix et les ventes de logements et les perspectives économiques régionales;

· Changements dans la nature et le volume du portefeuille et dans les conditions de

prêts;

· Expérience, capacité et profondeur de la gestion des prêts ;

· Volume et sévérité des prêts en souffrance, non courus et classifiés ;

· Changements dans la qualité du système d’examen des prêts de l’institution ;

· Valeurs collatérales ;

· Concentrations de prêts et croissance des prêts ; et

· L’effet d’autres facteurs externes tels que la concurrence, la législation et la réglementation

   requirements on the level of estimated credit losses.




Qualitative reserve adjustment factors are decreased for favorable trends and
increased for unfavorable trends. There is no certainty that our ALL will be
appropriate over time to cover losses in our portfolio as economic and market
conditions may ultimately differ from our reasonable and supportable forecast.

Le tableau suivant résume le détail des radiations nettes en pourcentage des prêts moyens par composition de prêt pour les périodes indiquées (en milliers).

61





                                                    Year ended December 31,
                               2021                           2020                          2019
                      Amount         Percent         Amount         Percent         Amount        Percent
Real Estate:
One-to-four
family
residential          $       3            0.00 %    $      (6 )          0.00 %    $    (11 )        -0.01 %
Commercial real
estate                      52            0.01 %            -            0.00 %          43           1.00 %
Home equity loans
and lines of
credit                       -            0.00 %            -            0.00 %          (2 )        -0.01 %
Residential
construction                 -            0.00 %            -            0.00 %           -           0.00 %
Other
construction and
land                       (17 )         -0.02 %           (1 )          0.00 %         (16 )        -0.02 %
Commercial                  79            0.02 %          792            0.30 %       1,618           0.56 %
Consumer                     2            0.02 %            3            0.04 %          37           0.25 %
Total                $     119                      $     788                      $  1,669

Ratios:
Net charge-offs
to average loans
outstanding                               0.01 %                         0.10 %                       0.11 %
Allowance to
nonperforming
loans at period
end(1)                                1,017.27 %                     2,358.72 %                      41.56 %
Allowance to
total loans at
period end                                1.47 %                         1.43 %                       1.36 %



(1) À 31 décembre 2021le total des prêts improductifs ne comprenait que

     nonaccrual loans.



Our allowance as a percentage of total loans increased to 1.47% at December 31,
2021 from 1.43% at December 31, 2020 primarily as the result of loan growth and
changes in the composition of the bank's loan portfolio.



We have continued to experience limited charge-off amounts and stable
collections of amounts previously charged-off. The overall historical loss rate
used in our allowance for loan losses calculation continues to decline as
previous quarters with larger loss rates are eliminated from the calculation as
time passes. Our coverage ratio of nonperforming loans decreased to 1,017.27% at
December 31, 2021 from 2,358.72% at December 31, 2020 primarily as the result of
the increased balance of nonperforming loans during the period.



Répartition de la provision pour pertes sur prêts

Le tableau ci-dessous résume le solde de la provision pour pertes sur prêts et le pourcentage du total des prêts par catégorie de prêt (en milliers).



                                                                           December 31,
                                                  2021                         2020                         2019
                                         Allowance         %*         Allowance         %*         Allowance         %*
Real estate mortgage loans:
One-to-four family residential          $     1,363        14.22     $     1,297        12.98     $     1,098        13.37
Commercial real estate                        4,688        45.36           4,559        42.03           3,122        40.55
Home equity loans and lines of credit           246         2.31             231         1.95             188         2.35
Residential construction                        430         4.16             389         3.52              84         1.11
Other construction and land                     824         8.10           
 843         7.80             584         7.34
Commercial                                    5,985        25.09           5,118        27.70           5,024        29.82
Consumer                                        187         0.76             135         4.02             187         5.46

Provision totale pour pertes sur prêts 13 723 $ 100,00 12 572 $ 100,00 10 287 $ 100,00

* Solde des prêts dans chaque catégorie, exprimé en pourcentage du total des prêts, net de

   deferred fees.



As discussed above, we compute our allowance for loan losses either through a
specific allowance to individually impaired loans or through a general allowance
applied to homogeneous loans by loan type. The above allocation represents the
allocation of the allowance by loan type regardless of specific or general
allocations. The largest allocation has been made to one-to-four family,
commercial real estate, and commercial due to the elevated risk in those
categories of loans.

62




Le tableau ci-dessous résume les soldes, les radiations et les provisions spécifiques liées aux prêts douteux aux dates indiquées (en milliers).



                                                                                                                         % of Specific
                                                                                                                      Allowance & Partial
                                               Recorded       Unpaid Principal         Partial         Specific       Charge-off to Unpaid
                                               Balance            Balance  

Allocation d’imputation Solde principal Au 31 décembre 2021
Prêts sans provision pour moins-value

           $    2,495     $            2,547     $          52     $        -                2.0%
Loans with a valuation allowance                     348                   
348                 -             20                5.7%
Total                                         $    2,843     $            2,895     $          52     $       20                2.5%

As of December 31, 2020
Loans without a valuation allowance           $    1,768     $            2,000     $         232     $        -                11.6%
Loans with a valuation allowance                      12                   
 12                 -              1                8.3%
Total                                         $    1,780     $            2,012     $         232     $        1                11.6%






As indicated in the above table, during the periods presented, we have
consistently maintained more than 2% of impaired loans in a reserve, either
through a direct charge-off or in a specific reserve included as part of the
allowance for loan losses. The total dollar amount of impaired loans increased
$1.1 million, or 59.7%, to $2.8 million at December 31, 2021 compared to $1.8
million at December 31, 2020. The increase in impaired loans is attributable to
loans becoming impaired during 2021 in excess of those that were paid off,
charged off or returned to non-impaired status upon changes to borrowers' status
that made collectability of all amounts contractually due no longer in doubt.



REO


Les tableaux ci-dessous résument les soldes et l’activité de REO aux dates et pour les périodes indiquées (en milliers).



                                As of December 31,
                                 2021          2020
Commercial real estate        $        -      $   513
Other construction and land          842        1,419
Total                         $      842      $ 1,932

                                As of December 31,
                                 2021          2020
Balance, beginning of year    $    1,932      $ 1,855
Additions                              -          513
Disposals                           (977 )       (160 )
Writedowns                          (113 )       (276 )
Balance, end of year          $      842      $ 1,932



Comme indiqué dans le tableau ci-dessus, le solde en REO s’élève à 0,8 million de dollars et
1,9 million de dollars à 31 décembre 2021 et 2020, respectivement. Nous continuons à déprécier REO au besoin et continuons à nous concentrer sur la cession de nos propriétés restantes.

As of December 31, 2021, our REO property with the largest balance of $0.7
million consisted of approximately eight acres of commercial land with frontage
on U.S. Highway 153 in Anderson, South Carolina. The property was acquired
in
October 2013.


Assurance-vie détenue par la banque (“BOLI”)




BOLI policies are recorded at book value based on cash surrender values provided
by a third-party administrator. The assets of the separate BOLI account are
invested in the Lincoln National Life Insurance Co. Investment Allocation
account rated AA- which is composed primarily of U.S. Government agency
sponsored funds and mortgage-backed securities fund. The assets in the general
account are invested in four insurance carriers with ratings ranging from AA- to
AA+. The assets of the hybrid account are invested in two different insurance
carriers with ratings ranging from A+ to A++.

63





The following table summarizes the composition of BOLI as of the dates indicated
(in thousands):



                       December 31,
                     2021         2020
Separate account   $    754     $    747
General account      11,043       10,899
Hybrid                2,981        3,215
Total              $ 14,778     $ 14,861




Net Deferred Tax Assets



Deferred income tax assets and liabilities are determined using the asset and
liability method and are reported on a net basis in our consolidated balance
sheets. Under this method, the net deferred tax asset or liability is based on
the tax effects of the differences between the book and tax basis of assets and
liabilities and recognizes enacted changes in tax rates and laws. When deferred
tax assets are recognized, they are subject to a valuation allowance based on
management's judgment as to whether realization is more likely than not. In
determining the need for a valuation allowance, we consider the following
sources of taxable income:



· des annulations futures de différences temporelles imposables existantes ;

· le revenu imposable futur hors annulation des différences temporelles et

les reports ;

· le revenu imposable des années de report rétrospectif antérieures ; et

· des stratégies de planification fiscale qui seraient, le cas échéant, mises en œuvre.





We determined a tax valuation allowance totaling $0.4 million and $0.3 million
was required as of December 31, 2021 and 2020, respectively, related to state
net operating losses of the Company.



Bonne volonté


Goodwill represents the cost in excess of the fair value of net assets acquired
(including identifiable intangibles) in transactions accounted for as business
combinations. Goodwill has an indefinite useful life and is evaluated for
impairment annually, or more frequently if events and circumstances indicate
that the asset might be impaired. An impairment loss is recognized to the extent
that the carrying amount of the reporting unit exceeds its fair value. We had
$0.7 million of goodwill as of December 31, 2021, and 2020.

Dépôts




The following table presents average deposits by category, percentage of total
average deposits and average rates for the periods indicated (in thousands).



                                                                  For the Years Ended December 31,
                                                         2021                                           2020
                                                       Percent of                                    Percent of
                                                         Total          Weighted                       Total          Weighted
                                        Average         Average         Average        Average        Average         Average
                                        Balance         Balance           Rate         Balance        Balance           Rate
Deposit type:
Savings accounts                      $    13,135              1.3           0.10 %   $   8,179              1.0           0.10 %
Time deposits                             243,066             23.9           0.49 %     332,453             38.8           1.63 %
Money market accounts                     442,451             43.6           0.43 %     306,694             35.8           0.62 %
Interest-bearing demand accounts           65,176              6.4           0.26 %      33,644              3.9           0.22 %
Noninterest-bearing demand accounts       251,295             24.8         
 0.00 %     175,871             20.5           0.00 %
Total deposits                        $ 1,015,123            100.0           0.32 %   $ 856,841            100.0           1.09 %




As indicated in the above table, average deposit balances increased
approximately $158.3 million, or 18.5%, for the year ended December 31, 2021
compared December 31, 2020. The increase in total average deposits was mainly
attributable to the $135.8 million, or 44.3%, increase in money market accounts
and $75.4 million, or 42.9%, in noninterest-bearing demand accounts, offset by a
$89.4 million, or 26.9%, decline in time deposits.

64




Le tableau suivant présente le détail des taux d’intérêt applicables sur nos certificats de dépôt aux dates indiquées (en milliers).



                       December 31,
                    2021          2020
Interest Rate:
Less than 1.00%   $ 203,089     $ 203,890
1.00% to 2.00%        5,723        79,384
2.00% to 3.00%          117           668
Total             $ 208,929     $ 283,942




The following table presents contractual maturities for certificates of deposit,
as of December 31, 2021, in amounts equal to or greater than $250,000 (in
thousands):



                                        Equal to or
                                        greater than
                                            $250
Three months or less                   $        8,255
Over three months through six months            7,278
Over six months through one year               10,339
Over one year                                  19,194
Total                                  $       45,066




At December 31, 2021 and 2020, we estimate that we have approximately $393.8
million and $295.0 million, respectively, in uninsured deposits including
related interest accrued and unpaid. Since it is not reasonably practicable to
provide a precise measure of uninsured deposits, these amounts are estimates and
are based on the same methodologies and assumptions used for the Bank's
regulatory reporting requirements by the FDIC for the Call Report.



Borrowings


We had fixed rate FHLB advances totaling $5.0 million and $16.0 million as of
December 31, 2021 and 2020, respectively. FHLB advances are secured by
qualifying one-to-four family permanent and commercial loans and by a blanket
collateral agreement with the FHLB. At December 31, 2021, we had unused
borrowing capacity with the FHLB of $30.7 million based on collateral pledged at
that date. We had total additional credit availability with the FHLB of $355.7
million as of December 31, 2021, if additional collateral was available and
pledged.



The following table sets forth information concerning balances and interest
rates on our FHLB advances as of or for the period indicated (in thousands).



                                                   As of or for the
                                                      Year Ended
                                                     December 31,
                                                         2021
Balance at end of period                          $            5,000
Average balance during period                     $           15,005
Maximum outstanding at any month end              $           16,000
Weighted average interest rate at end of period                 0.40 %
Weighted average interest rate during period                    0.87 %




Junior Subordinated Notes



We had $35.9 million and $35.7 million in three issuances of junior subordinated
notes outstanding at December 31, 2021 and 2020. Notes totaling $8.2 million,
payable to an unconsolidated subsidiary, accrue interest at 1.85% above the
90-day LIBOR, adjusted quarterly. Notes totaling $10.0 million accrue interest
at a fixed rate of 6.50% until November 30, 2023, at which time the interest
will accrue at 3.43% above the 90-day LIBOR, adjusted quarterly. Notes totaling
$18.0 million issued in 2020 accrue interest at a fixed rate of 4.375% until
November 15, 2025, at which time the interest will accrue at 4.16% above the
90-day Secured Overnight Financing Rate (SOFR), adjusted quarterly. The
effective interest rate on the notes was 4.43% at December 31, 2021 and 4.44% at
December 31, 2020.

65





Equity



Total shareholders' equity increased $10.9 million to $97.4 million at December
31, 2021 compared to $86.5 million at December 31, 2020. This increase was
primarily attributable to $16.1 million of net income partially offset by common
and preferred stock repurchases of $4.0 million and dividends declared totaling
$2.2 million.


Discussion des résultats d’exploitation

Like most financial institutions, net interest income is our primary source of
revenue. Net interest income is the difference between interest income earned on
interest-earning assets, such as loans and investment securities, and interest
incurred on interest-bearing liabilities, such as deposits and borrowings. Net
interest income depends upon the relative mix of interest-earning assets and
interest-bearing liabilities, the ratio of interest-earning assets to total
assets and of interest-bearing liabilities to total funding sources, and
movements in market interest rates. Our net interest income can be significantly
influenced by a variety of factors, including overall loan demand, economic
conditions, credit risk, the amount of nonearning assets, the amounts of and
rates at which assets and liabilities reprice, variances in prepayment of loans
and securities, early withdrawal of deposits, exercise of call options on
borrowings or securities, a general rise or decline in interest rates, changes
in the slope of the yield-curve, and balance sheet growth or contraction. Our
asset and liability management committee ("ALCO") seeks to manage interest rate
risk under a variety of rate environments by structuring our balance sheet and
off-balance sheet positions.

Analyse des soldes moyens et des intérêts créditeurs nets




The following table sets forth the average balances of assets and liabilities,
the total dollar amounts of interest income and dividends from average
interest-earning assets on a tax-equivalent basis, the total dollar amounts of
interest expense on average interest-bearing liabilities, and the resulting
average tax-equivalent yields and cost for the periods indicated. All average
balances are daily average balances. Nonaccrual loans were included in the
computation of average balances, but have been reflected in the table as loans
carrying a zero yield. The yields set forth below include the effect of deferred
fees, discounts and premiums that are amortized or accreted to interest income
or expense.

66





                                                                                                      For the Years Ended December 31,
                                                                2021                                                2020                                                2019
                                              Average                                             Average                                             Average
                                            Outstanding                          Yield/         Outstanding                          Yield/         Outstanding                          Yield/
(In thousands, fully taxable equivalent)      Balance          Interest    
      Rate            Balance          Interest           Rate            Balance          Interest           Rate

Interest-earning assets:
Loans - Core Bank(1)                        $    824,901      $    34,415            4.17 %    $     733,894      $    32,024            4.36 %    $     613,709      $    31,049            5.06 %
Loans - CarBucks(2)                               89,694           18,694           20.84 %           76,031           16,555           21.77 %           83,708           18,671           22.30 %
Investments - taxable                            114,380            1,406            1.23 %           79,589            1,223            1.54 %           45,186            1,058            2.34 %
Investment tax exempt(3)                          12,666              352            2.78 %            8,702              252            2.90 %            4,081              144            3.54 %
Federal funds sold and other interest
earning deposits                                  78,747              107            0.14 %           38,781              113            0.29 %           68,412            1,376            2.01 %
Other investments, at cost                         4,654              108            2.32 %            8,465              216            2.55 %           12,698              303            2.39 %

Total interest-earning assets                  1,125,042           55,082            4.90 %          945,462           50,383            5.33 %          827,794           52,601            6.35 %

Noninterest-earning assets                        37,387                   
                          34,982                                              32,140

Total assets                                $  1,162,429                                       $     980,444                                       $     859,934

Interest-bearing liabilities:
Savings accounts                            $     13,135      $        13            0.10 %    $       8,179      $         8            0.10 %    $       5,536      $         7            0.13 %
Time deposits                                    243,066            1,192            0.49 %          332,453            5,416            1.63 %          369,194            8,247            2.23 %
Money market accounts                            442,451            1,888            0.43 %          306,694            1,915            0.62 %          243,999            3,568            1.46 %
Interest bearing transaction accounts             65,176              167            0.26 %           33,644               75            0.22 %           20,918               25            1.20 %
Total interest bearing deposits                  763,828            3,260  
         0.43 %          680,970            7,414            1.09 %          639,647           11,847            1.85 %

FHLB advances                                     15,005              130            0.87 %           16,691              161            0.96 %            4,123              102            2.48 %
Junior subordinated debentures                    35,802            1,727            4.82 %           20,466            1,035            5.06 %           18,067            1,056            5.84 %
Federal funds purcahsed                              101                1            0.99 %              454                7            1.64 %                -                -            0.00 %
Total interest-bearing liabilities               814,736            5,118            0.63 %          718,581            8,617            1.20 %          661,837           13,005            1.96 %

Noninterest-bearing deposits                     251,295                                             175,871                                            

122 879

Other non interest bearing liabilities             5,770                   
                           4,393                                               4,799

Total liabilities                              1,071,801                                             898,845                                             789,515
Total equity                                      90,628                                              81,599                                              70,419
Total liabilities and equity                $  1,162,429                                       $     980,444                                       $    

859 934

Tax-equivalent net interest income                            $    49,964                                         $    41,766                                         $    39,596

Net interest-earning assets(2)              $    310,306                                       $     226,881                                       $    

165 957


Average interest-earning assets to
interest-bearing liabilities                      138.09 %                                            131.57 %                                          

125,08 %


Tax-equivalent net interest rate
spread(3)                                                                            4.27 %                                              4.13 %                                              4.39 %
Tax-equivalent net interest margin(4)                                      
         4.44 %                                              4.42 %                                              4.78 %



(1) Les prêts et investissements défiscalisés sont calculés en tenant compte d’un abattement de 21%

taux d’imposition fédéral, ou 74 000 $, 52 000 $et 30 000 $ pour les années terminées

31 décembre 20212020 et 2019, respectivement.

(2) Les actifs productifs d’intérêts nets représentent le total des actifs productifs d’intérêts moins

total des passifs portant intérêt.

(3) L’écart de taux d’intérêt net équivalent fiscal représente la différence entre le

     tax equivalent yield on average interest-earning assets and the cost of
     average interest-bearing liabilities.

(4) La marge nette d’intérêt en équivalent fiscal représente l’intérêt net en équivalent fiscal

revenu divisé par le total moyen des actifs productifs d’intérêts.


67




Pour les années terminées 31 décembre 20212020 et 2019, nous n’avions pas de titres achetés avec des promesses de rachat ou de billets de trésorerie.




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 change in volume (changes in
volume multiplied by prior rate). The total 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 absolute values of changes due to rate and the changes due to volume.



                                                         For the Year Ended December 31, 2021                        For the Year Ended December 31, 2020
                                                     Compared to the Year Ended December 31, 2020                Compared to the Year Ended December 31, 2019
                                                             Increase (decrease) due to:                                 Increase (decrease) due to:
(In thousands)                                      Volume                   Rate              Total            Volume                   Rate              Total
Interest-earning assets:
Loans - Core Bank(1)                            $         3,842         $        (1,451 )     $  2,391      $         5,589         $        (4,614 )     $    975
Loans - CarBucks(1)                                       2,871                    (732 )        2,139               (1,680 )                  (460 )       (2,116 )
Investment - taxable                                        462                    (279 )          183                  615                    (450 )          165
Investments - tax exempt(2)                                 110                     (10 )          100                  139                     (31 )          108
Interest-earning deposits                                    75                     (81 )           (6 )               (425 )                  (838 )       (1,263 )
Other investments, at cost                                  (90 )                   (18 )         (108 )               (106 )                    19            (87 )
Total interest-earning assets                             7,270                  (2,571 )        4,699                4,132                  (6,374 )       (2,218 )

Interest-bearing liabilities:
Savings accounts                                              5                       -              5                    3                      (2 )            1
Time deposits                                            (1,173 )                (3,051 )       (4,224 )               (760 )                (2,071 )       (2,831 )
Money market accounts                                       692                    (719 )          (27 )                754                  (2,407 )       (1,653 )
Interest bearing transaction accounts                        80            
         12             92                   21                      29             50
FHLB advances                                               (15 )                   (16 )          (31 )                153                     (94 )           59
Junior subordinated debentures                              742            
        (50 )          692                  130                    (151 )          (21 )
Other borrowings                                             (7 )                     1             (6 )                  7                       -              7
Total interest-bearing liabilities                          324                  (3,823 )       (3,499 )                308                  (4,696 )       (4,388 )
Change in tax-equivalent net interest income    $         6,946         $  
      1,252       $  8,198      $         3,824         $        (1,678 )     $  2,170




(1)  Nonaccrual loans are included in the above analysis.

(2) Les revenus d’intérêts sur les prêts et placements exonérés d’impôt sont ajustés en fonction

     a 21% federal tax rate.



Comparaison des exercices terminés 31 décembre 2021 et 2020.

General. Net income for the year ended December 31, 2021 was $16.1 million,
compared to $8.6 million for 2020. The increase in net income was primarily the
result of increases in net interest income and noninterest income of $8.2
million and $1.3 million, respectively, and a decrease in provision for loan
losses of $1.8 million, partially offset by increases in noninterest expense
totaling $1.1 million.


Net Interest Income. Net interest income increased $8.2 million, or 19.6%, to
$49.9 million for the year ended December 31, 2021, compared to $41.7 million
for 2020. The increase in net interest income was primarily due to a $104.7
million increase in average loans, a $38.8 million increase in average
investments, both taxable and tax exempt and decreases in costs on our average
time deposits and money market accounts. These changes were partially offset by
the decline in yields on our loans and investments during the period and a $82.9
million increase in our average interest-bearing liabilities.

Our tax-equivalent net interest margin was 4.44% for the year ended December 31,
2021, compared to 4.42% for 2020, an increase of two basis points. The increase
in net interest margin was primarily attributable to interest rate reductions
which impacted our cost of funds in the year ended December 31, 2021, partially
offset by the impact of these interest rate reductions on our loans,
investments, and interest-earning deposits.

68





CarBucks provides specialty floor plan inventory financing for more than 2,000
small automobile dealers in over 20 states. Credit lines are established for
each approved dealer using Board approved underwriting guidelines. Advances and
repayments on credit lines averaging $0.1 million are vehicle specific. The
inventory typically consists of over 12,000 floored used vehicles with an
average price of $8,400 per unit, generally has an average 61-day turnover, and
generates approximately $250 in financing fees per vehicle which is included in
loan interest income.

CarBucks net income increased $1.9 million to $5.3 million for the year ended
December 31, 2021 compared to $3.5 million for the same period in 2020. Net
interest income increased $2.3 million to $17.2 million for the 2021 period from
$14.9 million for the same period a year ago primarily due to increased fees
related to increases in inventory. Provision for loan losses decreased $0.6
million for the year ended December 31, 2021 compared to 2020 due to decreased
net charge offs and lower qualitative adjustments related to COVID-19
uncertainty in 2021. Noninterest expense increased $0.3 million to $9.9 million
for the 2021 period compared to $9.6 million for the same period in 2020 due
primarily to increased salary and overhead allocation expenses.

Provision for Loan Losses. We recorded a provision for loan losses for the year
ended December 31, 2021 of $1.3 million due to organic loan growth and certain
qualitative adjustments in response to shifts in used car demand which could
impact our CarBucks portfolio. This compares to a $3.1 million provision for
loan losses in 2020. We are experiencing continued stabilization in asset
quality, low charge-off amounts and a decline in the historical loss rates used
in our allowance for loan losses model. In light of ongoing supply chain
disruptions, labor shortages and the associated impact on monetary policy, there
is a risk that loss rates could increase.



Noninterest Income



The following table summarizes the components of noninterest income and the
corresponding changes between the years ended December 31, 2021 and 2020 (in
thousands):



                                                   Years Ended December 31,
                                                    2021               2020            Change
Service charges on deposit accounts             $      1,244       $        983      $      261
Gain (loss) on sale of investment securities
available for sale                                      (819 )              392          (1,211 )
Net gain on sale of loan portfolio                     1,227                  -           1,227
Net gain on settlement of litigation                     828                  -             828
Bank owned life insurance                                344                414             (70 )
Net gain on sale of premises and equipment                26               
 14              12
Other noninterest income                                 959                749             210
Total noninterest income                        $      3,809       $      2,552      $    1,257




Our noninterest income increased $1.3 million to $3.8 million in the year ended
December 31, 2021, compared to 2020. This increase was driven by a $1.2 million
gain on sale of a portion of the loan portfolio and a $0.8 million gain on the
settlement of litigation, partially offset by a $0.8 million loss on sale of
investment securities available for sale.

69





Noninterest Expense


Le tableau suivant résume les composantes des frais autres que d’intérêts et la variation correspondante entre les exercices clos 31 décembre 2021 et 2020 (en milliers):



                                        Years Ended December 31,
                                         2021               2020         Change

Rémunération et avantages sociaux 21 131 $ 20 371 $ $

 760
Net occupancy                               2,309              2,186         123
Federal deposit insurance                     634                522         112
Professional and advisory                   1,139              1,328        (189 )
Data processing                             2,021              1,880         141
Marketing and advertising                     185                163          22
Net cost of operation of REO                   90                371        (281 )
Other                                       3,632              3,225         407
Total noninterest expenses           $     31,141       $     30,046     $ 1,095



Nos frais autres que d’intérêts ont augmenté 1,1 million de dollars pour 31,1 millions de dollars dans l’année terminée 31 décembre 2021par rapport à 2020.

· La rémunération et les avantages sociaux ont augmenté 0,8 million de dollarssoit 3,7 %, pour le

année terminée 31 décembre 2021 par rapport à 2020. L’augmentation est principalement

   related to increased full-time equivalent employees, annual raises and
   increases in employee benefits, incentives and commissions.



· Augmentation des primes fédérales d’assurance-dépôts 0,1 million de dollars pour l’année terminée

31 décembre 2021par rapport à 2020, principalement en raison de soldes de dépôts plus élevés.

· Les dépenses professionnelles et de conseil ont diminué 0,2 million de dollars pour l’année terminée

31 décembre 2021par rapport à 2020, principalement en raison de la baisse

   reliance on external advisors.



· Les dépenses de traitement de données ont augmenté 0,1 million de dollars pour l’année terminée le 31 décembre,

2021, par rapport à 2020, principalement en raison d’un nombre accru de comptes et

   transactions.



· Augmentation du marketing et de la publicité 22 000 $ pour l’exercice terminé en décembre

31 2021, par rapport à 2020, principalement en raison des contributions de parrainage et

   donations in 2021 that were not paid in 2020.



· Le coût net de fonctionnement du REO a diminué 0,3 million de dollars pour l’exercice terminé en décembre

31, 2021, par rapport à 2020, principalement en raison des ajustements de valeur pour

   appraisals or sales contract amounts.



· Augmentation des autres frais autres que d’intérêts 0,4 million de dollars pour l’exercice terminé en décembre

31 2021, par rapport à 2020, principalement en raison de la maintenance des logiciels et

des droits de licence et une redevance forfaitaire liée au prépaiement des avances du FHLB,

   partially offset by a decrease in office supplies expense.




Income Taxes



Income tax expense totaled $5.2 million for the year ended December 31, 2021
compared to $2.5 million for 2020. Income tax expense for the years ending
December 31, 2021 and 2020 benefited from tax-exempt income related to municipal
bond investments and BOLI income resulting in effective tax rates of 24.3% and
22.4%, respectively. The increase in the effective tax rate is primarily
attributable to the growth of taxable income exceeding that of nontaxable
income.



Nous continuons d’avoir des pertes d’exploitation nettes inutilisées aux fins de l’impôt sur le revenu de l’État et nous n’avons pas de créance ou de dette d’impôt exigible importante.

Liquidité, risque de marché et ressources en capital




Liquidity. Our primary sources of funds consist of deposit inflows, loan
repayments, advances from the FHLB, and the sale of available-for-sale
securities. While maturities and scheduled amortization of loans and securities
are predictable sources of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition. Our ALCO, under the direction of our Chief Financial Officer, 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 unanticipated
contingencies. We have not experienced any unusual pressure on our deposit
balances or our liquidity position as a result of the COVID-19 pandemic. We
believe that, as of December 31, 2021, we have enough sources of liquidity to
satisfy our liquidity needs for the next twelve months and thereafter.

70




We regularly monitor and adjust our investments in liquid assets based upon our
assessment of expected loan demand, expected deposit flows and borrowing
maturities, yields available on interest-earning deposits and securities, and
the objectives of our asset/liability management program. Excess liquid assets
are invested generally in FHLB and Federal Reserve Bank of Richmond ("FRB")
interest-earning deposits and investment securities and are also used to pay off
short-term borrowings. At December 31, 2021, cash and cash equivalents totaled
$124.1 million. Included in this total was $102.5 million held at the FRB, $1.2
million held at the FHLB, and $16.9 million held at correspondent banks in
interest-earning accounts.



Our cash flows are derived from operating activities, investing activities and
financing activities as reported in our consolidated statements of cash flows
included in our consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K. The following summarizes the most significant
sources and uses of liquidity during the years ended December 31, 2021 and
2020
(in thousands):



                                                       Years Ended December 31,
                                                         2021              2020
Investing activities:
Purchases of investments                             $    (57,950 )     $  (67,337 )
Maturities and principal repayments of investments         25,286          
13,684
Sales of investments                                       28,836           18,787
Net increase in loans                                     (55,049 )       (112,622 )
Purchase of fixed assets                                   (2,100 )         (4,253 )
Redemption of other investments, at cost                    3,268          
 4,129

Financing activities:
Net increase in deposits                             $    112,561       $  133,979
Repurchase of common stock                                 (3,946 )              -
Proceeds from issuance of subordinated debt                     -          
17,602
Proceeds from FHLB advances                                     -           27,000
Repayment of FHLB advances                                (11,000 )        (11,000 )
Dividends paid on common stock                             (2,066 )        
(1,668 )




In addition, because the Company is a separate entity from the Bank, it must
provide for its own liquidity. The Company is responsible for payment of
dividends declared on its common and preferred stock and interest and principal
on any outstanding debt or trust preferred securities. The Company currently has
internal capital resources to meet these obligations. While the Company has
access to capital, the ultimate sources of its liquidity are dividends from the
Bank and tax allocation agreements, which are limited by applicable law and
regulations. The Bank paid no dividends to the Company in 2021 or 2020.



À 31 décembre 2021nous avons eu 327,6 millions de dollars d’engagements en cours pour accorder des crédits par le biais de lignes de crédit non utilisées et de lettres de crédit stand-by.

During 2021, we entered into an agreement to fund capital contributions of up to
$1 million with a financial technology company. As of December 31, 2021, none of
the commitment has been funded. We will account for our ownership interest in
the financial technology company in accordance with Subtopic 946-323 as an
equity method investment. We have unfunded commitments of $1 million related to
this agreement as of December 31, 2021.



Depending on market conditions, we may be required to pay higher rates on our
deposits or other borrowings than we currently pay on certificates of deposit.
Based on historical experience and current market interest rates, we anticipate
that following their maturity we will retain a large portion of our retail
certificates of deposit with maturities of one year or less as of December
31,
2021.



In addition to loans, we invest in securities that provide a source of
liquidity, both through repayments and as collateral for borrowings. Our
securities portfolio includes both callable securities (which allow the issuer
to exercise call options) and mortgage-backed securities (which allow borrowers
to prepay loans). Accordingly, a decline in interest rates would likely prompt
issuers to exercise call options and borrowers to prepay higher-rate loans,
producing higher than otherwise scheduled cash flows.

71




Liquidity management is both a daily and long-term function of management. If we
require more funds than we are able to generate locally, we have a borrowing
agreement with the FHLB. The following summarizes our borrowing capacity as of
December 31, 2021 (in thousands):



                                     Total          Used         Unused
                                   Capacity       Capacity      Capacity
FHLB
Loan collateral capacity           $ 355,725
Pledgeable marketable securities     111,462
FHLB totals                          467,187     $    5,000     $ 462,187
Fed funds lines                       49,000              -        49,000
                                   $ 516,187     $    5,000     $ 511,187




Market Risk. One of the most significant forms of market risk is interest rate
risk because, as a financial institution, the majority of our assets and
liabilities are sensitive to changes in interest rates. Interest rate
fluctuations affect earnings by changing net interest income and other
interest-sensitive income and expense levels. Accepting this risk is a normal
part of banking and can be an important source of profitability and shareholder
value. However, excessive risk can threaten our earnings, capital, liquidity and
solvency. Therefore, a principal part of our operations is to manage interest
rate risk and limit the exposure of our net interest income to changes in market
interest rates. The board of directors of the Bank has established an ALCO,
which is responsible for evaluating the interest rate risk inherent in our
assets and liabilities, for determining the level of risk that is appropriate,
given our business strategy, operating environment, capital, liquidity and
performance objectives, and for managing this risk consistent with the
guidelines approved by the board of directors. Our ALCO monitors and seeks to
manage market risk through rate shock analyses, economic value of equity
analyses and simulations in order to avoid unacceptable earnings and market
value fluctuations due to changes in interest rates.



From a funding perspective, we expect to satisfy the majority of our future
requirements with retail deposit growth, including checking and savings
accounts, money market accounts and certificates of deposit generated within our
primary markets. If our funding needs exceed our deposits, we will utilize our
excess funding capacity with the FHLB.



Nous avons pris les mesures suivantes pour réduire notre risque de taux d’intérêt :

· augmenté nos comptes chèques personnels et professionnels et notre marché monétaire

comptes, qui sont moins sensibles aux taux que les certificats de dépôt et qui

nous fournir une source de financement stable et peu coûteuse ;

· limité la période de taux fixe sur les prêts de notre portefeuille ;

· utilisé notre portefeuille de titres pour un positionnement basé sur les intérêts projetés

environnements tarifaires ;

· certificats de dépôt tarifés pour inciter les clients à prolonger

termes; et

· utilisé les avances FHLB pour le positionnement.





Net Interest Income. We analyze the impact of changing rates on our net interest
income. Using our balance sheet as of a given date, we analyze the repricing
components of individual assets, and, adjusting for changes in interest rates at
100 basis point increments, we analyze the impact on our net interest income.
Changes to our net interest income are shown in the following table based on
immediate changes to interest rates in 100 basis point increments.



Le tableau ci-dessous reflète l’impact d’une augmentation immédiate des taux d’intérêt par tranches de 100 points de base sur le revenu net d’intérêts avant impôts (“NII”).



                                        December 31,
                                 2021                 2020
                             % Change in           % Change in
Change in Interest Rates      Pretax Net           Pretax Net
(basis points)             Interest Income       Interest Income
+400                                    7.6                   7.1
+300                                    8.1                   7.5
+200                                    5.9                   5.4
+100                                    3.6                   3.2
-                                         -                     -
-100                                   (0.7 )                 0.5


72




The results from the rate shock analysis on NII are consistent with having an
asset sensitive balance sheet. Having an asset sensitive balance sheet means
assets will reprice at a faster pace than liabilities during the short-term
horizon. The implications of an asset sensitive balance sheet will differ
depending upon the change in market rates. For example, with an asset sensitive
balance sheet in a declining interest rate environment, the interest rate on
assets will decrease at a faster pace than liabilities. This situation generally
results in a decrease in NII and operating income. Conversely, with an asset
sensitive balance sheet in a rising interest rate environment, the interest rate
on assets will increase at a faster pace than liabilities. This situation
generally results in an increase in NII and operating income. As indicated in
the table above, a 200 basis point increase in rates would result in a 5.9%
increase in NII as of December 31, 2021 as compared to a 5.4% increase in NII as
of December 31, 2020, suggesting that there is a benefit for the Company to net
interest income in rising interest rates The Company generally seeks to remain
neutral to the impact of changes in interest rates by maximizing current
earnings while balancing the risk of changes in interest rates.



Capital Resources. Regulatory capital rules adopted in July 2013 and
fully-phased in as of January 1, 2019, which we refer to as the Basel III rules
or Basel III, impose minimum capital requirements for bank holding companies and
banks. The Basel III rules apply to all national and state banks and savings
associations regardless of size and bank holding companies and savings and loan
holding companies other than "small bank holding companies," generally holding
companies with consolidated assets of less than $3 billion (such as the
Company). In order to avoid restrictions on capital distributions or
discretionary bonus payments to executives, a covered banking organization must
maintain a "capital conservation buffer" on top of our minimum risk-based
capital requirements. This buffer must consist solely of common equity Tier 1,
but the buffer applies to all three measurements (common equity Tier 1, Tier 1
capital and total capital). The capital conservation buffer consists of an
additional amount of common equity Tier 1 equal to 2.5% of risk-weighted assets.



The Bank is subject to various regulatory capital requirements, including a
risk-based capital measure. The risk-based guidelines and framework under prompt
corrective action provisions include both a definition of capital and a
framework for calculating risk-weighted assets by assigning balance sheet assets
and off-balance sheet items to broad risk categories.



Les tableaux ci-dessous résument les montants et ratios de capital de la Banque et les exigences réglementaires minimales conformément à Bâle III et les dispositions d’action corrective rapide à 31 décembre 2021 et 2020 (en milliers).



                                                                                                 To Be Well-
                                                                                              Capitalized Under
                                                                For Capital Adequacy          Prompt Corrective
                                           Actual                    Purposes(1)              Action Provisions
As of December 31, 2021:             Amount        Ratio         Amount         Ratio         Amount        Ratio
Tier 1 Leverage Capital             $ 123,344       10.21 %   $     48,317        >4.0%     $   60,396       >5.0%
Common Equity Tier 1 Capital        $ 123,344       12.24 %   $     70,517        >7.0%     $   65,480       >6.5%
Tier 1 Risk-based Capital           $ 123,344       12.24 %   $     85,628        >8.5%     $   80,591       >8.0%
Total Risk-based Capital            $ 135,951       13.50 %   $    105,776       >10.5%     $  100,739        >10%

As of December 31, 2020:
Tier 1 Leverage Capital             $ 105,820       10.05 %   $     36,100        >4.0%     $   45,125       >5.0%
Common Equity Tier 1 Capital        $ 105,820       11.73 %   $     63,174        >7.0%     $   58,662       >6.5%
Tier 1 Risk-based Capital           $ 105,820       11.73 %   $     76,712        >8.5%     $   72,199       >8.0%
Total Risk-based Capital            $ 117,117       12.98 %   $     94,761       >10.5%     $   90,249        >10%




(1)  Includes capital conservation buffer of 2.50%.




Under the Federal Reserve's Small Bank Holding Company Policy Statement, the
Company is not subject to the minimum capital adequacy and capital conservation
buffer capital requirements at the holding company level, unless otherwise
advised by the Federal Reserve (such capital requirements are applicable only at
the Bank level). Although the minimum regulatory capital requirements are not
applicable to the Company, we calculate these ratios for our own planning and
monitoring purposes. The Company is not subject to the prompt corrective action
provisions applicable to the Bank. The tables below summarize the capital
amounts and ratios of the Company and the minimum regulatory requirements in
accordance with Basel III at December 31, 2021 and December 31, 2020 (in
thousands).

73





                                                           For Capital Adequacy
                                      Actual                    Purposes(1)
As of December 31, 2021:        Amount        Ratio         Amount         Ratio
Tier I Leverage Capital        $ 103,730        8.59 %   $     48,327        >4.0%
Common Equity Tier 1 Capital   $  95,482        9.47 %   $     70,574        >7.0%
Tier I Risk-based Capital      $ 103,730       10.29 %   $     85,696        >8.5%
Total Risk Based Capital       $ 143,963       14.28 %   $    105,860       >10.5%

As of December 31, 2020:
Tier I Leverage Capital        $  91,876        8.72 %   $     42,189        >4.0%
Common Equity Tier 1 Capital   $  83,629        9.26 %   $     63,248        >7.0%
Tier I Risk-based Capital      $  91,876       10.17 %   $     76,801        >8.5%
Total Risk Based Capital       $ 130,683       14.46 %   $     94,871       >10.5%



(1) Inclut un coussin de conservation des fonds propres de 2,50 %.

Arrangements hors bilan




To accommodate the financial needs of our customers, we make commitments under
various terms to lend funds. These commitments include revolving credit
agreements, term loan commitments and short-term borrowing agreements.
Commitments to extend credit are agreements to lend to a customer as long as
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 we expect many of these commitments to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. We evaluate each customer's creditworthiness
and the amount of collateral we obtain, if we deem it to be necessary upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held includes first and second mortgages on one-to-four
family residential real estate, accounts receivable, inventory, and commercial
real estate. Certain lines of credit are unsecured.



The following summarizes our approximate commitments to extend credit (in
thousands):



                             December 31,
                                 2021
Lines of credit             $      322,712
Standby letters of credit            4,928
                            $      327,640

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