GLEN BURNIE BANCORP MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

FORWARD-LOOKING STATEMENTS

When used in this discussion and elsewhere in this Form 10-Q, the words or
phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company cautions readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made, and readers are advised that various factors could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from those anticipated or projected. While
it is impossible to identify all such factors, such factors include, but are not
limited to, those factors identified in the Company's periodic reports filed
with the Securities and Exchange Commission, including its most recent Annual
Report on Form 10-K.

The Company does not undertake and specifically disclaims any obligation to update any forward-looking statements to reflect the occurrence of any anticipated or unanticipated events or circumstances after the date of such statements.

OVERVIEW


Glen Burnie Bancorp, a Maryland corporation (the "Company"), through its
subsidiary, The Bank of Glen Burnie, a Maryland banking corporation (the
"Bank"), operates a commercial bank with eight offices in Anne Arundel County
Maryland. Total interest income declined $506,000 to $5.9 million for the
six-month period ended June 30, 2022, as compared to the same period in 2021.
The decrease was driven by lower interest income on loans, partially offset by
increases in interest and dividends on securities and interest on deposits with
banks and federal funds sold. The Bank's loan portfolio decreased by $9.5
million or 4.55% during the first six months of 2022. As a result of minimal
charge-offs, recoveries on previously charged off loans, reduction in our loan
portfolio and strong credit discipline, the Company continued to release
portions of its allowance for credit losses in the amount of $217,000 for the
six months ended June 30, 2022, and $471,000 for the six months ended June 30,
2021. Shareholder's equity decreased to $21.3 million on June 30, 2022, a $14.5
million or 40.46% decrease, as compared to $35.7 million on December 31, 2021.
The decrease was primarily due to unrealized losses, net of taxes, on securities
available for sale amounting to $15.4 million on June 30, 2022. The Company has
strong liquidity and capital positions that provide ample capacity for future
growth. The Bank's total regulatory capital to risk weighted assets were 15.90%
on June 30, 2022, as compared to 16.03% on December 31, 2021.

Return on average assets for the three- and six-month periods ended June 30,
2022, was 0.29% and 0.25% compared to 0.45% and 0.51% for the three- and
six-month periods ended June 30, 2021.  Return on average equity for the three-
and six-month periods ended June 30, 2022, was 4.99% and 3.69% compared to 5.51%
and 6.10% for the three- and six-month period ended June 30, 2021.  Lower net
income and higher average asset balances primarily drove the lower return on
average assets.  Lower average equity balance, partially offset by lower net
income, primarily drove the higher return on average equity for the three-months
ended June 30, 2022.  Lower net income, partially offset by lower average equity
balance, primarily drove the lower return on average equity for the six-months
ended June 30, 2022.

The book value per share of Bancorp common stock was $7.44 on June 30, 2022compared to $12.43 per share on June 30, 2021. The decrease is primarily the result of unrealized losses on the Company’s available-for-sale securities and rapidly rising interest rates in the second quarter of 2022.


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To June 30, 2022, the Bank remained above all levels of “well capitalized” regulatory requirements. The Bank’s estimated risk-based Tier 1 capital ratio was 15.13% at June 30, 2022compared to 15.32% at December 31, 2021.


Our liquidity position remained strong due to managed cash and cash equivalents,
borrowing lines with the FHLB of Atlanta and correspondent banks, and the size
and composition of the bond portfolio.

RESULTS OF OPERATIONS


Net income attributable to common stockholders for the three-month period ended
June 30, 2022 was $309,000, or $0.11 per basic and diluted common share compared
to $480,000, or $0.17 per basic and diluted common share for the same period of
2021. The results for the three-month period ended June 30, 2022, were lower
than the same period of 2021 resulting primarily from a $213,000 decrease in net
interest income when compared to the same period of 2021. Net income
attributable to common stockholders for the six-month period ended June 30, 2022
was $540,000, or $0.19 per basic and diluted common share compared to $1.1
million, or $0.38 per basic and diluted common share for the same period of
2021. The results recorded for the six-month period ended June 30, 2022 were
lower than the same period of 2021 resulting primarily from a $410,000 decrease
in net interest income and $254,000 decrease in release of credit loss
provision, offset by a $142,000 decrease in income tax expense in 2022 when
compared to the same period of 2021.

Net Interest Income. The Company's net interest income for the three-month
period ended June 30, 2022 was $2.8 million, as compared to $3.0 million for the
same period in 2021, a decrease of $213,000, or 7.07%. The decrease in net
interest income was due to lower interest income in the amount of $260,000,
offset by lower interest expense in the amount of $47,000. The decrease in
interest income was primarily driven by lower interest and fees on loans from a
$33.5 million decrease in loan portfolio balances, offset by higher interest and
dividends on securities. Although deposit driven excess liquidity fueled average
interest-earning asset growth, competitive loan origination pressures as well as
a low interest rate environment drove the overall decrease in average
interest-earning asset yields. The Company's net interest income for the
six-month period ended June 30, 2022 was $5.5 million, compared to $5.9 million
for the same period in 2021, a decrease of $410,000, or 6.96%. The decrease in
net interest income was due to lower interest income in the amount of $506,000,
offset by lower interest expense in the amount of $96,000. The decrease in
interest income was primarily due to lower interest and fees on loans from a
decrease in the loan portfolio, partially offset by increases in interest and
dividends on securities and interest on deposits with banks and federal funds
sold. The decrease in interest expense was due to a decrease in the costs of
interest-bearing deposits.

Total interest income for the second quarter of 2022 decreased $260,000, or
7.90% when compared to the same period in 2021, from $3.3 million in 2021 to
$3.0 million in 2022. The primary driver of the decrease was a $479,000 decrease
in interest and fees on loans due to lower average loan balances, offset by a
$96,000 increase in interest and dividends on investment securities and a
$123,000 increase in interest on deposits with banks and federal funds sold due
to higher average balances. Total interest income decreased $506,000 for the
six-month period ended June 30, 2022 when compared to the same period in 2021
from $6.5 million in 2021 to $5.9 million, a decrease of 7.84%. The primary
driver of the decrease in total interest income was a decrease of $949,000 in
interest and fees on loans, offset by a $289,000 increase on interest and
dividends on securities and a $154,000 increase in interest on deposits with
banks and federal funds sold due to higher average balances. The decreases can
be attributed to a decrease in the loan portfolio and the lower interest rate
environment.

Interest expense for the second quarter 2022 decreased $46,000 from $274,000 for
the same period in 2021 to $227,000, a decrease of 16.79%. The primary driver
for the decrease was a $38,000 decrease in expense on interest-bearing deposits.
The decreases for the three-month period ended June 30, 2022 are attributed to
the lower interest rate environment and decline in the average balance of time
deposits. Interest expense decreased $96,000 for the six-month period ended June
30, 2022 from $557,000 for the same period in 2021 to $461,000 in 2022, a
decrease of 17.12%. The decrease was primarily due to a $81,000 decrease in the
cost of interest on deposits. The decreases for the three-and six-month periods
ended June 30, 2022 can be attributed to maturing times deposits that are
renewing at a lower interest rate.

Net interest margin for the three-month period ended June 30, 2022 was 2.61%
compared to 2.92% for the three-month period ended June 30, 2021. Higher average
balances combined with lower yields on interest-earning

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assets, and lower cost of funds on interest-bearing liabilities and higher
noninterest-bearing deposits were the primary drivers of the results. The yield
on interest earning assets decreased by 0.36% from 3.18% for the three-month
period ended June 30, 2021 to 2.82% from the same period of 2022 primarily due
to lower interest rates. The cost of funds decreased 0.06% from 0.28% for the
three-month period ended June 30, 2021 to 0.22% for the same period of 2022 due
to a decrease in total time deposits and the renewal of matured time deposits at
lower interest rates. Net interest margins for the six-month period ended June
30, 2022 were 2.57% compared to 2.92% for the six-month period ended June 30,
2021. The decrease was primarily due to lower yields on interest earning assets
and lower cost of funds resulting from the lower interest rate environment. The
yield on interest earning assets decreased by 0.41% from 3.20% for the six-month
period ended June 30, 2021 to 2.79% for the same period of 2022. The cost of
funds decreased 0.06% from 0.29% for the six-month period ended June 30, 2021 to
0.23% for the same period of 2022 due to a decrease in total time deposits and
the renewal of time deposits at a lower interest rates in 2021.

The following tables set forth, for the periods indicated, information regarding
the average balances of interest-earning assets and interest-bearing
liabilities, the amount of interest income and interest expense and the
resulting yields on average interest-earning assets and rates paid on average
interest-bearing liabilities.

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                                                                 Three Months Ended June 30,
                                                        2022                                   2021
                                          Average                    Yield/      Average                   Yield/
       (dollars in thousands)             Balance       Interest      Cost       Balance      Interest      Cost
ASSETS:
Interest-earning assets:
Interest-bearing deposits w/ banks &
fed funds                                $   61,172    $      123       0.81 %  $  23,172    $        5       0.09 %
Investment securities available for
sale                                        167,651           808       1.93      150,556           706       1.88
Restricted equity securities                  1,072            10       3.59        1,062            11       4.00
Total interest-bearing
deposits/investments                        229,895           941       1.64      174,790           722       1.65

Loans Secured by Real Estate
Construction and land                         3,613            25       2.77          753            29      15.54
Farmland                                        339             4       5.04          349             4       5.01
Single-family residential                    77,996           796       4.08       81,427           873       4.29
Multi-family                                  4,898            68       5.53        6,456            83       5.12
Commercial                                   46,836           613       5.25       58,719           700       4.77
Total loans secured by real estate          133,682         1,506       4.52      147,704         1,689       4.57
Commercial and Industrial
Commercial and industrial                     9,167            74       3.25        7,141            72       4.03
SBA guaranty                                  6,039            78       5.15        7,376           196      10.62
Comm SBA PPP                                    530             1       1.00        8,252            21       1.00
Total commercial and industrial loans        15,736           153       3.90       22,769           289       5.08
Consumer Loans
Consumer                                      2,215             6       1.03        4,813             7       0.58
Automobile                                   50,000           424       3.39       64,626           583       3.61
Total consumer loans                         52,215           430       3.30       69,439           590       3.40
Total loans                                 201,633         2,089       4.16      239,912         2,568       4.31
Total interest-earning assets               431,528         3,030       

2.82 414 702 3,290 3.18

Cash                                          2,031                                 2,062
Allowance for credit losses                 (2,277)                               (2,945)
Market valuation                           (17,231)                               (1,169)
Other assets                                 20,246                                16,849
Total non-earning assets                      2,769                                14,797
Total assets                             $  434,297                             $ 429,499

LIABILITIES AND STOCKHOLDER'S EQUITY:
Interest-bearing deposits:
Interest-bearing checking and savings    $  150,539            18       0.05 %  $ 136,647            15       0.05 %
Money market                                 23,950             3       0.05       20,904             3       0.05
Certificates of deposit                      59,255            99       0.67       66,555           140       0.84
Total interest-bearing deposits             233,744           120       0.21      224,106           158       0.28

Borrowed Funds:
PPPLF Term Funding                                -             -          -          616             1       0.42
Federal Funds Purchased                           -             -          -            1             -          -
FHLB advances                                20,000           107       2.15       20,000           115       2.32
Total borrowed funds                         20,000           107       2.15       20,617           116       2.28
Total interest-bearing liabilities          253,744           227       0.36      244,723           274       0.45

Non-interest-bearing deposits               153,614                        

147,009

Total cost of funds                         407,358           227       0.22      391,732           274       0.28

Other liabilities and accrued
expenses                                      2,036                                 2,841
Total liabilities                           409,394                               394,573

Stockholder's equity                         24,903                                34,926
Total liabilities and equity             $  434,297                             $ 429,499
Net interest income                                    $    2,803                            $    3,016
Yield on earning assets                                                 2.82 %                                3.18 %
Cost of interest-bearing liabilities                                    0.36 %                                0.45 %
Net interest spread                                                     2.46 %                                2.73 %
Net interest margin                                                     2.61 %                                2.92 %


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                                                                 Six Months Ended June 30,
                                                       2022                                   2021
                                         Average                    Yield/      Average                   Yield/
       (dollars in thousands)            Balance       Interest      Cost       Balance      Interest      Cost
ASSETS:
Interest-earning assets:
Interest-bearing deposits w/ banks &
fed funds                               $   63,004    $      149       0.48 %  $  26,611    $       12       0.09 %
Investment securities available for
sale                                       161,625         1,520       1.88      134,581         1,211       1.80
Restricted equity securities                 1,068            20       3.74        1,121            23       4.17
Total interest-bearing
deposits/investments                       225,697         1,689       1.50      162,313         1,246       1.54

Loans Secured by Real Estate
Construction and land                        3,656            58       3.19          757            53      13.90
Farmland                                       340             9       5.04          350             9       4.98
Single-family residential                   77,890         1,582       4.06       82,004         1,764       4.30
Multi-family                                 4,930           135       5.48        6,530           163       4.99
Commercial                                  47,819         1,237       5.22       58,913         1,376       4.67
Total loans secured by real estate         134,635         3,021       4.52
     148,554         3,365       4.53
Commercial and Industrial
Commercial and industrial                    9,528           150       3.17        6,947           160       4.62
SBA guaranty                                 6,172           170       5.56        7,662           426      11.13
Comm SBA PPP                                   673             3       1.00        8,867            44       1.00
Total commercial and industrial loans       16,373           323       3.98
      23,476           630       5.36
Consumer Loans
Consumer                                     2,295            11       0.95        5,255            17       0.65
Automobile                                  51,174           901       3.52       67,131         1,193       3.55
Total consumer loans                        53,469           912       3.44       72,386         1,210       3.34
Total loans                                204,477         4,256       4.20      244,416         5,205       4.29
Total interest-earning assets              430,174         5,945       2.79
     406,729         6,451       3.20

Cash                                         2,020                                 2,111
Allowance for credit losses                (2,356)                               (2,984)
Market valuation                          (10,635)                                 (178)
Other assets                                18,681                                16,472
Total non-earning assets                     7,710                                15,421
Total assets                            $  437,884                             $ 422,150

LIABILITIES AND STOCKHOLDER'S EQUITY:
Interest-bearing deposits:
Interest-bearing checking and savings   $  147,925            34       0.05
%  $ 133,476            30       0.05 %
Money market                                23,680             6       0.05       20,578             5       0.05
Certificates of deposit                     59,761           204       0.69       67,168           290       0.87
Total interest-bearing deposits            231,366           244       0.21
     221,222           325       0.30

Borrowed Funds:
PPPLF Term Funding                               -             -          -          589             1       0.42
Federal Funds Purchased                          1             -          -            1             -          -
FHLB advances                               20,001           217       2.19       20,001           231       2.34
Total borrowed funds                        20,002           217       2.19       20,591           232       2.28
Total interest-bearing liabilities         251,368           461       0.37
     241,813           557       0.47

Non-interest-bearing deposits              154,700                               142,105
Total cost of funds                        406,068           461       0.23      383,918           557       0.29

Other liabilities and accrued
expenses                                     2,305                                 2,733
Total liabilities                          408,373                               386,651

Stockholder's equity                        29,511                                35,499
Total liabilities and equity            $  437,884                             $ 422,150
Net interest income                                   $    5,484                            $    5,894
Yield on earning assets                                                2.79 %                                3.20 %
Cost of interest-bearing liabilities                                   0.37
%                                0.47 %
Net interest spread                                                    2.42 %                                2.73 %
Net interest margin                                                    2.57 %                                2.92 %


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Provision for Credit Losses on Loans.  The Company recognized a release of
allowance for credit losses on loans in the amount of $116,000 and $67,000 for
the three-month periods ended June 30, 2022 and 2021, respectively.  The
increase in the release for the three-month period ended June 30, 2022, compared
to the three-month period ended June 30, 2021, is due to a $24.7 million
decrease in the reservable balance of the loan portfolio (excluding PPP loans)
and an 11% decrease in the current expected credit loss percentage, offset by a
$59,000 increase in net charge offs.  The Company recognized a release of
allowance for credit losses on loans in the amount of $217,000 and $471,000 for
the six-month periods ended June 30, 2022 and 2021, respectively.  The decrease
in the release for the six-month period ended June 30, 2022, compared to the
six-month period ended June 30, 2021, is due to a $323,000 increase in net
charge offs, offset by a $24.7 million decrease in the reservable balance of the
loan portfolio (excluding PPP loans) and an 11% decrease in the current expected
credit loss percentage.  As of June 30, 2022, the allowance for credit losses
represented 1.12% of total loans compared to 1.23% at June 30, 2021.


Noninterest Income. Noninterest income decreased to $260,000 for the three-month
period ended June 30, 2022, from $280,000 for the corresponding period in 2021,
a decrease of $20,000, or 7.14%. The decrease was primarily due to decreases in
other fees and commissions and lower gains on the sale of other real estate.
Noninterest income decreased to $514,000 for the six-month period ended June 30,
2022, from $527,000 for the corresponding period in 2021, a decreased of
$13,000, or 2.47%. The decrease was primarily due to lower gains on the sale of
other real estate.

Noninterest Expenses. Noninterest expenses for the three-month period ended June
30, 2022 and 2021 were $2.83 million and $2.79 million, respectively, an
increase of $43,000 or 1.55%.  The increase was driven by decreases in salary
and employee benefits, offset by increases in legal, accounting and other
professional fees and other expenses. Noninterest expenses decreased from $5.6
million for the six-month period ended June 30, 2021, to $5.6 million for the
corresponding period in 2022, a decrease of $2,000. The decrease was driven by
decreases in salary and employee benefits cost, data processing and item
processing services, FDIC insurance costs, loan collection costs and telephone
costs, offset by increases in occupancy and equipment expenses, legal,
accounting, and other professional fees.

Income Taxes. During the three-month period ended June 30, 2022, the Company
recorded income tax expense of $35,000 compared to $91,000 for the same period
in 2021, a $56,000, or 61.54%, decrease. During the six-month period ended June
30, 2022, the Company recorded income tax expense of $56,000 compared to
$197,000 expense for the same period in 2021, a $141,000, or 71.57%, decrease.
The Company's annualized effective tax rate at June 30, 2022 was 11.11% compared
to 15.83% for the prior year. The decrease in income tax expense was due to
lower income before taxes at June 30, 2021, compared to June 30, 2022.

Comprehensive Income (Loss). In accordance with regulatory requirements, the
Company reports comprehensive income (loss) in its financial statements.
Comprehensive income (loss) consists of the Company's net income, adjusted for
unrealized gains and losses on the Bank's portfolio of investment securities and
interest rate swap contracts. For the second quarter of 2022, comprehensive
loss, net of tax, totaled $5,759,000 compared to a gain in the amount of
$2,172,000 for the same period in 2021. The decrease was due to higher
unrealized losses on available for sale securities, offset by higher net
unrealized gains on interest rate swaps. For the six months ended June 30, 2022,
comprehensive loss, net of tax, totaled $13,936,000 compared to a comprehensive
gain, net of tax, in the amount of $277,000 for the same period in 2021. The
decrease was due to lower net income and higher unrealized losses on available
for sale securities, offset by higher net unrealized gains on interest rate
swaps.

FINANCIAL CONDITION

General. The Company's assets decreased to $429.4 million at June 30, 2022 from
$442.1 million at December 31, 2021, a decrease of $12.7 million or 2.87%,
primarily due to a $10.8 million decrease in cash and cash equivalents and a
$9.5 million decrease and loans, net, offset by a $1.9 million increase in
investment securities available for sale and $5.5 million increase in deferred
tax assets, net. Loans totaled $198.5 million at June 30, 2022, a decrease of
$9.5 million or 4.55%, from $207.9 million at December 31, 2021. The decrease
was primarily attributable to decreases in commercial loans, commercial and
industrial loans, consumer, and automobile loans, offset by an increase in
single-family residential loans. Investment securities available for sale as of
June 30, 2022, totaled $157.8 million, an increase of $1.9 million, or 1.22%
from $155.9 million on December 31, 2021. Cash and cash equivalents as of June
30, 2022,

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totaled $51.4 milliona decrease of $10.8 millioni.e. 17.39% of $62.2 million
on December 31, 2021 resulting mainly from an increase in the cost price of investment securities.

Loans are placed on nonaccrual status when they are past due 90 days as to
either principal or interest or when, in the opinion of management, the
collection of all interest and/or principal is in doubt. Placing a loan on
nonaccrual status means that we no longer accrue interest or amortize deferred
fees or costs on such loans and reverse any interest previously accrued but not
collected. Management may grant a waiver from nonaccrual status for a 90 day
past due loan that is both well secured and in the process of collection. A loan
remains on nonaccrual status until the loan is current as to payment of both
principal and interest and the borrower has demonstrated the ability to make
payments in accordance with the terms of the loan and remain current.

A loan is considered to be impaired when, based on current information and
events, it is probable that we will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Impaired loans are
measured based on the fair value of the collateral for collateral dependent
loans and at the present value of expected future cash flows using the loans'
effective interest rates for loans that are not collateral dependent.

At June 30, 2022, impaired loans totaled $0.2 million. Included in the impaired
loans total were $0.2 million in loans classified as nonaccrual loans. At June
30, 2022, troubled debt restructurings included in impaired loans totaled
$35,000. Borrowers under all other restructured loans are paying in accordance
with the terms of the modified loan agreement and have been placed on accrual
status after a period of performance with the restructured terms.

The following table provides details of our non-performing loans and assets, as these measures of asset quality are assessed by management, on the dates indicated:


                                                June 30,     December 31,
           (dollars in thousands)                 2022           2021
Nonaccrual loans                               $    220     $      338
TDR loans excluding those in nonaccrual loans        -              -
Accruing loans past due 90+ days                     12            15

Total nonperforming loans                           232            353

Real estate acquired through foreclosure             -              -

Total nonperforming assets                     $    232     $      353

Nonperforming assets to total assets                0.05 %         0.08 %


Deposits as of June 30, 2022, totaled $385.8 million, an increase of $2.6
million, or 0.66% from $383.2 million on December 31, 2021. Demand deposits as
of June 30, 2022 totaled $151.7 million, a decrease of $3.9 million, or 2.53%
from $155.6 million at December 31, 2021. Interest-bearing checking accounts as
of June 30, 2022 totaled $39.5 million, an increase of $2.2 million, or 5.77%
from $37.3 million at December 31, 2021. Savings accounts as of June 30, 2022
totaled $111.6 million, an increase of $4.8 million, or 4.46%, from $106.8
million at December 31, 2021. Money market accounts as of June 30, 2022 totaled
$24.2 million, an increase of $1.1 million, or 4.79%, from $23.1 million at
December 31, 2021. Time deposits under $100,000 totaled $34.1 million on June
30, 2022, a $1.7 million or a 4.74% decrease from $35.8 million at December 31,
2021. Time deposits over $100,000 totaled $24.8 million on June 30, 2022, a $0.1
million, or 0.54% increase from $24.6 million at December 31, 2021.

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Deposits on June 30, 2022and December 31, 2021were the following:


                                       June 30, 2022             December 31, 2021              2022 vs 2021

(in thousands of dollars) Amount % of total amount

  % of Total     $ Change    % Change
Noninterest-bearing deposits       $ 151,679        39.3 %    $    155,624 
      40.6 %    $ (3,945)     (2.5) %

Interest-bearing deposits:
Checking                              39,458        10.2 %          37,305         9.7 %        2,153       5.8 %
Savings                              111,584        28.9 %         106,818        28.0 %        4,766       4.5 %
Money market                          24,210         6.3 %          23,103         6.0 %        1,107       4.8 %
Total interest-bearing checking,
savings and money market deposits    175,252        45.4 %         167,226 

43.7% 8,026 4.8%

Term deposits under $100,000 34,078 8.9% 35,773

        9.3 %      (1,695)     (4.7) %
Time deposits of $100,000 or more     24,756         6.4 %          24,624         6.4 %          132       0.5 %
Total time deposits                   58,834        15.3 %          60,397 

15.7% (1,563) (2.6)%

Total interest-bearing deposits 234,086 60.7% 227,623

      59.4 %        6,463       2.8 %

Total Deposits                     $ 385,765       100.0 %    $    383,247       100.0 %    $   2,518       0.7 %


Lease Commitments. The Financial Accounting Standards Board ("FASB") issued
guidance, Leases, which requires an entity to recognize both assets and
liabilities arising from financing and operating leases, along with additional
qualitative and quantitative disclosures. The Bank adopted this guidance on
January 1, 2019. It was applied using a modified retrospective approach which
allows entities to either apply the new lease standard to the beginning of the
earliest period presented or only to the current period consolidated financial
statements. For leases where the Bank is the lessee, operating leases are
included in premises and equipment, net, and accrued expenses and other
liabilities on the Consolidated Balance Sheet. The Bank currently does not have
any finance leases. The initial adoption of this guidance had no material effect
on the Bank and there was no cumulative-effect adjustment to beginning retained
earnings. Management evaluates the effects of the lease guidance on a quarterly
basis.

Operating lease Right-of-Use ("ROU") assets and operating lease liabilities are
recognized based on the present value of the future minimum lease payments over
the lease term at commencement date. ROU assets also include any initial direct
costs incurred and any lease payments made at or before the lease commencement
date, less lease incentives received. The Company uses its incremental borrowing
rate based on the information available at the commencement date in determining
the lease liabilities as the Company's leases generally do not provide an
implicit rate. Lease terms may include options to extend or terminate when the
Company is reasonably certain that the option will be exercised.

Future minimum payments of the Bank's operating leases as of June 30, 2022 are
as follows:

Year ending December 31,             Amount
                             (dollars in thousands)
2022                        $                     92
2023                                             181
2024                                             161
2025                                               3
2026                                               2
Thereafter                                         -
Total                       $                    439


Pension and Profit Sharing Plans. The Bank has a defined contribution retirement
plan qualifying under Section 401(k) of the Internal Revenue Code that is funded
through a profit sharing agreement and voluntary employee

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contributions. The plan provides for discretionary employer matching contributions which will be determined annually by the Board of Directors. The plan covers almost all employees.

For the six months ended June 30, 2022the Bank has accumulated $123,000 for his projected 401(k) matching contribution as well as other profit sharing benefits.

MARKET RISK AND INTEREST RATE SENSITIVITY


Our primary market risk is interest rate fluctuation. Interest rate risk results
primarily from the traditional banking activities in which the Bank engages,
such as gathering deposits and extending loans. Many factors, including economic
and financial conditions, movements in interest rates and consumer preferences
affect the difference between the interest earned on our assets and the interest
paid on liabilities. Our interest rate risk represents the level of exposure we
have to fluctuations in interest rates and is primarily measured as the change
in earnings and the theoretical market value of equity that results from changes
in interest rates. The Investment Committee ("IC") oversees our management of
interest rate risk. The objective of the management of interest rate risk is to
maximize stockholder value, enhance profitability and increase capital, serve
customer and community needs, and protect us from any material financial
consequences associated with changes in interest rate risk.

Interest rate risk is that risk to earnings or capital arising from movement of
interest rates. It arises from differences between the timing of rate changes
and the timing of cash flows (repricing risk); from changing rate relationships
across yield curves that affect bank activities (basis risk); from changing rate
relationships across the spectrum of maturities (yield curve risk); and from
interest rate related options embedded in certain bank products (option risk).
Changes in interest rates may also affect a bank's underlying economic value.
The value of a bank's assets, liabilities, and interest-rate related,
off-balance sheet contracts is affected by a change in rates because the present
value of future cash flows, and in some cases the cash flows themselves, is
changed.

We believe that accepting some level of interest rate risk is necessary in order
to achieve realistic profit goals. Management and the Board of Directors have
chosen an interest rate risk profile that is consistent with our strategic
business plan.

The Company's Board of Directors has established a comprehensive interest rate
risk management policy, which is administered by our IC. The policy establishes
limits on risk, which are quantitative measures of the percentage change in net
interest income (a measure of net interest income at risk) and the fair value of
equity capital (a measure of economic value of equity or "EVE" at risk)
resulting from a hypothetical change in U.S. Treasury interest rates. We measure
the potential adverse impacts that changing interest rates may have on our
short-term earnings, long-term value, and liquidity by employing simulation
analysis through the use of computer modeling. The simulation model captures
optionality factors such as call features and interest rate caps and floors
imbedded in investment and loan portfolio contracts. As with any method of
gauging interest rate risk, there are certain shortcomings inherent in the
interest rate modeling methodology we employ. When interest rates change, actual
movements in different categories of interest-earning assets and
interest-bearing liabilities, loan prepayments, and withdrawals of time and
other deposits, may deviate significantly from assumptions used in the model.
Finally, the methodology does not measure or reflect the impact that higher
rates may have on adjustable-rate loan customers' ability to service their
debts, or the impact of rate changes on demand for loan and deposit products.

We prepare a current base case and alternative simulations at least once a
quarter and report the analysis to the IC and Board of Directors. In addition,
more frequent forecasts are produced when the direction or degree of change in
interest rates are particularly uncertain to evaluate the impact of balance
sheet strategies or when other business conditions so dictate.

The statement of condition is subject to quarterly testing for alternative
interest rate shock possibilities to indicate the inherent interest rate risk.
Average interest rates are shocked by +/ - 100, 200, 300, and 400 basis points
("bp"), although we may elect not to use particular scenarios that we determine
are impractical in the current rate environment. It is our goal to structure the
balance sheet so that net interest-earnings at risk over a 12-month period and
the economic value of equity at risk do not exceed policy guidelines at the
various interest rate shock levels.

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At June 30, 2022, the simulation analysis indicated that the Bank is in an asset
sensitive position. Management strives to manage higher costing fixed rate
funding instruments, while seeking to increase assets that are more fluid in
their repricing. An asset sensitive position, theoretically, is favorable in a
rising rate environment since more assets than liabilities will re-price in a
given time frame as interest rates rise. Similarly, a liability sensitive
position, theoretically, is favorable in a declining interest rate environment
since more liabilities than assets will re-price in a given time frame as
interest rates decline. Management works to maintain a consistent spread between
yields on assets and costs of deposits and borrowings, regardless of the
direction of interest rates.

The foregoing analysis assumes that the Company's assets and liabilities move
with rates at their earliest repricing opportunities based on final maturity.
Mortgage backed securities are assumed to mature during the period in which they
are estimated to prepay and it is assumed that loans and other securities are
not called prior to maturity. Certificates of deposit and IRA accounts are
presumed to reprice at maturity. NOW savings accounts are assumed to reprice
within three months although it is the Company's experience that such accounts
may be less sensitive to changes in market rates.

                                                        Static Balance Sheet/Immediate Change in Rates
Estimated Changes in Net Interest Income      `-200 bp                     
     `-100 bp    `+100 bp    `+200 bp
Policy Limit                                    (15) %                             (10) %      (10) %      (15) %
June 30, 2022                                   (14) %                              (7) %         6 %        13 %
June 30, 2021                                    (9) %                              (6) %        10 %        17 %


The following table sets forth the Company's interest-rate sensitivity at June
30, 2022.

                                                                    Over 1
                                                    Over 3 to       Through        Over
                                    0-3 Months      12 Months       5 Years       5 Years       Total

                                                          (dollars in thousands)
Assets:
Cash and due from banks             $         -    $         -    $         -    $       -    $   2,140
Federal funds and overnight
deposits                                 49,226              -              -            -       49,226
Securities                                    -              -         23,878      133,945      157,823
Loans                                     1,143          3,921         39,735      153,661      198,460
Fixed assets                                  -              -              -            -        3,446
Other assets                                  -              -              -            -       18,299
Total assets                        $    50,369    $     3,921    $    63,613    $ 287,606    $ 429,393

Liabilities:
Demand deposit accounts             $         -    $         -    $         -    $       -    $ 151,679
NOW accounts                             39,458              -              -            -       39,458
Money market deposit accounts            24,210              -              -            -       24,210
Savings accounts                        111,584              -              -            -      111,584
IRA accounts                              1,521          6,658         10,651          424       19,254
Certificates of deposit                  10,282 0       14,119 0       15,117 0         62 -1    39,580
Long-term borrowings                          -              -         10,000            -       10,000
Short-term borrowings                         -         10,000              -            -       10,000
Other liabilities                             -              -              -            -        2,363
Stockholders' equity:                         -              -              -            -       21,265
Total liabilities and
stockholders' equity                $   187,055    $    30,777    $   

35,768 $486 $429,393


GAP                                 $ (136,686)    $  (26,856)    $    27,845    $ 287,120
Cumulative GAP                      $ (136,686)    $ (163,542)    $ (135,697)    $ 151,423
Cumulative GAP as a % of total
assets                                  (31.83) %      (38.09) %      (31.60) %      35.26 %


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As shown above, measures of net interest income at risk were less favorable on
June 30, 2022 than on June 30, 2021 over a 12-month modeling period. All
measures remained within prescribed policy limits in the up and down interest
rate scenarios. Given the current rate environment, down shocks may not be
meaningful as market rates can only be shocked down to zero.

The measures of equity value at risk indicate the ongoing economic value of the
Company by considering the effects of changes in interest rates on all of the
Company's cash flows, and by discounting the cash flows to estimate the present
value of assets and liabilities. The difference between these discounted values
of the assets and liabilities is the economic value of equity, which, in theory,
approximates the fair value of the Company's net assets.

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