Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 10,~~November 9, 2021, the registrant had ~~5,598,177~~5,588,944 shares of common stock, $0.01 par value per share, outstanding.

OCONEE FEDERAL FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Amounts in thousands, except share and per share data)

For the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020

Common
Stock
Treasury
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (loss)
Unearned
ESOP
Shares
Total

Balance at December 31, 2019 $ 65 $ (8 ) $ 10,215 $ 78,392 $ 699 $ (507 ) $ 88,856
Net income — — — 946 — — 946
Other comprehensive income — — — — 1,204 — 1,204
Purchase of 42,981 shares of treasury stock ⁽¹⁾ — (1 ) (1,109 ) — — — (1,110 )
Stock-based compensation expense — — 20 — — — 20
Dividends — — — (593 ) — — (593 )
ESOP shares earned — — 66 — — 50 116
Balance at March 31, 2020 $ 65 $ (9 ) $ 9,192 $ 78,745 $ 1,903 $ (457 ) $ 89,439

Balance at December 31, 2020 $ 65 $ (9 ) $ 7,272 $ 80,315 $ 2,087 $ (314 ) $ 89,416
Net income — — — 870 — — 870
Other comprehensive loss — — — — (1,629 ) — (1,629 )
Purchase of 17,447 shares of treasury stock ⁽²⁾ — (1 ) (523 ) — — — (524 )
Stock-based compensation expense — — 17 — — — 17
Common Stock Issued 1 — — — — — 1
Dividends — — — (561 ) — — (561 )
ESOP shares earned — — 37 — — 52 89
Balance at March 31, 2021 $ 66 $ (10 ) $ 6,803 $ 80,624 $ 458 $ (262 ) $ 87,679


												Accumulated
						Additional						Other			Unearned
	Common		Treasury			Paid-In			Retained			Comprehensive			ESOP
	Stock		Stock			Capital			Earnings			Income (loss)			Shares			Total
Balance at June 30, 2020	$	65	$	(9	)	$	7,342		$	79,071		$	2,243		$	(407	)	$	88,305
Net income		—		—			—			1,273			—			—			1,273
Other comprehensive loss		—		—			—			—			(168	)		—			(168	)
Purchase of 1,276 shares of treasury stock ⁽¹⁾		—		—			(31	)		—			—			—			(31	)
Stock-based compensation expense		—		—			21			—			—			—			21
Common Stock Issued		—		—			5			—			—			—			5
Dividends		—		—			—			(561	)		—			—			(561	)
ESOP shares earned		—		—			34			—			—			50			84
Balance at September 30, 2020	$	65	$	(9	)	$	7,371		$	79,783		$	2,075		$	(357	)	$	88,928

Balance at June 30, 2021	$	66	$	(10	)	$	6,400		$	80,915		$	941		$	(212	)	$	88,100
Net income		—		—			—			771			—			—			771
Other comprehensive loss		—		—			—			—			(797	)		—			(797	)
Purchase of 2,865 shares of treasury stock ⁽²⁾		—		—			(67	)		—			—			—			(67	)
Stock-based compensation expense		—		—			30			—			—			—			30
Dividends		—		—			—			(559	)		—			—			(559	)
ESOP shares earned		—		—			38			—			—			51			89
Balance at September 30, 2021	$	66	$	(10	)	$	6,401		$	81,127		$	144		$	(161	)	$	87,567

_______________

(1)

The weighted average cost of treasury shares purchased during the three months ended September 30, 2020 was ~~$25.81~~$24.58 per share. Treasury stock repurchases were accounted for using the par value method.

(2)

The weighted average cost of treasury shares purchased during the three months ended September 30, 2021 was ~~$26.69~~$23.43 per share. Treasury stock repurchases were accounted for using the par value method.

See accompanying notes to the consolidated financial statements

OCONEE FEDERAL FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)

(Amounts in thousands, except share and per share data)

~~For the nine months ended March 31, 2021 and March 31, 2020~~


	Three Months Ended
	September 30, 2021			September 30, 2020
Cash Flows From Operating Activities
Net income	$	771		$	1,273
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net		530			423
Net accretion of purchase accounting adjustments		(56	)		(84	)
Deferred income tax (benefit)/expense		(24	)		88
Change in loan servicing asset		14			43
Net gain on sales of securities		—			(62	)
Mortgage loans originated for sale		(5,109	)		(3,103	)
Mortgage loans sold		5,379			2,325
Gain on sales of mortgage loans		(106	)		(35	)
Change in fair value of equity securities		50			(23	)
Increase in cash surrender value of bank owned life insurance		(113	)		(112	)
Gain on payoff of purchased credit impaired loans		—			(195	)
ESOP compensation expense		89			84
Stock based compensation expense		30			21
Net change in operating assets and liabilities:
Accrued interest receivable and other assets		33			(29	)
Accrued interest payable and other liabilities		(96	)		(195	)
Net cash provided by operating activities		1,392			419

Cash Flows From Investing Activities
Purchases of premises and equipment		(88	)		(141	)
Purchases of securities available-for-sale		(22,202	)		(10,059	)
Proceeds from maturities, paydowns and calls of securities available-for-sale		8,370			5,527
Proceeds from sales of securities available-for-sale		—			1,872
Sales of restricted equity securities		374			—
Loan originations and repayments, net		1,254			(3,114	)
Net cash used in investing activities		(12,292	)		(5,915	)

Cash Flows from Financing Activities
Net change in deposits		9,504			3,746
Repayment of notes payable to FHLB		(10,000	)		—
Dividends paid		(559	)		(561	)
Purchase of treasury stock		(67	)		(31	)
Proceeds from sale of common stock, net of issuance costs		—			5
Net cash (used)/provided by financing activities		(1,122	)		3,159

Change in cash and cash equivalents		(12,022	)		(2,337	)

Cash and cash equivalents, beginning of period		30,649			34,582
Cash and cash equivalents, end of period	$	18,627		$	32,245

Common
Stock
Treasury
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (loss)
Unearned
ESOP
Shares
Total

Balance at June 30, 2019 $ 65 $ (8 ) $ 10,986 $ 77,464 $ 394 $ (604 ) $ 88,297
Net income — — — 2,971 — — 2,971
Other comprehensive income — — — — 1,509 — 1,509
Purchase of 83,060 shares of treasury stock ⁽¹⁾ — (1 ) (2,036 ) — — — (2,037 )
Stock-based compensation expense — — 59 — — — 59
Dividends ⁽²⁾ — — 29 (1,690 ) — — (1,661 )
ESOP shares earned — — 154 — — 147 301
Balance at March 31, 2020 $ 65 $ (9 ) $ 9,192 $ 78,745 $ 1,903 $ (457 ) $ 89,439

Balance at June 30, 2020 $ 65 $ (9 ) $ 7,342 $ 79,071 $ 2,243 $ (407 ) $ 88,305
Net income — — — 3,214 — — 3,214
Other comprehensive loss — — — — (1,785 ) — (1,785 )
Purchase of 27,314 shares of treasury stock ⁽³⁾ — (1 ) (771 ) — — — (772 )
Stock-based compensation expense — — 58 — — — 58
Common Stock Issued 1 — 5 — — — 6
Dividends ⁽⁴⁾ — — 21 (1,661 ) — — (1,640 )
ESOP shares earned — — 148 — — 145 293
Balance at March 31, 2021 $ 66 $ (10 ) $ 6,803 $ 80,624 $ 458 $ (262 ) $ 87,679

	~~(1)~~	~~The weighted average cost of treasury shares purchased during the nine months ended was $24.52 per share. Treasury stock repurchases were accounted for using the par value method.~~
	~~(2)~~	Approximately $79 of cash dividends paid on shares in the ESOP was used as an additional principal reduction on the ESOP debt, resulting in the release of approximately 7,300 additional shares. The portion of the dividend paid on allocated shares of approximately $50 and resulting release of approximately 4,400 shares, was treated as a dividend. The portion of the dividend paid on unallocated shares of approximately $29 and resulting release of approximately 2,800 shares, and was accounted for as additional compensation expense for the nine months ended March 31, 2020.
	~~(3)~~	~~The weighted average cost of treasury shares purchased during the nine months ended was $25.59 per share. Treasury stock repurchases were accounted for using the par value method.~~
	~~(4)~~	Approximately $77 of cash dividends paid on shares in the ESOP was used as an additional principal reduction on the ESOP debt, resulting in the release of approximately 7,000 additional shares. The portion of the dividend paid on allocated shares of approximately $56 and resulting release of approximately 5,300 shares, was treated as a dividend. The portion of the dividend paid on unallocated shares of approximately $21 and resulting release of approximately 1,700 shares, and was accounted for as additional compensation expense for the nine months ended March 31, 2021.

See accompanying notes to the consolidated financial statements

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ~~OF CASH FLOWS~~

(Unaudited)

(Amounts in thousands, except share and per share data)

Nine Months Ended
March 31, March 31,
2021 2020
Cash Flows From Operating Activities
Net income $ 3,214 $ 2,971
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for real estate owned 21 117
Depreciation and amortization, net 1,367 932
Net accretion of purchase accounting adjustments (160 ) (50 )
Deferred income tax (benefit)/expense (54 ) 403
Net (gain)/loss on sale of real estate owned (26 ) 120
Change in loan servicing asset 72 278
Net gain on sales of securities (109 ) (125 )
Mortgage loans originated for sale (11,431 ) (9,603 )
Mortgage loans sold 11,348 8,623
Gain on sales of mortgage loans (177 ) (103 )
Change in fair value of equity securities 11 98
Increase in cash surrender value of bank owned life insurance (344 ) (348 )
Gain on payoff of purchased credit impaired loans (195 ) (309 )
ESOP compensation expense 293 301
Stock based compensation expense 58 59
Net change in operating assets and liabilities:
Accrued interest receivable and other assets 111 289
Accrued interest payable and other liabilities (583 ) (1 )
Net cash provided by operating activities 3,416 3,652

Cash Flows From Investing Activities
Purchases of premises and equipment (217 ) (1,798 )
Purchases of securities available-for-sale (64,054 ) (21,627 )
Proceeds from maturities, paydowns and calls of securities available-for-sale 18,706 16,708
Proceeds from sales of securities available-for-sale 7,923 14,762
Sales of restricted equity securities 191 818
Purchases of restricted equity securities — (213 )
Proceeds from sale of real estate owned 216 279
Loan originations and repayments, net 16,425 7,282
Net cash (used)/provided in investing activities (20,810 ) 16,211

Cash Flows from Financing Activities
Net change in deposits 20,099 (12,743 )
Proceeds from notes payable to FHLB — 5,000
Repayment of notes payable to FHLB — (19,000 )
Dividends paid (1,640 ) (1,661 )
Purchase of treasury stock (772 ) (2,037 )
Proceeds from sale of common stock, net of issuance costs 6 —
Net cash provided/(used) by financing activities 17,693 (30,441 )

Change in cash and cash equivalents 299 (10,578 )

Cash and cash equivalents, beginning of period 34,582 36,690
Cash and cash equivalents, end of period $ 34,881 $ 26,112

(1)

BASIS OF PRESENTATION, RISKS AND UNCERTAINTIES

~~See accompanying notes to the consolidated financial statements~~

~~OCONEE FEDERAL FINANCIAL CORP.~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~
~~(Amounts in thousands, except share and per share data)~~

~~(1) BASIS OF PRESENTATION, RISKS AND UNCERTAINTIES~~

Basis of Presentation:

The accompanying unaudited consolidated financial statements of Oconee Federal Financial Corp., which include the accounts of its wholly owned subsidiary Oconee Federal Savings and Loan Association (the “Association”) (referred to herein as “the Company,” “we,” “us,” or “our”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Intercompany accounts and transactions are eliminated during consolidation. The Company is majority owned ~~(74.36%~~(74.49%) by Oconee Federal, MHC. These financial statements do not include the transactions and balances of Oconee Federal, MHC.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial position as of ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 and the results of operations and cash flows for the interim periods ended ~~March 31,~~September 30, 2021 and 2020. All interim amounts are unaudited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year ending June 30, ~~2021~~2022 or any other period. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2020.~~2021.

Reclassifications:

Certain amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on net income or shareholders’ equity as previously reported.

Cash Flows:

Cash and cash equivalents include cash on hand, federal funds sold, overnight interest-earning deposits and amounts due from other depository institutions.

Use of Estimates:

To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ.

Risks and Uncertainties:

The novel coronavirus (“COVID-19”) pandemic has adversely impacted global commercial activity and contributed to ~~significant declines and~~ volatility in financial markets. The COVID-19 pandemic and government responses continue to disrupt global supply chains and adversely impact many industries. The pandemic may continue to have a material adverse impact on economic and market conditions. The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and legislation has been passed to provide relief from reporting loan classifications due to modifications related to the COVID-19 pandemic. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. The spread of the coronavirus has caused us to modify our business practices with regard to interactions of employees and customers. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate impact of the COVID-19 pandemic with regard to capital, liquidity, loan loss reserves, etc. Nevertheless, the pandemic presents uncertainty and risk with respect to the Company, its performance, and its financial results.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

~~(2)~~~~NEW ACCOUNTING STANDARDS~~

(2)

NEW ACCOUNTING STANDARDS

Accounting Standards Update (“ASU”) 2021-06, “Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946)”. Issued in August 2021, ASU 2021-06 amends SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The amendments are effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2020-04, “Reference Rate Reform (Topic 848)”. Issued in March 2020, ASU 2020-04 provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2019-12, “Income Taxes (Topic 740)”. Issued in December 2019, ASU 2019-12 provides guidance to simplify accounting for income taxes by removing specific technical exceptions that often produce information difficult for investors to understand. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For the Company, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. ~~Early adoption is permitted.~~ The Company ~~does~~adopted this standard on July 1, 2021. This pronouncement did not ~~expect these amendments to~~ have a material effect on ~~its~~the financial statements.

ASU 2019-11, “Codification to Improvements to Topic 326, Financial Instruments – Credit Losses”. Issued in November 2019, ASU 2019-11 provides guidance that addresses issues raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect a variety of Topics in the Accounting Standards Codification. For the Company, the amendments are effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. Early adoption is permitted in any interim period as long as an entity has adopted the amendments in ASU 2016-13.

ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)”. Issued in November 2019, ASU 2019-10 provides guidance to defer the effective dates for private companies, not-for-profit organizations, and certain smaller reporting companies (such as the Company) applying standards on current expected credit losses (CECL), derivatives, hedging and leases. For the Company, the new effective date for Credit Losses (CECL) will be for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. For the Company, the effective dates for Derivatives, Hedging and Leases were not deferred under this guidance.

ASU 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”. Issued in May 2019, ASU 2019-05 provides entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. On October 16, 2019, the Financial Accounting Standards Board (“FASB”) announced a delay in the implementation schedule allowing certain entities, including smaller reporting companies (such as the Company) to adopt ASU 2016-13 in fiscal years beginning after December 15, 2022, and interim periods within those years.

ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”. Issued in April 2019, ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The amendments related to credit losses will be effective for the Company for reporting periods beginning after December 15, 2019. The amendments related to hedging will be effective for the Company for interim and annual periods beginning after December 15, 2018. The amendments related to recognition and measurement of financial instruments will be effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this standard on July 1, 2020. This pronouncement did not have a material effect on the financial statements.

ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. Issued in August 2018, ASU 2018-13 provides guidance about fair value measurement disclosures. The amendment requires numerous removals, modifications and additions of fair value disclosure information. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this standard on July 1, 2020. This pronouncement did not have a material effect on the financial statements.

ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. Issued in January 2017, ASU 2017-04 amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted this standard on July 1, 2020. This pronouncement did not have a material effect on the financial statements.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(2)

NEW ACCOUNTING STANDARDS (continued)

ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. Issued in June 2016, ASU 2016-13 provides financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as a credit loss expense. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company ~~has determined that it will continue to prepare its credit loss allowance internally. The Company~~ is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements. In November 2019, the FASB issued guidance delaying the implementation schedule and allowing certain entities, including smaller reporting companies (such as the Company) to adopt ASU 2016-13 in fiscal years beginning after December 15, 2022, and interim periods within those years.

There have been no accounting standards that have been issued or proposed by the FASB or other standards-setting bodies during this quarter that are expected to have a material impact on the Company’s financial position, results of operations or cash flows. The Company continues to evaluate the impact of standards previously issued and not yet effective, and has no changes in its assessment since filing the Annual Report on Form 10-K.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

~~(3)~~~~EARNINGS PER SHARE (“EPS”)~~

(3)

EARNINGS PER SHARE (“EPS”)

Basic EPS is based on the weighted average number of common shares outstanding and is adjusted for ESOP shares not yet committed to be released. Unvested restricted stock awards, which contain rights to non-forfeitable dividends, are considered participating securities and the two-class method of computing basic and diluted EPS is applied. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as outstanding stock options, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable (such as stock options) or which could be converted into common stock, if dilutive, using the treasury stock method. The factors used in the earnings per common share computation follow:

Schedule of factors used in the earnings per common share computation


	Three Months Ended						Nine Months Ended						Three Months Ended
	March 31, 2021			March 31, 2020			March 31, 2021			March 31, 2020			September 30, 2021			September 30, 2020
Earnings per share
Net income	$	870		$	946		$	3,214		$	2,971		$	771		$	1,273
Less: distributed earnings allocated to participating securities		—			(1	)		(1	)		(3	)		(1	)		(1	)
Less: (undistributed income) dividends in excess of earnings allocated to participating securities		—			—			(1	)		(2	)		(1	)		—
Net earnings available to common shareholders	$	870		$	945		$	3,212		$	2,966		$	769		$	1,272

Weighted average common shares outstanding including participating securities		5,603,199			5,705,937			5,604,002			5,721,903			5,592,583			5,758,040
Less: participating securities		(2,800	)		(8,800	)		(2,800	)		(8,800	)		(14,300	)		(5,800	)
Less: average unearned ESOP shares		(25,927	)		(51,990	)		(32,181	)		(54,778	)		(6,855	)		(35,124	)
Weighted average common shares outstanding		5,574,472			5,645,147			5,569,021			5,658,325			5,571,428			5,717,116

Basic earnings per share	$	0.16		$	0.17		$	0.58		$	0.52		$	0.14		$	0.22

Weighted average common shares outstanding		5,574,472			5,645,147			5,569,021			5,658,325			5,571,428			5,717,116
Add: dilutive effects of assumed exercises of stock options		71,769			71,002			71,593			67,598			66,084			73,103
Average shares and dilutive potential common shares		5,646,241			5,716,149			5,640,614			5,725,923			5,637,512			5,790,219

Diluted earnings per share	$	0.15		$	0.17		$	0.57		$	0.52		$	0.14		$	0.22

For the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021, 11,200 shares were considered anti-dilutive as the exercise price was in excess of the average market price, and for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2020, 11,200 shares were considered anti-dilutive as the exercise price was in excess of the average market price.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

~~(4) SECURITIES AVAILABLE-FOR-SALE~~

(4)

SECURITIES AVAILABLE-FOR-SALE

Debt, mortgage-backed and equity securities have been classified in the consolidated balance sheets according to management’s intent. U.S. Government agency mortgage-backed securities consists of securities issued by U.S. Government agencies and U.S. Government sponsored enterprises. Investment securities at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 are as follows:

Schedule of investment securities

March 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Change in Fair Value Equity Securities		Fair Value

														Gross		Gross			Change in
												Amortized		Unrealized		Unrealized			Fair Value		Fair
September 30, 2021												Cost		Gains		Losses			Equity Securities		Value
Available-for-sale:
FHLMC common stock	$	20	$	—	$	—		$	147	$	167	$	20	$	—	$	—		$	47	$	67
Certificates of deposit		2,493		65		—			—		2,558		2,244		41		—			—		2,285
Municipal securities		18,767		721		(14	)		—		19,474		18,708		722		—			—		19,430
CMOs		8,204		269		(11	)		—		8,462		11,521		207		(51	)		—		11,677
U.S. Government agency mortgage-backed securities		83,453		975		(975	)		—		83,453		105,284		808		(1,245	)		—		104,847
U.S. Treasury and Government agency bonds		11,518		13		(464	)		—		11,067		13,477		9		(310	)		—		13,176
Total available-for-sale	$	124,455	$	2,043	$	(1,464	)	$	147	$	125,181	$	151,254	$	1,787	$	(1,606	)	$	47	$	151,482

June 30, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Change in Fair Value Equity Securities		Fair Value
														Gross		Gross			Change in
												Amortized		Unrealized		Unrealized			Fair Value		Fair
June 30, 2021												Cost		Gains		Losses			Equity Securities		Value
Available-for-sale:
FHLMC common stock	$	20	$	—	$	—		$	158	$	178	$	20	$	—	$	—		$	97	$	117
Certificates of deposit		2,493		99		—			—		2,592		2,244		53		—			—		2,297
Municipal securities		20,821		822		—			—		21,643		18,737		794		—			—		19,531
CMOs		9,723		383		—			—		10,106		7,468		262		(14	)		—		7,716
U.S. Government agency mortgage-backed securities		53,660		1,538		(25	)		—		55,173		95,811		916		(614	)		—		96,113
U.S. Treasury and Government agency bonds		1,011		23		—			—		1,034		13,493		32		(238	)		—		13,287
Total available-for-sale	$	87,728	$	2,865	$	(25	)	$	158	$	90,726	$	137,773	$	2,057	$	(866	)	$	97	$	139,061

Securities pledged at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 had fair values of ~~$15,073~~$21,601 and ~~$12,524,~~$22,726, respectively. These securities were pledged to secure public deposits and Federal Home Loan Bank (“FHLB”) advances.

At ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, there were no holdings of securities of any one issuer, other than U.S. Government agencies and U.S. Government sponsored enterprises, in an amount greater than ~~10%~~10% of shareholders’ equity.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(4)

SECURITIES AVAILABLE-FOR-SALE (continued)

The following tables show the fair value and unrealized loss of securities that have been in unrealized loss positions for less than twelve months and for twelve months or more at ~~March 31,~~September 30, 2021 and June 30, ~~2020.~~2021. The tables also show the number of securities in an unrealized loss position for each category of investment security as of the respective dates.

Schedule of fair value and unrealized loss of securities that have been in unrealized loss positions

Less than 12 Months 12 Months or More Total
Fair Value Unrealized
Loss Number in Unrealized Loss ⁽¹⁾ Fair Value Unrealized
Loss Number in Unrealized Loss ⁽¹⁾ Fair Value Unrealized
Loss Number in Unrealized Loss ⁽¹⁾
March 31, 2021
Available-for-sale:
Municipal securities $ 1,263 $ (14 ) 4 $ — $ — — $ 1,263 $ (14 ) 4
CMOs 994 (11 ) 1 — — — 994 (11 ) 1
U.S. Government agency mortgage-backed securities 56,677 (975 ) 28 — — — 56,677 (975 ) 28
U.S. Treasury and Government agency bonds 10,049 (464 ) 6 — — — 10,049 (464 ) 6
$ 68,983 $ (1,464 ) 39 $ — $ — — $ 68,983 $ (1,464 ) 39

	Less than 12 Months							12 Months or More						Total							Less than 12 Months							12 Months or More							Total
June 30, 2020	Fair Value		Unrealized Loss			Number in Unrealized Loss ⁽¹⁾		Fair Value		Unrealized Loss		Number in Unrealized Loss ⁽¹⁾		Fair Value		Unrealized Loss			Number in Unrealized Loss ⁽¹⁾
September 30, 2021																					Fair Value		Unrealized Loss			Number in Unrealized Loss⁽¹⁾		Fair Value		Unrealized Loss			Number in Unrealized Loss⁽¹⁾		Fair Value		Unrealized Loss			Number in Unrealized Loss⁽¹⁾
Available-for-sale:
CMOs																					$	4,874	$	(30	)		1	$	982	$	(21	)		1	$	5,856	$	(51	)		2
U.S. Government agency mortgage-backed securities																						77,386		(1,240	)		36		1,272		(5	)		2		78,658		(1,245	)		38
U.S. Treasury and Government agency bonds																						6,411		(123	)		4		3,761		(187	)		2		10,172		(310	)		6
																					$	88,671	$	(1,393	)		41	$	6,015	$	(213	)		5	$	94,686	$	(1,606	)		46
Available-for-sale:
U.S. Government agency mortgage-backed securities	$	6,342	$	(25	)		4	$	—	$	—		—	$	6,342	$	(25	)		4
	$	6,342	$	(25	)		4	$	—	$	—		—	$	6,342	$	(25	)		4

	Less than 12 Months							12 Months or More							Total
June 30, 2021	Fair Value		Unrealized Loss			Number in Unrealized Loss⁽¹⁾		Fair Value		Unrealized Loss			Number in Unrealized Loss⁽¹⁾		Fair Value		Unrealized Loss			Number in Unrealized Loss⁽¹⁾
Available-for-sale:
CMOs	$	990	$	(14	)		1	$	—	$	—			—	$	990	$	(14	)		1
U.S. Government agency mortgage-backed securities		51,863		(606	)		25		1,101		(8	)		1		52,964		(614	)		26
U.S. Treasury and Government agency bonds		7,993		(238	)		5		—		—			—		7,993		(238	)		5
	$	60,846	$	(858	)		31	$	1,101	$	(8	)		1	$	61,947	$	(866	)		32

(1)

Actual amounts.

The Company evaluates securities for other-than-temporary impairments (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company considers the length of time and the extent to which the fair value has been less than amortized cost and the financial condition and near-term prospects of the issuer. Additionally, the Company considers its intent to sell or whether it will be more likely than not it will be required to sell the security prior to the security’s anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by federal Government agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

None of the unrealized losses at ~~March 31,~~September 30, 2021 were recognized into net income for the three ~~or nine~~ months ended ~~March 31,~~September 30, 2021 because the issuers’ bonds are of high credit quality, management does not intend to sell and it is more likely than not that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value of these securities is expected to recover as they approach their maturity date or reset date. None of the unrealized losses at June 30, ~~2020~~2021 were recognized as having OTTI during the year ended June 30, ~~2020.~~2021.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(4)

SECURITIES AVAILABLE-FOR-SALE (continued)

The following table presents the amortized cost and fair value of debt securities classified as available-for-sale at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 by contractual maturity.

Schedule of amortized cost and fair value of debt securities classified as available-for-sale by contractual maturity

									September 30, 2021				June 30, 2021
	March 31, 2021				June 30, 2020				Amortized		Fair		Amortized		Fair
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Cost		Value		Cost		Value
Less than one year	$	2,755	$	2,797	$	499	$	503	$	4,237	$	4,279	$	3,003	$	3,034
Due from one to five years		6,296		6,528		7,759		8,044		4,552		4,728		5,793		6,008
Due after five years to ten years		19,676		19,599		10,707		11,152		22,836		22,943		22,258		22,459
Due after ten years		4,051		4,175		5,360		5,570		2,804		2,941		3,420		3,614
Mortgage-backed securities, CMOs and FHLMC stock ⁽¹⁾		91,677		92,082		63,403		65,457		116,825		116,591		103,299		103,946
Total available for sale	$	124,455	$	125,181	$	87,728	$	90,726	$	151,254	$	151,482	$	137,773	$	139,061

(1)

Actual cash flows may differ from contractual maturities as borrowers may prepay obligations without prepayment penalty. FHLMC common stock is not scheduled because it has no contractual maturity date.

The following table presents the gross proceeds from sales of securities available-for-sale and gains or losses recognized for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 and 2020:

Schedule of proceeds from sales of securities available-for-sale and gains or losses recognized


											Three Months Ended
	Three Months Ended					Nine Months Ended					September 30, 2021		September 30, 2020
Available-for-sale:	March 31, 2021		March 31, 2020			March 31, 2021		March 31, 2020
Proceeds	$	—	$	9,494		$	7,923	$	14,762		$	—	$	1,872
Gross gains		—		122			109		137			—		62
Gross losses		—		(9	)		—		(12	)		—		—

The tax provision related to the net realized gain for the three months ended ~~March 31,~~September 30, 2020 was ~~$23. The tax provision related to the net realized gain for the nine months ended March 31, 2021 and March 31, 2020 was $23 and $26, respectively.~~$13.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

~~(5) LOANS~~

(5)

LOANS

The components of loans at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 were as follows:

Schedule of components of loans

	March 31, 2021		June 30, 2020		September 30, 2021		June 30, 2021
Real estate loans:
One-to-four family	$	273,276	$	283,931	$	271,840	$	268,889
Multi-family		665		704		389		649
Home equity		6,233		5,763		5,995		6,158
Nonresidential		21,228		20,083		21,794		21,868
Agricultural		1,073		1,187		2,656		2,683
Construction and land		24,793		29,096		23,717		27,002
Total real estate loans		327,268		340,764		326,391		327,249
Commercial and industrial ⁽¹⁾		6,176		8,135		5,485		5,871
Consumer and other loans		6,094		6,768		6,015		5,969
Total loans	$	339,538	$	355,667	$	337,891	$	339,089

(1)

Includes ~~$2,823~~$2,310 and ~~$4,094~~$2,677 of ~~100%~~100% Small Business Administration (“SBA”) guaranteed Paycheck Protection Program (“PPP”) loans as of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

The following ~~tables present~~table presents the activity in the allowance for loan losses for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 by portfolio segment:

Three months ended March 31, 2021 Beginning
Balance Provision Charge-offs Recoveries Ending
Balance
Real estate loans:
One-to-four family $ 1,027 $ (3 ) $ — $ — $ 1,024
Multi-family 4 — — — 4
Home equity 36 5 — — 41
Nonresidential 117 6 — — 123
Agricultural 4 — — — 4
Construction and land 94 (3 ) — — 91
Total real estate loans 1,282 5 — — 1,287
Commercial and industrial 28 (5 ) — — 23
Consumer and other loans 29 — — — 29
Total loans $ 1,339 $ — $ — $ — $ 1,339

Nine months ended March 31, 2021 Beginning
Balance Provision Charge-offs Recoveries Ending
Balance
Real estate loans:
One-to-four family $ 1,032 $ (6 ) $ (2 ) $ — $ 1,024
Multi-family 4 — — — 4
Home equity 34 12 (5 ) — 41
Nonresidential 75 48 — — 123
Agricultural 4 — — — 4
Construction and land 105 (14 ) — — 91
Total real estate loans 1,254 40 (7 ) — 1,287
Commercial and industrial 65 (42 ) — — 23
Consumer and other loans 27 2 — — 29
Total loans $ 1,346 — $ (7 ) $ — $ 1,339

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts~~Schedule of activity in ~~thousands, except share and per share data)~~the allowance for loan losses

Three months ended September 30, 2021		Beginning Balance		Provision			Charge-offs		Recoveries		Ending Balance
Real estate loans:
One-to-four family	$	992	$	10		$	—	$	—	$	1,002
Multi-family		4		—			—		—		4
Home equity		41		—			—		—		41
Nonresidential		133		2			—		—		135
Agricultural		15		—			—		—		15
Construction and land		103		(13	)		—		—		90
Total real estate loans		1,288		(1	)		—		—		1,287
Commercial and industrial		22		1			—		—		23
Consumer and other loans		29		—			—		—		29
Total loans	$	1,339	$	—		$	—	$	—	$	1,339

The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at ~~March 31,~~September 30, 2021:

Schedule of recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment

	Ending Allowance on Loans:				Loans:					Ending Allowance on Loans:				Loans:
At March 31, 2021	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
At September 30, 2021										Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Real estate loans:
One-to-four family	$	—	$	1,024	$	1,748	$	271,528	$	—	$	1,002	$	1,683	$	270,157
Multi-family		—		4		—		665		—		4		—		389
Home equity		—		41		—		6,233		—		41		—		5,995
Nonresidential		—		123		—		21,228		—		135		509		21,285
Agricultural		—		4		—		1,073		—		15		—		2,656
Construction and land		—		91		—		24,793		—		90		—		23,717
Total real estate loans		—		1,287		1,748		325,520		—		1,287		2,192		324,199
Commercial and industrial ⁽¹⁾		—		23		—		6,176		—		23		—		5,485
Consumer and other loans		—		29		—		6,094		—		29		—		6,015
Total loans	$	—	$	1,339	$	1,748	$	337,790	$	—	$	1,339	$	2,192	$	335,699

(1)	Includes ~~$2,823~~$2,310 of PPP loans for which no loan loss reserve was allocated due to 100% SBA guarantee.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

The following tables present the activity in the allowance for loan losses for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2020 by portfolio segment:

Three months ended March 31, 2020
Beginning
Balance
Provision Charge-offs Recoveries
Ending
Balance

Real estate loans:
One-to-four family $ 993 $ 6 $ — $ — $ 999
Multi-family 4 — — — 4
Home equity 33 3 — — 36
Nonresidential 77 (14 ) — — 63
Agricultural 4 — — — 4
Construction and land 94 10 — — 104
Total real estate loans 1,205 5 — — 1,210
Commercial and industrial 66 (7 ) — — 59
Consumer and other loans 25 2 — — 27
Total loans $ 1,296 $ — $ — $ — $ 1,296

Nine months ended March 31, 2020
Beginning
Balance

Ending
Provision
Charge-offs Recoveries
Ending
Balance

Real estate loans:
One-to-four family $ 995 $ 4 $ — $ — $ 999
Multi-family 4 — — — 4
Home equity 24 12 — — 36
Nonresidential 87 (24 ) — — 63
Agricultural 3 1 — — 4
Construction and land 94 10 — — 104
Total real estate loans 1,207 3 — — 1,210
Commercial and industrial 67 (8 ) — — 59
Consumer and other loans 23 5 (1 ) — 27
Total loans $ 1,297 $ — $ (1 ) $ — $ 1,296

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts~~Schedule of activity in ~~thousands, except share and per share data)~~the allowance for loan losses

Three months ended September 30, 2020		Beginning Balance		Provision			Charge-offs			Recoveries		Ending Balance
Real estate loans:
One-to-four family	$	1,032	$	(41	)	$	(2	)	$	—	$	989
Multi-family		4		—			—			—		4
Home equity		34		6			—			—		40
Nonresidential		75		33			—			—		108
Agricultural		4		—			—			—		4
Construction and land		105		(9	)		—			—		96
Total real estate loans		1,254		(11	)		(2	)		—		1,241
Commercial and industrial		65		9			—			—		74
Consumer and other loans		27		2			—			—		29
Total loans	$	1,346	$	—		$	(2	)	$	—	$	1,344

The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at June 30, ~~2020:~~2021:

Schedule of recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment

		Ending Allowance on Loans:				Loans:
At June 30, 2021		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Real estate loans:
One-to-four family	$	—	$	992	$	1,711	$	267,178
Multi-family		—		4		—		649
Home equity		—		41		—		6,158
Nonresidential		—		133		—		21,868
Agricultural		—		15		—		2,683
Construction and land		—		103		—		27,002
Total real estate loans		—		1,288		1,711		325,538
Commercial and industrial⁽¹⁾		—		22		—		5,871
Consumer and other loans		—		29		—		5,969
Total loans	$	—	$	1,339	$	1,711	$	337,378

Ending Allowance on Loans: Loans:
At June 30, 2020 Individually
Evaluated for
Impairment Collectively
Evaluated for
Impairment Individually
Evaluated for
Impairment
Collectively
Evaluated for
Impairment

Real estate loans:
One-to-four family $ — $ 1,032 $ 1,832 $ 282,099
Multi-family — 4 — 704
Home equity — 34 — 5,763
Nonresidential — 75 562 19,521
Agricultural — 4 — 1,187
Construction and land — 105 — 29,096
Total real estate loans — 1,254 2,394 338,370
Commercial and industrial ⁽¹⁾ — 65 — 8,135
Consumer and other loans — 27 — 6,768
Total loans $ — $ 1,346 $ 2,394 $ 353,273

(1)

~~(1)~~

Includes ~~$4,094~~$2,677 of PPP loans for which no loan loss reserve was allocated due to 100% SBA guarantee.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

The tables below present loans that were individually evaluated for impairment by portfolio segment at ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, including the average recorded investment balance and interest earned for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and the year ended June 30, ~~2020:~~2021:

Schedule of loans individually evaluated for impairment by portfolio segment

		September 30, 2021
		Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no recorded allowance:
Real estate loans:
One-to-four family	$	1,705	$	1,683	$	—	$	1,697	$	8
Multi-family		—		—		—		—		—
Home equity		—		—		—		—		—
Nonresidential		540		509		—		255		—
Agricultural		—		—		—		—		—
Construction and land		—		—		—		—		—
Total real estate loans		2,245		2,192		—		1,952		8
Commercial and industrial		—		—		—		—		—
Consumer and other loans		—		—		—		—		—
Total	$	2,245	$	2,192	$	—	$	1,952	$	8

With recorded allowance:
Real estate loans:
One-to-four family	$	—	$	—	$	—	$	—	$	—
Multi-family		—		—		—		—		—
Home equity		—		—		—		—		—
Nonresidential		—		—		—		—		—
Agricultural		—		—		—		—		—
Construction and land		—		—		—		—		—
Total real estate loans		—		—		—		—		—
Commercial and industrial		—		—		—		—		—
Consumer and other loans		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—

Totals:
Real estate loans	$	2,245	$	2,192	$	—	$	1,952	$	8
Consumer and other loans		—		—		—		—		—
Total	$	2,245	$	2,192	$	—	$	1,952	$	8

March 31, 2021
Unpaid
Principal
Balance Recorded
Investment Related
Allowance Average
Recorded
Investment Interest
Income
Recognized
With no recorded allowance:
Real estate loans:
One-to-four family $ 1,771 $ 1,748 $ — $ 1,790 $ 26
Multi-family — — — — —
Home equity — — — — —
Nonresidential — — — 281 —
Agricultural — — — — —
Construction and land — — — — —
Total real estate loans 1,771 1,748 — 2,071 26
Commercial and industrial — — — — —
Consumer and other loans — — — — —
Total $ 1,771 $ 1,748 $ — $ 2,071 $ 26

With recorded allowance:
Real estate loans:
One-to-four family $ — $ — $ — $ — $ —
Multi-family — — — — —
Home equity — — — — —
Nonresidential — — — — —
Agricultural — — — — —
Construction and land — — — — —
Total real estate loans — — — — —
Commercial and industrial — — — — —
Consumer and other loans — — — — —
Total $ — $ — $ — $ — $ —

Totals:
Real estate loans $ 1,771 $ 1,748 $ — $ 2,071 $ 26
Consumer and other loans — — — — —
Total $ 1,771 $ 1,748 $ — $ 2,071 $ 26

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

June 30, 2020
Unpaid
Principal
Balance Recorded
Investment Related
Allowance Average
Recorded
Investment Interest
Income
Recognized
With no recorded allowance:
Real estate loans:
One-to-four family $ 1,863 $ 1,832 $ — $ 2,062 $ 36
Multi-family — — — — —
Home equity — — — — —
Nonresidential 596 562 — 588 —
Agricultural — — — 178 —
Construction and land — — — — —
Total real estate loans 2,459 2,394 — 2,828 36
Commercial and industrial — — — — —
Consumer and other loans — — — — —
Total $ 2,459 $ 2,394 $ — $ 2,828 $ 36

With recorded allowance:
Real estate loans:
One-to-four family $ — $ — $ — $ — $ —
Multi-family — — — — —
Home equity — — — — —
Nonresidential — — — — —
Agricultural — — — — —
Construction and land — — — — —
Total real estate loans — — — — —
Commercial and industrial — — — — —
Consumer and other loans — — — — —
Total $ — $ — $ — $ — $ —

Totals:
Real estate loans $ 2,459 $ 2,394 $ — $ 2,828 $ 36
Consumer and other loans — — — — —
Total $ 2,459 $ 2,394 $ — $ 2,828 $ 36

(5) LOANS (continued)

		June 30, 2021
		Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no recorded allowance:
Real estate loans:
One-to-four family	$	1,736	$	1,711	$	—	$	1,772	$	34
Multi-family		—		—		—		—		—
Home equity		—		—		—		—		—
Nonresidential		—		—		—		281		—
Agricultural		—		—		—		—		—
Construction and land		—		—		—		—		—
Total real estate loans		1,736		1,711		—		2,053		34
Commercial and industrial		—		—		—		—		—
Consumer and other loans		—		—		—		—		—
Total	$	1,736	$	1,711	$	—	$	2,053	$	34

With recorded allowance:
Real estate loans:
One-to-four family	$	—	$	—	$	—	$	—	$	—
Multi-family		—		—		—		—		—
Home equity		—		—		—		—		—
Nonresidential		—		—		—		—		—
Agricultural		—		—		—		—		—
Construction and land		—		—		—		—		—
Total real estate loans		—		—		—		—		—
Commercial and industrial		—		—		—		—		—
Consumer and other loans		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—

Totals:
Real estate loans	$	1,736	$	1,711	$	—	$	2,053	$	34
Consumer and other loans		—		—		—		—		—
Total	$	1,736	$	1,711	$	—	$	2,053	$	34

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

The following tables present the aging of past due loans as well as nonaccrual loans. Nonaccrual loans and accruing loans past due 90 days or more include both smaller balance homogenous loans and larger balance loans that are evaluated either collectively or individually for impairment.

Total past due loans and nonaccrual loans at ~~March 31,~~September 30, 2021:

Schedule of past due and nonaccrual loans by portfolio segment

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More
Real estate loans:
One-to-four family	$	2,031	$	866	$	627	$	3,524	$	269,752	$	273,276	$	2,455	$	—	$	3,212	$	498	$	358	$	4,068	$	267,772	$	271,840	$	2,033	$	—
Multi-family		218		—		—		218		447		665		—		—		214		—		—		214		175		389		—		—
Home equity		—		—		—		—		6,233		6,233		—		—		27		—		—		27		5,968		5,995		—		—
Nonresidential		381		—		—		381		20,847		21,228		531		—		245		—		—		245		21,549		21,794		509		—
Agricultural		—		—		—		—		1,073		1,073		—		—		—		—		—		—		2,656		2,656		—		—
Construction and land		—		—		—		—		24,793		24,793		—		—		—		—		—		—		23,717		23,717		—		—
Total real estate loans		2,630		866		627		4,123		323,145		327,268		2,986		—		3,698		498		358		4,554		321,837		326,391		2,542		—
Commercial and industrial		—		—		—		—		6,176		6,176		—		—		—		—		—		—		5,485		5,485		—		—
Consumer and other loans		—		—		—		—		6,094		6,094		—		—		—		—		—		—		6,015		6,015		—		—
Total	$	2,630	$	866	$	627	$	4,123	$	335,415	$	339,538	$	2,986	$	—	$	3,698	$	498	$	358	$	4,554	$	333,337	$	337,891	$	2,542	$	—

COVID-19 Loan Modifications:

In light of ~~recent~~ disruptions in economic conditions caused by COVID-19, the financial regulators have issued guidance encouraging banks to work constructively with borrowers affected by the virus in our community. This guidance provides that the agencies will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practices. Included in the table above are $12,610 in loans that were modified to defer principal payments or principal and interest payments from three to six months based on the affected borrower’s request and need for COVID-19 financial relief. All loans modified for COVID-19 financial relief were current at the time of modification. Of this amount, there were $8,950 in one-to-four family loans, $3,256 in non-residential loans and $404 in multi-family loans. Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” which was extended by the Consolidated Appropriations Act for the fiscal year ending September 30, 2021, provides banks the option to temporarily suspend certain requirements under ASC 340-10 troubled debt restructuring classifications for a limited period of time to account for the effects of COVID-19. The Federal Reserve and the other banking agencies and regulators have also issued a joint statement encouraging banks to work prudently with borrowers and to describe the agencies’ interpretations of how accounting rules under ASC 310-40 apply to certain COVID-19 related modifications. We have not considered any of the COVID-19 related modifications performed to date to be troubled debt restructurings. ~~As of March 31, 2021, $11,669 of such loans were current and $941 were 30 days or more past due. As of March 31, 2021, $12,267 of these are no longer in deferral.~~

~~OCONEE FEDERAL FINANCIAL CORP.~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~
~~(Amounts in thousands, except share and per share data)~~

~~Total past due and nonaccrual loans by portfolio segment at June 30, 2020:~~

30-59
Days
Past Due 60-89
Days
Past Due 90 Days
or More
Past Due Total
Past Due Current Total
Loans Nonaccrual
Loans Accruing
Loans
Past Due 90
Days or More
Real estate loans:
One-to-four family $ 2,055 $ 407 $ 561 $ 3,023 $ 280,908 $ 283,931 $ 1,969 $ —
Multi-family — — — — 704 704 — —
Home equity — — 40 40 5,723 5,763 40 —
Nonresidential 179 — — 179 19,904 20,083 732 —
Agricultural — — — — 1,187 1,187 — —
Construction and land — 10 — 10 29,086 29,096 — —
Total real estate loans 2,234 417 601 3,252 337,512 340,764 2,741 —
Commercial and industrial — — — — 8,135 8,135 — —
Consumer and other loans — — — — 6,768 6,768 — —
Total $ 2,234 $ 417 $ 601 $ 3,252 $ 352,415 $ 355,667 $ 2,741 $ —

Included in the table above are ~~$15,024~~$9,551 in loans still remaining that were modified to defer principal payments or principal and interest payments from three to six months based on the affected borrower’s request and need for COVID-19 financial relief. All loans modified for COVID-19 financial relief were current at the time of modification. Of this amount, there were ~~$10,993~~$6,672 in one-to-four family loans, ~~$3,615~~$2,490 in non-residential loans and ~~$416~~$389 in multi-family loans. As of September 30, 2021, $8,624 of such loans were current and $927 were 30 days or more past due. As of September 30, 2021, all of the COVID-19 related modifications have returned to regular payment status.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

Total past due and nonaccrual loans by portfolio segment at June 30, 2021:

Schedule of past due and nonaccrual loans by portfolio segment

		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Nonaccrual Loans		Accruing Loans Past Due 90 Days or More
Real estate loans:
One-to-four family	$	2,302	$	574	$	434	$	3,310	$	265,579	$	268,889	$	2,260	$	—
Multi-family		—		217		—		217		432		649		—		—
Home equity		61		—		—		61		6,097		6,158		—		—
Nonresidential		374		—		—		374		21,494		21,868		521		—
Agricultural		—		—		—		—		2,683		2,683		—		—
Construction and land		6		—		—		6		26,996		27,002		—		—
Total real estate loans		2,743		791		434		3,968		323,281		327,249		2,781		—
Commercial and industrial		—		—		—		—		5,871		5,871		—		—
Consumer and other loans		—		—		—		—		5,969		5,969		—		—
Total	$	2,743	$	791	$	434	$	3,968	$	335,121	$	339,089	$	2,781	$	—

Included in the table above are $10,362 in loans still remaining that were modified to defer principal payments or principal and interest payments from three to six months based on the affected borrower’s request and need for COVID-19 financial relief. All loans modified for COVID-19 financial relief were current at the time of modification. Of this amount, there were $7,084 in one-to-four family loans, $2,881 in non-residential loans and $397 in multi-family loans. As of June 30, ~~2020, $14,781~~2021, $9,578 were current and ~~$243~~$784 were 30 days or more past due.

Troubled Debt Restructurings:

At ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, total loans that have been modified as troubled debt restructurings were ~~$1,699~~$1,622 and ~~$1,985,~~$1,661, respectively, which consisted of one non-residential real estate loan and three one-to-four family first lien loans at ~~March 31,~~September 30, 2021 and ~~two non-residential real estate loans and four one-to-four family first lien loans at~~ June 30, ~~2020. There was no specific allowance for loss established for these loans at March 31, 2021 or June 30, 2020.~~2021. Additionally, there were no commitments to lend any additional amounts on any loan after the modification. No loans have been modified as troubled debt restructurings during the ~~nine~~three months ended ~~March 31,~~September 30, 2021. No loans modified as troubled debt restructurings during the twelve months ended ~~March 31,~~September 30, 2021 have defaulted since restructuring. All of these loans are on nonaccrual at ~~March 31,~~September 30, 2021 and June 30, ~~2020.~~2021. At ~~March 31,~~September 30, 2021 and June 30, ~~2020, $1,134~~2021, $1,589 and ~~$1,774,~~$1,107, respectively, were individually evaluated for impairment.

Allowance for Loan Loss:

There have been no changes to our allowance for loan loss methodology during the quarter ended ~~March 31,~~September 30, 2021. We have assessed the impact of the COVID-19 pandemic on the allowance for loan loss using the information that is ~~available and have made adjustments to certain qualitative factors in our model in response to the additional risks that we~~available. We believe ~~have become present. After such adjustments to the calculation, we have determined~~ that the recorded allowance is ~~believed to be~~ adequate at this time and as a result no additional provision for loan losses has been recorded during the quarter ended ~~March 31,~~September 30, 2021. However, the ~~rapid development and~~ fluidity of this pandemic precludes any prediction as to the ultimate ~~material adverse~~ impact of the COVID-19 outbreak. We will continue to review and make adjustments as may be ~~necessary as we move through the pandemic related quarantine and the country continues to fully reopen.~~necessary. To the best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

Loan Grades:

The Company utilizes a grading system whereby all loans are assigned a grade based on the risk profile of each loan. Loan grades are determined based on an evaluation of relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. All loans, regardless of size, are analyzed and are given a grade based upon the management’s assessment of the ability of borrowers to service their debts.

Pass: Loan assets of this grade conform to a preponderance of our underwriting criteria and are acceptable as a credit risk, based upon the current net worth and paying capacity of the obligor. Loans in this category also include loans secured by liquid assets and secured loans to borrowers with unblemished credit histories.

Pass-Watch: Loan assets of this grade represent our minimum level of acceptable credit risk. This grade may also represent obligations previously rated “Pass”, but with significantly deteriorating trends or previously rated.

Special Mention: Loan assets of this grade have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loan assets of this grade are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Portfolio Segments:

One-to-four family: One-to-four family residential loans consist primarily of loans secured by first or second deeds of trust on primary residences, and are originated as adjustable-rate or fixed-rate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the ~~Company’s~~Company's market area. The Company currently originates residential mortgage loans for our portfolio with loan-to-value ratios of up to ~~80%~~80% for traditional owner-occupied homes.

For traditional homes, the Company may originate loans with loan-to-value ratios in excess of ~~80%~~80% if the borrower obtains mortgage insurance or provides readily marketable collateral. The Company may make exceptions for special loan programs that we offer. The Company also originates residential mortgage loans for non-owner-occupied homes with loan-to-value ratios of up to ~~80%~~80%.

The Company historically originated residential mortgage loans with loan-to-value ratios of up to 75% for manufactured or modular homes. The Company no longer offers residential mortgage loans for manufactured or modular homes as of 2014. However, renewals of existing performing credits that meet the Company’s underwriting requirements will be considered. The Company requires lower loan-to-value ratios for manufactured and modular homes because such homes tend to depreciate over time. Manufactured or modular homes must be permanently affixed to a lot to make them more difficult to move without the Company’s permission. Such homes must be “de-titled” by the State of South Carolina or Georgia so that they are taxed and must be transferred as residential homes rather than vehicles. The Company also obtains a mortgage on the real estate to which such homes are affixed.

Multi-family: Multi-family real estate loans generally have a maximum term of five years with a 30 year amortization period and a final balloon payment and are secured by properties containing five or more units in the ~~Company’s~~Company's market area. These loans are generally made in amounts of up to ~~75%~~75% of the lesser of the appraised value or the purchase price of the property with an appropriate projected debt service coverage ratio. The ~~Company’s~~Company's underwriting analysis includes considering the ~~borrower’s~~borrower's expertise and requires verification of the ~~borrower’s~~borrower's credit history, income and financial statements, banking relationships, independent appraisals, references and income projections for the property. The Company generally obtains personal guarantees on these loans.

~~OCONEE FEDERAL FINANCIAL CORP.~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~
~~(Amounts in thousands, except share and per share data)~~

Multi-family real estate loans generally present a higher level of risk than loans secured by one-to-four family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family residential real estate is typically dependent upon the successful operation of the related real estate project.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

Home Equity: The Company offers home equity loans and lines of credit secured by first or second deeds of trust on primary residences in our market area. The Company’s home equity loans and lines of credit are limited to an ~~80%~~80% loan-to-value ratio (including all prior liens). Standard residential mortgage underwriting requirements are used to evaluate these loans. The Company offers adjustable-rate and fixed-rate options for these loans with a maximum term of 10 years. The repayment terms on lines of credit are interest only monthly with principle due at maturity. Home equity loans have a more traditional repayment structure with principal and interest due monthly. The maximum term on home equity loans is 10 years with an amortization schedule not exceed 20 years.

Nonresidential Real Estate: Nonresidential loans include those secured by real estate mortgages on churches, owner-occupied and non-owner-occupied commercial buildings of various types, retail and office buildings, hotels, and other business and industrial properties. The nonresidential real estate loans that the Company originates generally have terms of five to 20 years with amortization periods up to20 years. The maximum loan-to-value ratio of our nonresidential real estate loans is generally ~~75%~~75%.

Loans secured by nonresidential real estate generally are larger than one-to-four family residential loans and involve greater credit risk. Nonresidential real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general, including the current adverse conditions. Our nonresidential real estate lending includes a significant amount of loans to churches. Because a church’s financial stability often depends on donations from congregation members rather than income from business operations, repayment may be affected by economic conditions that affect individuals located both in our market area and in other market areas with which we are not as familiar. In addition, due to the unique nature of church buildings and properties, the real estate securing church loans may be less marketable than other nonresidential real estate.

The Company considers a number of factors in originating nonresidential real estate loans. The Company evaluates the qualifications and financial condition of the borrower, including credit history, cash flows, the applicable business plan, the financial resources of the borrower, the ~~borrower’s~~borrower's experience in owning or managing similar property and the ~~borrower’s~~borrower's payment history with the Company and other financial institutions. In evaluating the property securing the loan, the factors the Company considers include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). For church loans, the Company also considers the length of time the church has been in existence, the size and financial strength of the denomination with which it is affiliated, attendance figures and growth projections and current operating budgets. The collateral underlying all nonresidential real estate loans is appraised by outside independent appraisers approved by our board of directors. Personal guarantees may be obtained from the principals of nonresidential real estate ~~borrowers, and in the case of church loans, guarantees from the applicable denomination may be obtained.~~borrowers.

Agricultural: These loans are secured by farmland and related improvements in the Company’s market area. These loans generally have terms offive to 20 years with amortization periods up to 20 years. The maximum loan-to-value ratio of these loans is generally ~~75%~~75%. The Company is managing a small number of these loans in our portfolio. We continue to closely monitor our existing relationships.

Loans secured by agricultural real estate generally are larger than one-to-four family residential loans and involve greater credit risk. Agricultural real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general, including the current adverse conditions.

~~OCONEE FEDERAL FINANCIAL CORP.~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~
~~(Amounts in thousands, except share and per share data)~~

Construction and Land: The Company makes construction loans to individuals for the construction of their primary residences and to commercial businesses for their real estate needs. These loans generally have maximum terms of twelve ~~months,~~months, and upon completion of construction convert to conventional amortizing mortgage loans. Residential construction loans have rates and terms comparable to one-to-four family residential mortgage loans that the Company originates. Commercial construction loans have rate and terms comparable to commercial loans that we originate. During the construction phase, the borrower generally pays interest only. Generally, the maximum loan-to-value ratio of our owner-occupied construction loans is ~~80%~~80%. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential mortgage loans. Commercial construction loans are generally underwritten pursuant to the same guidelines used for originating commercial loans.

The Company also makes interim construction loans for nonresidential properties. In addition, the Company occasionally makes loans for the construction of homes ~~“on~~"on speculation,”" but the Company generally permits a borrower to have only two such loans at a time. These loans generally have a maximum term of eight months, and upon completion of construction convert to conventional amortizing nonresidential real estate loans. These construction loans have rates and terms comparable to permanent loans secured by property of the type being constructed that we originate. Generally, the maximum loan-to-value ratio of these construction loans is ~~85%~~85%.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

Commercial and Industrial Loans: Commercial and industrial loans are offered to businesses and professionals in the Company’s market area. These loans generally have short and medium terms on both a collateralized and uncollateralized basis. The structure of these loans are largely determined by the loan purpose and collateral. Sources of collateral can include a lien on furniture, fixtures, equipment, inventory, receivables and other assets of the company. A UCC-1 is typically filed to perfect our lien on these assets.

Commercial and industrial loans and leases typically are underwritten on the basis of the borrower’s or lessee’s ability to make repayment from the cash flow of its business and generally are collateralized by business assets. As a result, such loans and leases involve additional complexities, variables and risks and require more thorough underwriting and servicing than other types of loans and leases.

Within this category for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and the year ended June 30, ~~2020~~2021 are PPP loans that were authorized under the CARES Act. PPP loans are originated by the Association, are 100% guaranteed by the SBA and qualify to be forgiven based on certain criteria as determined by the SBA. The Association received a fee, with the percentage depending on the size of the loan, for originating these loans and earns 1%1% on the outstanding balance for the term of the loans, the maximum of which is five years unless forgiven sooner by the SBA. For the three months ended September 30, 2021 and September 30, 2020, $33 and $22 of PPP loan fees were recognized in income, respectively. As of ~~March 31,~~September 30, 2021 ~~$4.2 million~~$5,274 of the original ~~$7.0 million~~$7,654 of PPP loans have been ~~forgiven.~~forgiven, with a remaining amount of $69 in deferred fees outstanding.

Consumer and Other Loans: The Company offers installment loans for various consumer purposes, including the purchase of automobiles, boats, and for other legitimate personal purposes. The maximum terms of consumer loans is 18 months for unsecured loans and 18 to 60 months for loans secured by a vehicle, depending on the age of the vehicle. The Company generally only extends consumer loans to existing customers or their immediate family members, and these loans generally have relatively low balances.

Consumer loans may entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or are secured by rapidly depreciable assets, such as automobiles. In addition, consumer loan collections are dependent on the ~~borrower’s~~borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(5) LOANS (continued)

Based on the most recent analysis performed, the risk grade of loans by portfolio segment are presented in the following tables.

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data)~~

Total loans by risk grade and portfolio segment at ~~March 31,~~September 30, 2021:

Schedule of total loans by risk grade and portfolio segment

	Pass		Pass-Watch		Special Mention		Substandard		Doubtful		Total		Pass		Pass-Watch		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	263,267	$	3,541	$	2,789	$	3,679	$	—	$	273,276	$	262,266	$	3,185	$	2,985	$	3,404	$	—	$	271,840
Multi-family		665		—		—		—		—		665		389		—		—		—		—		389
Home equity		5,995		230		—		8		—		6,233		5,772		215		—		8		—		5,995
Nonresidential		20,234		—		855		139		—		21,228		20,920		—		202		672		—		21,794
Agricultural		1,073		—		—		—		—		1,073		2,656		—		—		—		—		2,656
Construction and land		24,363		391		—		39		—		24,793		23,306		373		—		38		—		23,717
Total real estate loans		315,597		4,162		3,644		3,865		—		327,268		315,309		3,773		3,187		4,122		—		326,391
Commercial and industrial		6,176		—		—		—		—		6,176		5,485		—		—		—		—		5,485
Consumer and other loans		6,094		—		—		—		—		6,094		6,015		—		—		—		—		6,015
Total	$	327,867	$	4,162	$	3,644	$	3,865	$	—	$	339,538	$	326,809	$	3,773	$	3,187	$	4,122	$	—	$	337,891

Total loans by risk grade and portfolio segment at June 30, ~~2020:~~2021:

	Pass		Pass-Watch		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	258,943	$	3,335	$	2,989	$	3,622	$	—	$	268,889
Multi-family		649		—		—		—		—		649
Home equity		5,929		221		—		8		—		6,158
Nonresidential		20,991		—		727		150		—		21,868
Agricultural		2,683		—		—		—		—		2,683
Construction and land		26,581		382		—		39		—		27,002
Total real estate loans		315,776		3,938		3,716		3,819		—		327,249
Commercial and industrial		5,871		—		—		—		—		5,871
Consumer and other loans		5,969		—		—		—		—		5,969
Total	$	327,616	$	3,938	$	3,716	$	3,819	$	—	$	339,089

Pass Pass-Watch Special
Mention Substandard Doubtful Total
Real estate loans:
One-to-four family $ 273,228 $ 3,848 $ 2,930 $ 3,925 $ — $ 283,931
Multi-family 704 — — — — 704
Home equity 5,268 392 54 49 — 5,763
Nonresidential 19,077 172 — 834 — 20,083
Agricultural 1,187 — — — — 1,187
Construction and land 28,611 416 — 69 — 29,096
Total real estate loans 328,075 4,828 2,984 4,877 — 340,764
Commercial and industrial 8,135 — — — — 8,135
Consumer and other loans 6,768 — — — — 6,768
Total $ 342,978 $ 4,828 $ 2,984 $ 4,877 $ — $ 355,667

At ~~March 31,~~September 30, 2021, ~~two~~three loans for ~~$98~~$199 were in formal foreclosure proceedings and are included in the one-to-four family loan category.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(6) BORROWINGS

At ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, advances from the Federal Home Loan Bank were as follows:

Schedule of advances from the Federal Home Loan Bank

	September 30, 2021
		Balance	Stated Interest Rate
FHLB advances due February 2023 through January 2025	$	5,000	1.40% - 1.59
Total	$	5,000

March 31, 2021
Balance Stated Interest Rate
FHLB advances due February 2023 through January 2025 $ 5,000 1.40% - 1.59%
Total $ 5,000

June 30, 2020
Balance Stated Interest Rate
FHLB advances due February 2023 through January 2025 $ 5,000 1.40% - 1.59%
Total $ 5,000

	June 30, 2021
		Balance	Stated Interest Rate
FHLB advances due September 2021 through January 2025	$	15,000	0.16% - 1.59
Total	$	15,000

Payments over the next five years are as follows:

Schedule of maturities of the advances from the Federal Home Loan Bank

2023 $ 2,500
2025 $ 2,500

2023	$2,500
2025	$2,500

The average interest rate of all outstanding FHLB advances was ~~1.50%~~1.50% and 0.61% on ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively.

Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances are collateralized by ~~$10,906~~$18,791 and ~~$10,786~~$19,613 of investment securities at ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively. The Association has also pledged as collateral FHLB stock and has entered into a blanket collateral agreement whereby qualifying mortgages, free of other encumbrances and at various discounted values as determined by the FHLB, will be maintained. Based on this collateral, the Association is eligible to borrow up to a total of ~~$131,581~~$136,419 at ~~March 31,~~September 30, 2021.

There were no overnight borrowings at ~~March 31,~~September 30, 2021 or June 30, ~~2020.~~2021.

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Investment Securities:

The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data)~~

Impaired Loans:

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. There were no impaired loans with specific allocations at September 30, 2021 or June 30, 2021.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Loans Held for Sale:

Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors and result in a Level 2 classification.

Loan Servicing Rights:

Fair value is determined based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data and results in a Level 3 classification.

Real Estate Owned:

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals, which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for both collateral-dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.

~~Loan Servicing Rights:~~ Deposits:

~~Fair value is determined based~~The fair values disclosed for demand deposit, money market and savings accounts are equal to the amount payable on ~~a valuation model that calculates~~demand at the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data and resultsreporting date resulting in a Level 32 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of deposit to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

FHLB Advances:

The fair values of the Company’s FHLB advances are estimated using discounted cash flow analysis based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Assets measured at fair value on a recurring basis at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 are summarized below:

Schedule of assets measured at fair value on a recurring basis

Fair Value Measurements
March 31, 2021 June 30, 2020
(Level 2) (Level 3) (Level 2) (Level 3)
Financial assets:
Securities available-for-sale:
FHLMC common stock $ 167 $ — $ 178 $ —
Certificates of deposit 2,558 — 2,592 —
Municipal securities 19,474 — 21,643 —
CMOs 8,462 — 10,106 —
U.S. Government agency mortgage-backed securities 83,453 — 55,173 —
U.S. Treasury and Government agency bonds 11,067 — 1,034 —
Total securities available-for-sale 125,181 — 90,726 —
Loan servicing rights — 386 — 458
Total financial assets $ 125,181 $ 386 $ 90,726 $ 458

	Fair Value Measurements
	September 30, 2021				June 30, 2021
	(Level 2)		(Level 3)		(Level 2)		(Level 3)
Financial assets:
Securities available-for-sale:
FHLMC common stock	$	67	$	—	$	117	$	—
Certificates of deposit		2,285		—		2,297		—
Municipal securities		19,430		—		19,531		—
CMOs		11,677		—		7,716		—
U.S. Government agency mortgage-backed securities		104,847		—		96,113		—
U.S. Treasury and Government agency bonds		13,176		—		13,287		—
Total securities available-for-sale		151,482		—		139,061		—
Loan servicing rights		—		291		—		305
Total financial assets	$	151,482	$	291	$	139,061	$	305

There are no liabilities measured at fair value on a recurring basis.

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data)~~

~~Presented in the table below are assets measured at fair value on a nonrecurring basis using level 3 inputs at March 31, 2021 and June 30, 2020:~~

Fair Value Measurements
March 31, June 30,
2021 2020
(Level 3) (Level 3)
Non-financial assets:
Real estate owned, net:
Nonresidential $ — $ 159
Total non-financial assets — 159
Total assets measured at fair value on a non-recurring basis $ — $ 159

Real estate owned is carried at the lower of carrying value or fair value less costs to sell. There was no real estate owned at March 31, 2021. The carrying value of real estate owned at June 30, 2020 was $159. There were no valuation allowances associated with these properties at June 30, 2020.

The table below presents a reconciliation of all Level 3 assets measured at fair value on a recurring basis using significant unobservable inputs for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 and 2020:

Schedule of reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs Level 3

	Fair Value Measurements
	(Level 3)
	Three Months Ended
	September 30, 2021			September 30, 2020
	Loan Servicing Rights			Loan Servicing Rights
Balance at beginning of period:	$	305		$	458
Unrealized net losses included in net income		(14	)		(43	)
Balance at end of period:	$	291		$	415

Fair Value Measurements
(Level 3)
Three Months Ended Nine Months Ended
March 31,
2021 March 31,
2020 March 31,
2021 March 31,
2020
Loan
Servicing
Rights Loan
Servicing
Rights Loan
Servicing
Rights Loan
Servicing
Rights
Balance at beginning of period: $ 386 $ 781 $ 458 $ 868
Unrealized net losses included in net income — (191 ) (72 ) (278 )
Balance at end of period: $ 386 $ 590 $ 386 $ 590

There are no assets or liabilities measured at fair value on a non-recurring basis at September 30, 2021 or June 30, 2021.

The table below presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value ~~on a non-recurring basis~~ at ~~March 31,~~September 30, 2021 and June 30, ~~2020.~~2021.

Schedule of valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis

Level 3 Quantitative Information
March 31, 2021
Fair Value June 30, 2020
Fair Value Valuation
Technique Unobservable Inputs Range
Loan servicing rights $ 386 $ 458 Discounted cash flows Discount rate, estimated timing of cash flows 8.25% to 8.75%

Real estate owned net:
Nonresidential $ — $ 159 Sales comparison approach Adjustment for differences between the comparable sales 0% to 20%

Level 3 Quantitative Information

September 30,
2021
Fair Value

June 30,2021
Fair Value

Valuation Technique

Unobservable Inputs

Range

Loan servicing rights

291

305

Discounted cash
flows

Discount rate, estimated
timing of cash flows

8.50% to 8.63%

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Many of the Company’s assets and liabilities are short-term financial instruments whose carrying amounts reported in the consolidated balance sheets approximate fair value. These items include cash and cash equivalents, bank owned life insurance, accrued interest receivable and payable balances, variable rate loan and deposits that re-price frequently and fully. The estimated fair values of the Company’s remaining on-balance sheet financial instruments at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 are summarized below:

Schedule of carrying amounts and estimated fair values of the Company's on-balance sheet financial instruments

	March 31, 2021										September 30, 2021
	Carrying		Fair Value								Carrying		Fair Value
	Amount		(Level 1)		(Level 2)		(Level 3)		Total		Amount		(Level 1)		(Level 2)		(Level 3)		Total
Financial assets
Securities available-for-sale	$	125,181	$	—	$	125,181	$	—	$	125,181	$	151,482	$	—	$	151,482	$	—	$	151,482
Loans, net ⁽¹⁾		338,199		—		—		338,850		338,850		336,552		—		—		337,762		337,762
Loans held for sale⁽²⁾		352		—		—		352		352
Loan servicing rights		386		—		—		386		386		291		—		—		291		291
Restricted equity securities		1,058		N/A		N/A		N/A		N/A		1,034		N/A		N/A		N/A		N/A

Financial liabilities
Deposits	$	441,191	$	249,972	$	189,966	$	—	$	439,938	$	449,434	$	—	$	447,794	$	—	$	447,794
Fed Funds Purchased		—		—		—		—		—
FHLB Advances		5,000		—		5,093		—		5,093		5,000		—		5,068		—		5,068

June 30, 2020
Carrying Fair Value
Amount (Level 1) (Level 2) (Level 3) Total
Financial assets
Securities available-for-sale $ 90,726 $ — $ 90,726 $ — $ 90,726
Loans, net ⁽¹⁾ 354,321 — — 364,636 364,636
Loans held for sale⁽²⁾ 92 — — 92 92
Loan servicing rights 458 — — 458 458
Restricted equity securities 1,249 N/A N/A N/A N/A

Financial liabilities
Deposits $ 421,092 $ 223,172 $ 197,020 $ — $ 420,192
Fed Funds Purchased — — — — —
FHLB Advances 5,000 — 5,141 — 5,141

	June 30, 2021
	Carrying		Fair Value
	Amount		(Level 1)		(Level 2)		(Level 3)		Total
Financial assets
Securities available-for-sale	$	139,061	$	—	$	139,061	$	—	$	139,061
Loans, net⁽¹⁾		337,750		—		—		339,762		339,762
Loans held for sale⁽²⁾		164		—		—		164		164
Loan servicing rights		305		—		—		305		305
Restricted equity securities		1,408		N/A		N/A		N/A		N/A

Financial liabilities
Deposits	$	439,930	$	—	$	438,491	$	—	$	438,491
FHLB Advances		15,000		—		15,087		—		15,087

(1)

~~(1)~~

Carrying amount of loans is net of unearned income and the allowance. In accordance with the adoption of ASU No. 2016-01, the fair value of loans as of ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 was measured using an exit price notion.

(2)

~~(2)~~

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(8) EMPLOYEE STOCK OWNERSHIP PLAN

Employees participate in an Employee Stock Ownership Plan (“ESOP”). The ESOP borrowed from the Company to purchase 248,842 shares of the Company’s common stock at ~~$10.00~~$10.00 per share during 2011. The Company makes discretionary contributions to the ESOP and pays dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts.

Participants receive the shares at the end of employment. The Company makes contributions to the ESOP each December. There were no discretionary contributions made to the ESOP for debt retirement in ~~2020~~2021 or ~~2019.~~2020. Total ESOP compensation expense for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 was ~~$88 and $256, respectively,~~$89 and for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2020 was ~~$93 and $301, respectively.~~$84.

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data)~~

Shares held by the ESOP at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 were as follows:

Schedule of Employee Stock Ownership Plan (ESOP)

	September 30, 2021		June 30, 2021
Committed to be released to participants		19,623		10,202
Allocated to participants		161,206		161,206
Unearned		2,093		11,616
Total ESOP shares		182,922		183,024

Fair value of unearned shares	$	49	$	272

March 31,
2021 June 30,
2020
Committed to be released to participants 5,120 12,903
Allocated to participants 161,352 141,264
Unearned 25,829 38,534
Total ESOP shares 192,301 192,701

Fair value of unearned shares $ 674 $ 993

(9) STOCK BASED COMPENSATION

On April 5, 2012, the shareholders of Oconee Federal Financial Corp. approved the Oconee Federal Financial Corp. 2012 Equity Incentive Plan (the “Plan”) for employees and directors of the Company. The Plan authorizes the issuance of up to 435,472 shares of the Company’s common stock, with no more than 124,420 of shares as restricted stock awards and 311,052 as stock options, either incentive stock options or non-qualified stock options. The exercise price of options granted under the Plan may not be less than the fair market value on the date the stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to whom equity incentive awards are granted.

~~On September 22, 2020, the compensation committee of the board of directors approved the issuance of 250 shares of restricted stock to a non-executive officer with immediate vesting.~~ There ~~are no performance-based conditions or any other material conditions applicable to the award issued. There were~~have been no stock options or restricted stock issued in fiscal ~~2020.~~2022.

The following table summarizes stock option activity for the ~~nine~~three months ended ~~March 31,~~September 30, 2021:

Options Weighted-
Average
Exercise
Price/Share Aggregate
Intrinsic
Value ⁽¹⁾
Outstanding - June 30, 2020 164,319 $ 14.18
Granted — —
Exercised (42,418 ) 11.58
Forfeited — —
Outstanding - March 31, 2021 121,901 $ 15.09 $ 1,340
Fully vested and exercisable at March 31, 2021 112,401 $ 14.15 $ 1,340
Expected to vest in future periods 9,500
Fully vested and expected to vest - March 31, 2021 121,901 $ 15.09 $ 1,340

	Options		Weighted- Average Exercise Price/Share		Aggregate Intrinsic Value ⁽¹⁾
Outstanding - June 30, 2021		131,901	$	15.70
Granted		0		0
Exercised		0		0
Forfeited		—		0
Outstanding - September 30, 2021		131,901	$	15.70	$	1,036
Fully vested and exercisable at September 30, 2021		112,401	$	14.15	$	1,057
Expected to vest in future periods		19,500
Fully vested and expected to vest - September 30, 2021		131,901	$	15.70	$	1,036

(1) The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The current market price was based on the closing price of common stock of $26.08 per share on March 31, 2021.

The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The current market price was based on the closing price of common stock of $23.56 per share on September 30, 2021.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(9) STOCK BASED COMPENSATION (continued)

The following table summarizes stock option activity for the three months ended September 30, 2020:

Schedule of stock option activity

	Options		Weighted- Average Exercise Price/Share		Aggregate Intrinsic Value⁽¹⁾
Outstanding - June 30, 2020		164,319	$	14.18
Granted		0		0
Exercised		0		0
Forfeited		—		0
Outstanding - September 30, 2020		164,319	$	14.18	$	1,197
Fully vested and exercisable at September 30, 2020		148,319	$	13.08	$	1,245
Expected to vest in future periods		16,000
Fully vested and expected to vest - September 30, 2020		164,319	$	14.18	$	1,197

(1)	The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The current market price was based on the closing price of common stock of $21.47 per share on September 30, 2020.

Stock options are assumed to be earned ratably over their respective vesting periods and charged to compensation expense based upon their grant date fair value and the number of options assumed to be earned. There were ~~4,453~~1,437 and ~~3,681~~1,638 options that were earned during the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Stock-based compensation expense for stock options for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 was ~~$5 and $16, respectively,~~$5 and for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2020 was ~~$5 and $15, respectively.~~$6. Total unrecognized compensation cost related to stock options was ~~$40~~$64 at ~~March 31,~~September 30, 2021 and is expected to be recognized over a weighted-average period of ~~3.0~~3.6 years.

The following table summarizes non-vested restricted stock activity for the ~~nine~~three months ended ~~March 31, 2021:~~September 30, 2021 and September 30, 2020:

Schedule of non-vested restricted stock activity

March 31,
2021
Balance - beginning of year 5,800
Granted 250
Forfeited —
Vested (3,250 )
Balance - end of period 2,800
Weighted average grant date fair value $ 19.79

	September 30, 2021		September 30, 2020
Balance - beginning of year		14,300		5,800
Granted		0		250
Forfeited		—		—
Vested		—		(250	)
Balance - end of period		14,300		5,800
Weighted average grant date fair value	$	22.50	$	19.78

The fair value of the restricted stock awards is amortized to compensation expense over their respective vesting periods and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. Stock-based compensation expense for restricted stock included in noninterest expense for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 was ~~$12 and $42, respectively,~~$25 and for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2020 was ~~$15 and $44, respectively.~~$15. Unrecognized compensation expense for non-vested restricted stock awards was ~~$47~~$276 at ~~March 31,~~September 30, 2021 and is expected to be recognized over a weighted-average period of ~~1.2~~3.9 years.

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(10) LOAN SERVICING RIGHTS

Mortgage loans serviced for others are not reported as assets; however, the underlying mortgage servicing rights associated with servicing these mortgage loans serviced for others is recorded as an asset in the consolidated balance sheet.

The principal balances of those loans at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021 are as follows:

Schedule of principal balances of mortgage loans serviced

March 31,
2021 June 30,
2020
Mortgage loan portfolio serviced for:
FHLMC $ 57,208 $ 69,553

	September 30, 2021		June 30, 2021
Mortgage loan portfolio serviced for:
FHLMC	$	48,199	$	52,199

Custodial escrow balances maintained in connection with serviced loans were ~~$475~~$680 and ~~$702~~$559 at ~~March 31,~~September 30, 2021 and June 30, ~~2020.~~

~~OCONEE FEDERAL FINANCIAL CORP.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data)~~

2021.

Activity for loan servicing rights for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 and 2020 is as follows:

Schedule of activity for loan servicing rights

Three Months Ended Nine Months Ended
March 31,
2021 March 31,
2020 March 31,
2021 March 31,
2020
Loan servicing rights:
Beginning of period: $ 386 $ 781 $ 458 $ 868
Change in fair value — (191 ) (72 ) (278 )
End of period: $ 386 $ 590 $ 386 $ 590

	Three Months Ended
	September 30, 2021			September 30, 2020
Loan servicing rights:
Beginning of period:	$	305		$	458
Change in fair value		(14	)		(43	)
End of period:	$	291		$	415

Fair value at ~~March 31,~~September 30, 2021 was determined using a discount rate of ~~8.75%~~8.63%, prepayment speed assumptions ranging from ~~10.45%~~10.36% to ~~16.95%~~19.69% Conditional Prepayment Rate (“CPR”) depending on the loans’ coupon, term and seasoning, and a weighted average default rate of ~~0.15%~~0.10%. Fair value at ~~March 31,~~September 30, 2020 was determined using a discount rate of ~~9.00%~~8.38%, prepayment speed assumptions ranging from ~~7.43%~~10.32% to ~~30.79%~~26.58% CPR depending on the loans’ coupon, term and seasoning, and a weighted average default rate of ~~0.26%~~0.31%.

(11) SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020 is as follows:

Schedule of supplemental cash flow information

	September 30, 2021			September 30, 2020
Cash paid during the period for:
Interest paid	$	327		$	567
Income taxes paid	$	310		$	267
Supplemental noncash disclosures:
Transfers from loans to real estate owned	$	—		$	52
Change in unrealized gain/loss on securities available-for-sale	$	(1,010	)	$	(213	)

March 31,
2021 March 31,
2020
Cash paid during the period for:
Interest paid $ 1,463 $ 3,187
Income taxes paid $ 1,082 $ 140
Supplemental noncash disclosures:
Transfers from loans to real estate owned $ 52 $ —
Change in unrealized gain/loss on securities available-for-sale $ (2,261 ) $ 1,909

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

(12) SUBSEQUENT EVENTS

Dividend Declared

On ~~April 22,~~October 28, 2021, the Board of Directors of Oconee Federal Financial Corp. declared a quarterly cash dividend of ~~$0.10~~$0.10 per share of Oconee Federal Financial Corp.’s common stock. The dividend is payable to stockholders of record as of ~~May 6,~~November 11, 2021, and will be paid on or about ~~May 20, 2021.~~November 24, 2021.

~~ITEM~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:

•

statements of our goals, intentions and expectations;

~~statements of our goals, intentions and expectations;~~

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

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

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.

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

•

our ability to manage our operations in response to changes in economic conditions (including real estate values, loan demand, inflation, commodity prices and employment levels) nationally and in our market areas;

~~our ability to manage our operations nationally and in our market areas;~~

the social and economic effects of the COVID-19 or any other pandemic;

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

significant increases in our delinquencies and loan losses, including as a result of our inability to resolve classified assets, changes in the underlying cash flows of our borrowers, and management’s assumptions in determining the adequacy of the allowance for loan losses;

credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance and provision for loan losses;

use of estimates for determining the fair value of certain of our assets, which may prove to be incorrect and result in significant declines in valuations;

increased competition among depository and other financial institutions;

our ability to attract and maintain deposits, including introducing new deposit products;

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

fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

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

our ability to successfully implement our business strategies, including attracting and maintaining deposits and introducing new financial products;

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

changes in the level of government support of housing finance;

the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

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

changes in laws or government regulations or policies affecting financial institutions, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements (particularly the new capital regulations), regulatory fees and compliance costs and the resources we have available to address such changes;

changes in the ability of third-party providers to perform their obligations to us;

technological changes that may be more difficult or expensive than expected;

cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems;

our reliance on a small executive staff;

changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs to implement our strategic plan;

changes in consumer spending, borrowing and savings habits;

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

•

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

the effects of actual government shutdowns;

the ability of the U.S. government to manage federal debt limits;

other changes in our financial condition or results of operations that reduce capital available to pay dividends;

other changes in the financial condition or future prospects of issuers of securities that we own, including our stock in the FHLB of Atlanta; and

other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services.

Novel Coronavirus Pandemic (COVID-19)

The COVID-19 pandemic has adversely impacted global commercial activity and contributed to ~~significant declines and~~ volatility in financial markets. The COVID-19 pandemic and government responses continue to disrupt global supply chains and adversely impact many industries. The pandemic may continue to have a material adverse impact on economic and market conditions. The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and legislation has been passed to provide relief from reporting loan classifications due to modifications related to the COVID-19 pandemic. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. The spread of the coronavirus has caused us to modify our business practices with regard to interactions of employees and customers. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

The ~~rapid development and~~ fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the COVID-19 pandemic. Nevertheless, the pandemic presents uncertainty and risk with respect to ~~the Company,~~Oconee Federal Financial Corp., its performance, and its financial results. As a result we could be subject to any of the following additional risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

•

demand for our products and services may decline, making it difficult to grow assets and income;

~~demand for our products and services may decline, making it difficult to grow assets and income;~~

if the economy is unable to substantially and successfully stay open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

~~a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend,~~

~~limitations may be placed on our ability to foreclose on properties during the pandemic;~~

~~litigation, regulatory enforcement risk and reputation risk regarding our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guarantees;~~

the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause management to perform impairment testing on our goodwill or core deposit and customer relationships intangibles that could result in an impairment charge being recorded for that period, that would adversely impact our results of operations and the ability of the Association to pay dividends to us;

~~our cyber security risks are increased as the result of an increase in the number of employees working remotely;~~

~~we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and~~

~~Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs.~~

•

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend,

•

limitations may be placed on our ability to foreclose on properties;

•

our cyber security risks are increased as the result of an increase in the number of employees working remotely;

•

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

•

Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

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

Critical Accounting Policies

There were no material changes to the critical accounting policies as disclosed in the Annual Report on Form 10-K for Oconee Federal Financial Corp. for the year ended June 30, ~~2020,~~2021, as filed with the Securities and Exchange Commission.

Comparison of Financial Condition at ~~March 31,~~September 30, 2021 and June 30, ~~2020~~2021

Our total assets ~~increased~~decreased by ~~$18.9~~$1.1 million, or ~~3.7%~~0.2%, to ~~$534.5~~$542.6 million at ~~March 31,~~September 30, 2021 from ~~$515.6~~$543.7 million at June 30, ~~2020.~~2021.

Total cash and cash equivalents ~~increased $299 thousand,~~decreased $12.0 million, or ~~0.9%~~39.2%, to ~~$34.9~~$18.6 million at ~~March 31,~~September 30, 2021 from ~~$34.6~~$30.6 million at June 30, ~~2020.~~2021. The ~~increase~~decrease in cash and cash equivalents was primarily due to ~~normal periodic fluctuations~~funds being used to reduce FHLB advances during the ~~nine~~three month period.

Our available-for-sale securities portfolio increased by ~~$34.5~~$12.4 million from ~~$90.7~~$139.1 million at June 30, ~~2020~~2021 to ~~$125.2~~$151.5 million at ~~March 31,~~September 30, 2021. The ~~Association began actively replenishing security repayments and maturities with purchases due~~increase in securities classified as available-for-sale was primarily a result of our efforts in fiscal 2022 to ~~increased liquidity.~~invest in higher yielding assets.

Gross loans decreased ~~$16.2~~$1.2 million, or ~~4.6%~~0.4%, to ~~$339.5~~$337.9 million at ~~March 31,~~September 30, 2021 from ~~$355.7~~$339.1 million at June 30, ~~2020.~~2021. This decrease was ~~due to normal~~primarily a result of loan originations generally not matching loan repayments ~~and a decrease in new loan demand~~ during the ~~nine~~three months ended ~~March 31,~~September 30, 2021.

Deposits increased ~~$20.1~~$9.5 million, or ~~4.8%~~2.2%, to ~~$441.2~~$449.4 million at ~~March 31,~~September 30, 2021 from ~~$421.1~~$439.9 million at June 30, ~~2020.~~2021. The increase in our deposits reflected an increase of ~~$9.8~~$2.4 million in interest bearing demand deposit accounts, ~~$9.0~~$3.8 million in money market accounts, ~~$6.0~~$3.5 million in savings deposits and ~~$2.0~~$3.7 million in non-interest bearing deposits, partially offset by a decrease of ~~$6.7~~$3.9 million in certificates of deposit. Oconee Federal, MHC’s cash is held on deposit with the Association. We generally do not accept brokered deposits and no brokered deposits were accepted during the ~~nine~~three months ended ~~March 31,~~September 30, 2021.

~~Federal Home Loan Bank~~FHLB advances ~~remained stable~~decreased $10.0 million, or 66.7%, to $5.0 million at ~~$5.0 million.~~September 30, 2021 from $15.0 million at June 30, 2021. The decrease was due to the repayment and non-renewal of short term advances that no longer had advantageous rates. We have credit available under a loan agreement with the Federal Home Loan Bank of Atlanta in the amount of 25% of our total assets as of ~~March 31,~~September 30, 2021, or approximately ~~$131.6~~$136.4 million. We had no federal funds purchased as of ~~March 31,~~September 30, 2021 or as of June 30, ~~2020.~~2021.

Total shareholders’ equity decreased ~~$626~~$533 thousand, or ~~0.7%~~0.6%, to ~~$87.7~~$87.6 million at ~~March 31,~~September 30, 2021 compared to ~~$88.3~~$88.1 million at June 30, ~~2020. This~~2021. The decrease was primarily ~~due to our payment~~the result of ~~dividends of $1.7 million, an increase in after-tax unrealized losses in our investment portfolio of $1.8 million and $772 thousand used~~net income for the ~~repurchase~~three months ended September 30, 2021 of ~~treasury stock~~$771 thousand being offset by ~~our net income during the period of $3.2 million and the increase of $293~~$797 thousand in ~~ESOP shares earned.~~other comprehensive loss, $67 thousand of stock repurchases and $559 thousand in dividends distributed. The ~~Company and the~~ Association exceeded all regulatory capital requirements at ~~March 31,~~September 30, 2021 and June 30, ~~2020.~~2021.

Nonperforming Assets

The table below sets forth the amounts and categories of our nonperforming assets at the dates indicated.

	March 31, 2021			June 30, 2020			September 30, 2021			June 30, 2021
	(Dollars in thousands)						(Dollars in thousands)
Nonaccrual loans:
Real estate loans:
One-to-four family	$	2,455		$	1,969		$	2,033		$	2,260
Multi-family		—			—			—			—
Home equity		—			40			—			—
Nonresidential		531			732			509			521
Agricultural		—			—			—			—
Construction and land		—			—
Construction and landa								—			—
Total real estate loans		2,986			2,741			2,542			2,781
Commercial and industrial		—			—			—			—
Consumer and other loans		—			—			—			—
Total nonaccrual loans ⁽¹⁾	$	2,986		$	2,741		$	2,542		$	2,781
Accruing loans past due 90 days or more:
Real estate loans	$	—		$	—		$	—		$	—
Commercial and industrial		—			—
Consumer and other loans		—			—			—			—
Total accruing loans past due 90 days or more		—			—			—			—
Total of nonaccrual and 90 days or more past due loans ⁽²⁾	$	2,986		$	2,741		$	2,542		$	2,781
Real estate owned, net:
One-to-four family	$	—		$	—		$	—		$	—
Nonresidential		—			159			—			—
Construction and land		—			—
Other nonperforming assets		—			—			—			—
Total nonperforming assets	$	2,986		$	2,900		$	2,542		$	2,781

Accruing troubled debt restructurings	$	—		$	—		$	—		$	—
Troubled debt restructurings and total nonperforming assets	$	2,986		$	2,900		$	2,542		$	2,781

Total nonperforming loans to total loans		0.88	%		0.77	%		0.75	%		0.82	%
Total nonperforming assets to total assets								0.47	%		0.51	%
Total nonperforming assets to loans and real estate owned								0.75	%		0.82	%

(1)	Nonaccrual troubled debt restructurings included in the totals above were $1.6 million and $1.7 million, ~~and $2.0 million,~~ at ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively.

(2)	There were no loans past due 90 days or more and still accruing at ~~March 31,~~September 30, 2021 or June 30, ~~2020.~~2021.

Nonperforming assets, ~~increased $86~~which comprised of nonaccrual loans only, decreased $239 thousand from ~~$2.90~~$2.78 million as of June 30, ~~2020~~2021 to ~~$3.0~~$2.54 million as of ~~March 31, 2021. Nonaccrual loans increased $245 thousand to $3.0 million as of March 31, 2021 and real estate owned decreased $159 thousand to zero as of March 31,~~September 30, 2021. There were no accruing loans past due 90 days or more at either date. The ~~increase~~decrease in nonaccrual loans primarily related to normal monthly fluctuations. Nonperforming assets to total assets and nonperforming assets to loans and real estate owned were ~~0.56%~~0.47% and ~~0.88%~~0.75%, respectively, at ~~March 31,~~September 30, 2021 compared to ~~0.56%~~0.51% and 0.82%, respectively at June 30, ~~2020.~~2021.

Analysis of Net Interest Margin

The following ~~tables set~~table sets forth average balance sheets, average annualized yields and rates, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the ~~tables~~table as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are amortized or accreted to income.

For the Three Months Ended
March 31, 2021 March 31, 2020
Average
Balance Interest and
Dividends Yield/
Cost Average
Balance Interest and
Dividends Yield/
Cost
(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans $ 344,551 $ 3,612 4.19 % $ 356,416 $ 4,174 4.68 %
Investment securities 96,824 294 1.21 67,393 368 2.18
Investment securities, tax-free 15,189 86 2.26 16,675 93 2.23
Other interest-earning assets 34,619 25 0.29 21,138 84 1.59
Total interest-earning assets 491,183 4,017 3.27 461,622 4,719 4.09
Noninterest-earning assets 40,712 40,715
Total assets $ 531,895 $ 502,337

Liabilities and equity:
Interest-bearing liabilities:
NOW and demand deposits $ 72,015 $ 27 0.15 % $ 57,242 $ 47 0.33
Money market deposits 86,465 38 0.18 76,843 127 0.66 %
Regular savings and other deposits 38,865 12 0.13 29,765 18 0.24
Certificates of deposit 193,300 322 0.68 208,684 713 1.37
Total interest-bearing deposits 390,645 399 0.41 372,534 905 0.97
Other Borrowings 5,000 19 1.54 3,294 13 1.58
Total interest-bearing liabilities 395,645 418 0.43 375,828 918 0.98
Noninterest bearing deposits 45,454 34,090
Other noninterest-bearing
liabilities 990 2,106
Total liabilities 442,089 412,024
Equity 89,806 90,313
Total liabilities and equity $ 531,895 $ 502,337
$ 3,801
Net interest income $ 3,599 2.84 % 3.11 %
Interest rate spread 2.93 % 3.29 %
Net interest margin
Average interest-earning assets to
average interest-bearing liabilities 1.24 x 1.23 x

	For the Nine Months Ended																For the Three Months Ended
	March 31, 2021								March 31, 2020								September 30, 2021								September 30, 2020
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in Thousands)																(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans	$	352,037		$	11,456		4.34	%	$	359,565		$	12,436		4.61	%	$	337,626		$	3,445		4.08	%	$	357,195		$	4,027		4.51	%
Investment securities		83,164			868		1.39			70,618			1,149		2.17			130,286			352		1.08			71,633			291		1.62
Investment securities, tax-free		15,807			268		2.26			17,633			292		2.21			15,057			86		2.28			16,178			91		2.25
Other interest-earning assets		32,905			84		0.34			26,579			422		2.12			22,347			16		0.28			32,127			27		0.33
Total interest-earning assets		483,913			12,676		3.49			474,395			14,299		4.02			505,316			3,899		3.09			477,133			4,436		3.72
Noninterest-earning assets		38,943								38,977								39,331								41,392
Total assets	$	522,856							$	513,372							$	544,647							$	518,525

Liabilities and equity:
Interest-bearing liabilities:
NOW and demand deposits	$	70,607		$	89		0.17	%	$	56,328		$	142		0.34	%	$	77,066		$	27		0.14	%	$	68,050		$	33		0.19	%
Money market deposits		83,354			123		0.20			76,005			452		0.79			82,359			32		0.15			80,623			46		0.23
Regular savings and other deposits		36,833			40		0.14			28,980			59		0.27			44,456			10		0.09			35,119			14		0.16
Certificates of deposit		194,421			1,156		0.79			216,937			2,338		1.43			184,377			237		0.51			196,445			457		0.92
Total interest-bearing deposits		385,215			1,408		0.49			378,250			2,991		1.05			388,258			306		0.31			380,237			550		0.57
Other Borrowings		5,000			57		1.52			9,882			198		2.67			14,167			23		0.64			5,000			19		1.51
Total interest-bearing liabilities		390,215			1,465		0.50			388,132			3,189		1.09			402,425			329		0.32			385,237			569		0.59
Noninterest bearing deposits		43,909								34,766								52,791								42,686
Other noninterest-bearing
liabilities		1,364								2,306
Other noninterest-bearing liabilities																		842								1,461
Total liabilities		435,488								425,204								456,058								429,384
Equity		87,368								88,168								88,589								89,141
Total liabilities and equity	$	522,856							$	513,372							$	544,647							$	518,525

Net interest income				$	11,211							$	11,110							$	3,570							$	3,867
Interest rate spread							2.99	%							2.93	%							2.77	%							3.13	%
Net interest margin							3.09	%							3.13	%							2.83	%							3.24	%
Average interest-earning assets to
average interest-bearing liabilities		1.24	x							1.22	x
Average interest-earning assets to average interest-bearing liabilities																		1.26	x							1.24	x

Comparison of Operating Results for the Three Months Ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020

General.We reported net income of ~~$870~~$771 thousand for the three months ended ~~March 31,~~September 30, 2021 as compared to net income of ~~$946~~$1.3 million for the three months ended September 30, 2020. Interest income decreased $537 thousand for the three months ended ~~March 31, 2020. Interest income decreased $702 thousand for~~September 30, 2021 compared to the three months ended ~~March 31, 2021 compared to March 31,~~September 30, 2020 and interest expense decreased ~~$500~~$240 thousand, resulting in a net decrease to net interest income of ~~$202~~$297 thousand. Noninterest income decreased ~~$226~~$190 thousand for the three months ended ~~March 31,~~September 30, 2021 compared to ~~March 31,~~the three months ended September 30, 2020. Total noninterest expense ~~decreased $365~~increased $148 thousand. Tax expense ~~increased $13~~decreased $133 thousand.

Interest Income. Interest income decreased by ~~$702~~$537 thousand to ~~$4.0~~$3.9 million from ~~$4.7~~$4.4 million for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, respectively. The yield on interest-earning assets decreased 8263 basis points from ~~4.09%~~3.72% for the three months ended ~~March 31,~~September 30, 2020 to ~~3.27%~~3.09% for the three months ended ~~March 31,~~September 30, 2021. Total average interest-earning assets increased by ~~$29.6~~$28.2 million to ~~$491.2~~$505.3 million for the three months ended ~~March 31,~~September 30, 2021 from ~~$461.6~~$477.1 million for the three months ended ~~March 31,~~September 30, 2020.

Interest income on loans decreased by ~~$562~~$582 thousand to ~~$3.6~~$3.4 million from ~~$4.2~~$4.0 million for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, respectively. The yield on loans decreased 4943 basis points from ~~4.68%~~4.51% for the three months ended ~~March 31,~~September 30, 2020 to ~~4.19%~~4.08% for the three months ended ~~March 31,~~September 30, 2021. The average balance of loans decreased by ~~$11.8~~$19.6 million, or ~~3.31%~~5.5%, to ~~$344.6~~$337.6 million for the three months ended ~~March 31,~~September 30, 2021 from ~~$356.4~~$357.2 million for the three months ended ~~March 31,~~September 30, 2020. The decrease in the average balance of our loans is reflective of reduced originations and normal loan repayments.

Interest income on investment securities ~~decreased by $81~~increased $56 thousand, or ~~17.6%~~14.7%, to ~~$380~~$438 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$461~~$382 thousand for the three months ended ~~March 31, 2020. The decrease reflected a decrease in the yield on securities to 1.36% for the three months ended March 31, 2021 from 2.19% for the three months ended March 31,~~September 30, 2020, ~~offset by~~reflecting an increase of $57.5 million, or 65.5%, in the average ~~balance~~balances of securities ~~of $27.9~~to $145.3 million ~~or 33.2%, to $112.0~~from $87.8 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, offset by a decrease in the total average yield of our investment securities of 53 basis points to 1.21% from ~~$84.1 million for the three months ended March 31, 2020.~~1.74%. The increase in ~~the~~ average balances of our investment securities ~~reflected~~is reflective of our efforts during ~~fiscal 2021~~the past twelve months to invest in higher yielding assets. Our decreased yields are reflective of a decrease of higher yielding investments due to maturities, paydowns, sales and calls in the past twelve months along with overall lower investment rates that were available on purchases made in during the prior twelve months.

Income on other interest earning assets decreased by ~~$59~~$11 thousand, or ~~70.2%~~40.7%, to ~~$25~~$16 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$84~~$27 thousand for the three months ended ~~March 31,~~September 30, 2020. The average balance of other interest-earning assets ~~increased $13.5~~decreased $9.8 million ~~from~~to $22.3 million for the three months ended ~~March 31, 2020 to~~September 30, 2021 from $32.1 million for the three months ended ~~March 31, 2021~~September 30, 2020 and the yield decreased ~~130~~five basis points over the same period. The ~~increase~~decrease in ~~the~~ average balance was primarily due to ~~normal periodic fluctuations.~~funds being used to reduce FHLB advances during the three month period ended September 30, 2021. The decrease in yield was primarily ~~the~~a result of ~~an overall decline in~~decreased rates on money market accounts and our Federal Reserve excess balance account, the balance of which comprised ~~95.7%~~91.5% of this category during the three months ended ~~March 31,~~September 30, 2021.

Interest Expense. Interest expense decreased ~~by $500~~$240 thousand, or ~~54.5%~~42.2%, to ~~$418~~$329 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$918~~$569 thousand for the three months ended ~~March 31,~~September 30, 2020. The average rate paid on interest bearing liabilities decreased 27 basis points from 0.59% for the three months ended September 30, 2020 to 0.32% for the three months ended September 30, 2021. This decrease was ~~attributable~~primarily due to a general decrease in retail and wholesale borrowing rates due to overall market decreases. ~~The decrease reflected a decrease of 56 basis points in the average rate paid~~

Interest expense on ~~interest-bearing~~ deposits decreased $244 thousand, or 44.4%, to $306 thousand for the three months ended ~~March 31,~~September 30, 2021 ~~to 0.41%~~ from ~~0.97%~~$550 thousand for the three months ended ~~March 31,~~September 30, 2020. The average rate paid on interest bearing liabilities decreased 26 basis points from 0.57% for the three months ended September 30, 2020 to 0.31% for the three months ended September 30, 2021. The decrease in the average rate paid on deposits ~~reflects our efforts to keep our cost of funds as low as possible~~was partially offset by an increase in the ~~current declining rate market while remaining competitive in our market. Average interest-bearing~~average balance of interest bearing deposits ~~were $390.6~~of $8.0 million, or 2.1%, to $388.3 million for the three months ended ~~March 31,~~September 30, 2021 ~~compared to $372.5~~from $380.2 million for the three months ended ~~March 31,~~September 30, 2020.

The largest decrease in deposit interest expense was related to expense on certificates of deposit, which decreased ~~$391~~by $220 thousand, or ~~54.8%,~~48.1% to ~~$322~~$237 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$713~~$457 thousand for the three months ended ~~March 31,~~September 30, 2020. The average ~~rate paid~~cost on ~~certificates of deposit~~these deposits decreased ~~by 69 basis points~~ from ~~1.37%~~0.92% for the three months ended ~~March 31,~~September 30, 2020 to ~~0.68%~~0.51% for the three months ended ~~March 31, 2021 and the~~September 30, 2021. The decrease in interest rate on these deposits is reflective of an overall decline in market rates. The average ~~balances~~balance on these deposits decreased ~~by $15.4~~$12.1 million, from ~~$208.7~~$196.4 million for the ~~three-month period~~three months ended ~~March 31,~~September 30, 2020 to ~~$193.3~~$184.4 million for the ~~three-month period~~three months ended ~~March 31,~~September 30, 2021. The decrease in the average balance of certificates of deposit is reflective of normal deposit fluctuation. ~~The decrease in the average rate paid on our certificates of deposit is reflective of an overall decline in market rates.~~

~~The second largest decrease in deposit interest expense was related to~~Interest expense on ~~money market~~NOW and demand deposits ~~which~~and regular savings and other deposits decreased ~~$89~~by $10 thousand ~~or 70.1%,~~ to ~~$38~~$37 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$127~~$47 thousand for the three months ended ~~March 31,~~September 30, 2020. The ~~average rate paid~~decrease in interest expense on ~~money market~~these deposits ~~decreased by 48 basis points from 0.66% for the three months ended March 31, 2020~~was attributable to 0.18% for the three months ended March 31, 2021 and the average balances increased by $9.7 million from $76.8 million for the three-month period ended March 31, 2020 to $86.5 million for the three-month period ended March 31, 2021. The increase in the average balance of money market deposits is reflective of normal deposit fluctuation. Thea decrease in the average ~~rate paid~~cost on ~~our money market~~these deposits to 0.12% from 0.18% offset by a $18.4 million increase in average balances. The decrease in interest expense on these deposits is reflective of an overall decline in market rates. The increase in the average balance of these deposits is reflective of normal deposit fluctuation.

Interest expense on money market deposits decreased $14 thousand as the cost of these deposits decreased eight basis points from 0.23% for the three months ended September 30, 2020 to 0.15% for the three months ended September 30, 2021. The average balance of money market deposits increased from $80.6 million to $82.4 million for the same period. The decrease in interest rate on these deposits is reflective of an overall decline in market rates. The increase in the average balance of these deposits is reflective of normal deposit fluctuation.

Interest expense for other borrowings increased by $6$4 thousand, or ~~46.2%~~21.1%, to $23 thousand for the three months ended September 30, 2021 from $19 thousand for the three months ended ~~March 31, 2021 from $13 thousand for the three months ended March 31,~~September 30, 2020. Other borrowings include both FHLB advances as well as any overnight federal funds purchased. Average other borrowings were $14.2 million for the three months ended September 30, 2021 compared to $5.0 million for the three months ended ~~March 31, 2021 compared to $3.3 million~~September 30, 2020. The average rate decreased 87 basis points from 1.51% for the three months ended ~~March 31, 2020. The average rate was 1.54% and 1.59%~~September 30, 2020 to 0.64% for the three months ended ~~March 31,~~September 30, 2021 ~~and 2020, respectively,~~ due to a decrease in market interest ~~rates.~~rates and use of shorter term advances in the period ended September 30, 2021.

Net Interest Income. Net interest income before the provision for loan losses decreased by ~~$202~~$297 thousand, or ~~5.3%~~7.7%, to $3.6 million for the three months ended ~~March 31,~~September 30, 2021. Our interest rate spread and net interest margin decreased to ~~2.84%~~2.77% and ~~2.93%~~2.83%, ~~respectively,~~ from ~~3.11%~~3.13% and ~~3.29%~~3.24%, ~~respectively,~~ for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, respectively. The decrease in yield on earning assets was larger than the decrease in cost of interest bearing liabilities which contributed to the decrease in net interest margin for the three months ended ~~March 31,~~September 30, 2021.

Provision for Loan Losses. We recorded no provision for loan losses for the three months ended ~~March 31,~~September 30, 2021 or for the three months ended ~~March 31,~~September 30, 2020. There were no charge-offs for the three months ended ~~March 31, 2021 or~~September 30, 2021. There were $2 thousand in charge-offs for the three months ended ~~March 31,~~September 30, 2020. The lack of provision for the three months ended ~~March 31,~~September 30, 2021 is primarily due to a decrease in the loan portfolio balance.

Our total allowance for loan losses was $1.3 million, or ~~0.39%~~0.40% of total gross loans as of ~~March 31,~~September 30, 2021 and $1.3 million, or ~~0.38%~~0.39% of total gross loans as of June 30, ~~2020.~~2021. Our total allowance for loan losses was 0.40% ~~and 0.38%~~ of total gross loans, net of PPP loans, as of ~~March 31,~~September 30, 2021 and June 30, ~~2020, respectively.~~2021. PPP loans are not allocated any allowance due to the 100% SBA guarantee. There were no specifically identified impaired loans at ~~March 31,~~September 30, 2021 or June 30, ~~2020.~~2021. Total loans individually evaluated for impairment ~~decreased $646~~increased $481 thousand, or ~~27.0%~~28.1%, to $2.2 million at September 30, 2021 compared to $1.7 million at ~~March 31, 2021 compared to $2.4 million at~~ June 30, ~~2020.~~2021.

To the best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the three months ended ~~March 31,~~September 30, 2021 and 2020. There have been no changes to our allowance for loan loss methodology during three months ended ~~March 31,~~September 30, 2021.

Noninterest Income. Noninterest income decreased ~~$226~~$190 thousand, or ~~35.7%~~31.5%, to ~~$407~~$413 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$633~~$603 thousand for the three months ended ~~March 31,~~September 30, 2020. Mortgage servicing income decreased $8$10 thousand due to a decline in the servicing portfolio balance. Gain on sale of mortgage loans was ~~$76~~$106 thousand and ~~$21~~$35 thousand for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. The change in fair value of equity securities was a loss of ~~$20~~$50 thousand for the three months ended ~~March 31,~~September 30, 2021 compared to a loss of ~~$130~~$23 thousand for the three months ended ~~March 31,~~September 30, 2020. Gains or losses on the fair value of equity securities are market driven. There were no sales of securities for the three months ended ~~March 31,~~September 30, 2021. There were ~~$113~~$62 thousand in gains on the sale of securities for the three months ended ~~March 31,~~September 30, 2020. Gains or losses on the sale of securities are largely market driven. Securities were sold during the quarter ended ~~March 31,~~September 30, 2020 to realize market gains and adjust the investment portfolio so that funds could be more beneficially used to yield higher net earnings going forward. There were no payoffs of purchase credit impaired loans for the three months ended ~~March 31,~~September 30, 2021. The net gain on payoff of purchase credit impaired loans was ~~$277~~$195 thousand for the three months ended ~~March 31,~~September 30, 2020 due to the liquidation of two loans. Changes in all other noninterest income items were due to normal periodic fluctuations.

Noninterest Expense. Noninterest expense for the three months ended ~~March 31,~~September 30, 2021 ~~decreased~~increased by ~~$365~~$148 thousand, or ~~11.2%~~5.2%, to ~~$2.9~~$3.0 million for three months ended ~~March 31,~~September 30, 2021. Salaries and employee benefits increased ~~$78~~$91 thousand due to routine increases. Occupancy and equipment ~~decreased $112~~increased $23 thousand due to normal periodic fluctuations. Data processing increased ~~$14~~$5 thousand due to routine upgrades and volume increases in the current period. Professional and supervisory fees decreased $8$13 thousand due to normal periodic fluctuations. Advertising increased $27 thousand due to normal periodic fluctuations. FDIC deposit insurance increased ~~$29 thousand. The three months ended March 31, 2021 is reflective of~~$2 thousand due to the standard FDIC assessed rate. The prior year period reflected an assessment credit received from FDIC as a result of the FDIC Deposit Insurance Fund Reserve Ratio exceeding 1.38% as of December 31, 2019.increased Association asset size. Foreclosed asset expenses decreased ~~$149 thousand. This is reflective~~$8 thousand due to normal periodic fluctuations. The change in the value of the ~~three months ended March 31, 2021 having $25~~loan servicing portfolio decreased $14 thousand ~~in net gains on the sale of REO whereas the three months ended March 31, 2020 had a $120 thousand loss on the sale of REO property.~~due to market conditions. For the three months ended ~~March 31,~~September 30, 2021, we ~~did not recognize a change~~recognized an expense for the decrease in value of the loan servicing asset asof $14 thousand compared to ~~a $191~~$43 thousand ~~decrease~~ for the three months ended ~~March 31,~~September 30, 2020. The fair value of our loan servicing asset is subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Changes in all other noninterest expense items were due to normal periodic fluctuations.

Income Tax Expense. Tax expense ~~increased $13~~decreased $133 thousand, or ~~5.4%~~38.0%, to ~~$255~~$217 thousand for the three months ended ~~March 31,~~September 30, 2021 from ~~$242~~$350 thousand for the three months ended ~~March 31,~~September 30, 2020. This was primarily due to ~~less favorable temporary tax differences being recognized~~a decrease in pre-tax income during the three months ended ~~March 31,~~September 30, 2021 as compared to the three months ended ~~March 31,~~September 30, 2020. Our effective income tax rate was ~~22.7%~~22.0% and ~~20.4%~~21.6% for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

~~Comparison of Operating Results for the Nine Months Ended March 31, 2021 and March 31, 2020~~

~~General.~~ We reported net income of $3.2 million for the nine months ended March 31, 2021 as compared to net income of $3.0 million for the nine months ended March 31, 2020. Interest income decreased $1.6 million for the nine months ended March 31, 2021 compared to March 31, 2020 and interest expense decreased $1.7 million resulting in a net increase to net interest income of $101 thousand. Noninterest income decreased $20 thousand for the nine months ended March 31, 2021 compared to March 31, 2020. Total noninterest expense decreased $427 thousand. Tax expense increased $265 thousand.

~~Interest Income.~~ Interest income decreased by $1.6 million to $12.7 million from $14.3 million for the nine months ended March 31, 2021 and March 31, 2020, respectively. The yield on interest-earning assets decreased 53 basis points from 4.02% for the nine months ended March 31, 2020 to 3.49% for the nine months ended March 31, 2021. Total average interest-earning assets increased by $9.5 million to $483.9 million for the nine months ended March 31, 2021 from $474.4 million for the nine months ended March 31, 2020.

Interest income on loans decreased by $980 thousand to $11.5 million from $12.4 million for the nine months ended March 31, 2021 and March 31, 2020, respectively. The yield on loans decreased 27 basis points from 4.61% for the nine months ended March 31, 2020 to 4.34% for the nine months ended March 31, 2021. The average balance of loans decreased by $7.6 million, or 2.1%, to $352.0 million for the nine months ended March 31, 2021 from $359.6 million for the nine months ended March 31, 2020. The decrease in the average balance of our loans is reflective of reduced originations and normal loan repayments.

Interest income on investment securities decreased by $305 thousand, or 21.2%, to $1.1 million for the nine months ended March 31, 2021 from $1.4 million for the nine months ended March 31, 2020. The decrease reflected a decrease in the yield on securities to 1.53% for the nine months ended March 31, 2021 from 2.18% for the nine months ended March 31, 2020 offset by an increase in the average balance of securities of $10.7 million, or 12.1%, to $99.0 million for the nine months ended March 31, 2021 from $88.3 million for the nine months ended March 31, 2020. The increase in the average balances of our securities reflected our efforts during fiscal 2021 to invest in higher yielding assets.

Income on other interest earning assets decreased by $338 thousand, or 80.1%, to $84 thousand for the nine months ended March 31, 2021 from $422 thousand for the nine months ended March 31, 2020. The average balance of other interest-earning assets increased $6.3 million from the nine months ended March 31, 2020 to the nine months ended March 31, 2021 and the yield decreased 178 basis points over the same period. The increase in the average balance was due to normal periodic fluctuations. The decrease in yield was primarily the result of an overall decline in rates on money market accounts and our Federal Reserve excess balance account, the balance of which comprised 95.4% of this category during the nine months ended March 31, 2021.

~~Interest Expense.~~ Interest expense decreased by $1.7 million, or 54.1%, to $1.5 million for the nine months ended March 31, 2021 from $3.2 million for the nine months ended March 31, 2020. This decrease was attributable to a general decrease in retail and wholesale borrowing rates due to overall market decreases. The decrease reflected a decrease of 56 basis points in the average rate paid on interest-bearing deposits for the nine months ended March 31, 2021 to 0.49% from 1.05% for the nine months ended March 31, 2020. The decrease in the average rate paid on deposits reflects our efforts to keep our cost of funds as low as possible in the current declining rate market while remaining competitive in our market. Average interest-bearing deposits were $385.2 million for the nine months ended March 31, 2021 compared to $378.3 million for the nine months ended March 31, 2020.

The largest decrease in deposit interest expense was related to expense on certificates of deposit, which decreased $1.1 million, or 47.8%, to $1.2 million for the nine months ended March 31, 2021 from $2.3 million for the nine months ended March 31, 2020. The average rate paid on certificates of deposit decreased by 64 basis points from 1.43% for the nine months ended March 31, 2020 to 0.79% for the nine months ended March 31, 2021 and the average balances decreased by $22.5 million from $216.9 million for the nine-month period ended March 31, 2020 to $194.4 million for the nine-month period ended March 31, 2021. The decrease in the average balance of certificates of deposit is reflective of normal deposit fluctuation. The decrease in the average rate paid on our certificates of deposit is reflective of an overall decline in market rates.

The second largest decrease in deposit interest expense was related to expense on money market deposits, which decreased $329 thousand, or 72.8%, to $123 thousand for the nine months ended March 31, 2021 from $452 thousand for the nine months ended March 31, 2020. The average rate paid on money market deposits decreased by 59 basis points from 0.79% for the nine months ended March 31, 2020 to 0.20% for the nine months ended March 31, 2021 and the average balances increased by $7.4 million from $76.0 million for the nine-month period ended March 31, 2020 to $83.4 million for the nine-month period ended March 31, 2021. The increase in the average balance of money market deposits is reflective of normal deposit fluctuation. The decrease in the average rate paid on our money market deposits is reflective of an overall decline in market rates.

Interest expense for other borrowings decreased by $141 thousand, or 71.2%, to $57 thousand for the nine months ended March 31, 2021 from $198 thousand for the nine months ended March 31, 2020. Other borrowings include both FHLB advances as well as overnight federal funds purchased. Average other borrowings were $5.0 million for the nine months ended March 31, 2021 compared to $9.9 million for the nine months ended March 31, 2020. The average rate was 1.52% and 2.67% for the nine months ended March 31, 2021 and 2020, respectively, due to a decrease in market interest rates.

~~Net Interest Income.~~ Net interest income before the provision for loan losses increased by $101 thousand, or 0.91%, to $11.2 million for the nine months ended March 31, 2021. Our interest rate spread increased to 2.99% from 2.93% for the nine months ended March 31, 2021 and March 31, 2020, respectively. Our net interest margin decreased to 3.09% from 3.13% for the nine months ended March 31, 2021 and March 31, 2020, respectively. The interest margin decline is partially attributed to an increase in the percentage of investments to total interest earning assets. The decreasing yield on earning assets, when coupled with the increased balances of interest earning assets, offset by the lower cost of interest bearing liabilities contributed to the increase in net interest income for the nine months ended March 31, 2021.

~~Provision for Loan Losses.~~ We recorded no provision for loan losses for the nine months ended March 31, 2021 or for the nine months ended March 31, 2020. There were $7 thousand in charge-offs for the nine months ended March 31, 2021 and $1 thousand in charge-offs for the nine months ended March 31, 2020. The lack of provision for the nine months ended March 31, 2021 is primarily due to a decrease in the loan portfolio balance.

Our total allowance for loan losses was $1.3 million, or 0.39% of total gross loans as of March 31, 2021 and $1.3 million, or 0.38% of total gross loans as of June 30, 2020. Our total allowance for loan losses was 0.40% and 0.38% of total gross loans, net of PPP loans, as of March 31, 2021 and June 30, 2020, respectively. PPP loans are not allocated any allowance due to the 100% SBA guarantee. There were no specifically identified impaired loans at March 31, 2021 or June 30, 2020. Total loans individually evaluated for impairment decreased $646 thousand, or 27.0%, to $1.7 million at March 31, 2021 compared to $2.4 million at June 30, 2020.

To the best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the nine months ended March 31, 2021 and 2020. There have been no changes to our allowance for loan loss methodology during the nine months ended March 31, 2021.

~~Noninterest Income.~~ Noninterest income decreased $20 thousand, or 1.3%, to $1.50 million for the nine months ended March 31, 2021 from $1.52 million for the nine months ended March 31, 2020. Mortgage servicing income decreased $27 thousand due to a decline in the servicing portfolio balance. Gain on sale of mortgage loans was $177 thousand and $103 thousand for the nine months ended March 31, 2021 and 2020, respectively. The change in fair value of equity securities was a loss of $11 thousand for the nine months ended March 31, 2021 and a loss of $98 thousand for the nine months ended March 31, 2020. Gains or losses on the fair value of equity securities are market driven. The sale of securities resulted in a $109 thousand gain for the nine months ended March 31, 2021. There were $125 thousand in gains on the sale of securities for the nine months ended March 31, 2020. Gains or losses on the sale of securities are largely market driven. Securities were sold during the nine months ended March 31, 2021 and March 31, 2020 to realize market gains and adjust the investment portfolio so that funds could be more beneficially used to yield higher net earnings going forward. The net gain on payoff of purchase credit impaired loans was $195 thousand for the nine months ended March 31, 2021 due to the liquidation of two loans. The net gain on payoff of purchase credit impaired loans was $309 thousand for the nine months ended March 31, 2020 due to the liquidation of three loans. Changes in all other noninterest income items were due to normal periodic fluctuations.

~~Noninterest Expense.~~ Noninterest expense for the nine months ended March 31, 2021 decreased by $427 thousand, or 4.7%, to $8.7 million for nine months ended March 31, 2021. Salaries and employee benefits increased $203 thousand due to routine increases. Occupancy and equipment decreased $170 thousand due to normal periodic fluctuations. Data processing increased $61 thousand due to routine upgrades and volume increases in the current period. Professional and supervisory fees decreased $72 thousand primarily due to reduced legal expenses. FDIC deposit insurance increased $90 thousand. The nine months ended March 31, 2021 is reflective of the standard FDIC assessed rate. The prior year period reflected an assessment credit received from FDIC as a result of the FDIC Deposit Insurance Fund Reserve Ratio exceeding 1.38% as of June 30, 2019, September 30, 2019 and December 31, 2019. Foreclosed asset expenses decreased $262 thousand. This is reflective of the nine months ended March 31, 2021 having $83 thousand in losses on sale of REO offset by $87 thousand in gains on sale of REO, whereas the nine months ended March 31, 2020 had $237 thousand in write downs and losses on sale of REO. The change in the value of the loan servicing portfolio decreased $206 thousand. The fair value of our loan servicing asset is subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Changes in all other noninterest expense items were due to normal periodic fluctuations.

~~Income Tax Expense.~~ Tax expense increased $265 thousand, or 47.7%, to $821 thousand for the nine months ended March 31, 2021 from $556 thousand for the nine months ended March 31, 2020. This was primarily due to smaller permanent tax benefits being recognized during the nine months ended March 31, 2021 as compared to the nine months ended March 31, 2020, which were a result of fewer nonqualified stock options being exercised during the nine months ended March 31, 2021 as compared to the nine months ended March 31, 2020. Our effective income tax rate was 20.3% and 15.8% for the nine months ended March 31, 2021 and 2020, respectively.

Liquidity and Capital Resources

Our primary sources of funds are deposits and the proceeds from principal and interest payments on loans and investment 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. We generally manage the pricing of our deposits to be competitive within our market and to increase core deposit relationships.

Liquidity management is both a daily and long-term responsibility of management. Our liquidity monitoring process is designed to contend with changing economic situations, which would include the current COVID-19 pandemic. We have therefore not changed our daily or long-term liquidity management procedures. We adjust our investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and investment securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits, federal funds sold, and short and intermediate-term U.S. Treasury and Government sponsored agencies and mortgage-backed securities of short duration. If we require funds beyond our ability to generate them internally, we have credit available under a loan agreement with the Federal Home Loan Bank of Atlanta in the amount of 25% of total assets, as of ~~March 31,~~September 30, 2021, or approximately ~~$131.6~~$136.4 million as of that date, with a remaining availability of ~~$126.6~~$131.5 million as of ~~March 31,~~September 30, 2021.

Common Stock Dividends. On ~~August 20, 2020, November 19, 2020 and February 25,~~July 22, 2021 the Company paid a $0.10 per share cash dividend on its common stock for a total of ~~$1.7 million.~~$559 thousand.

Equity Compensation Plans. During the three months ended ~~March 31,~~September 30, 2021, no shares of restricted stock or common stock were issued.

~~ITEM~~
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosures of quantitative and qualitative market risk are not required by smaller reporting companies, such as the Company.

~~ITEM~~
ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of ~~March 31,~~September 30, 2021. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended ~~March 31,~~September 30, 2021, there have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, amended) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~PART~~PART II

~~ITEM~~
ITEM 1. LEGAL PROCEEDINGS

There are various claims and lawsuits in which the Company is periodically involved incidental to the Company’s business. In the opinion of management, no material loss is expected from any of such pending claims or lawsuits.

~~ITEM~~
ITEM 1A. RISK FACTORS

Disclosures of risk factors are not required of smaller reporting companies, such as the Company.

~~ITEM~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

~~(a)~~

None.

(b)

~~(b)~~

Not applicable.

(c)

~~(c)~~

Issuer Repurchases. On May ~~28, 2020,~~14, 2021, the Board of Directors authorized the repurchase of up to 100,000 shares of the Company’s common ~~stock.~~stock, terminating the previous authorization on May 28, 2020 to repurchase 100,000 shares. The repurchase authorization expires on March 31, 2022. In connection with ~~the authorization of this stock~~these repurchase ~~program, the Board of Directors terminated the Company’s then existing stock repurchase program, which had authorized~~authorizations, the Company ~~to purchase up to 100,000 shares of its issued and outstanding common stock. Under this previous program, the Company~~has purchased a total of ~~97,147~~2,865 shares of its common stock ~~at a weighted average price of $24.52 per share.~~during the three months ended September 30, 2021.

The following table sets forth information in connection with repurchases of the Company’s common stock for the quarter ended ~~March 31,~~September 30, 2021:

Total
Number of
Shares
Purchased Average Price
Paid Per
Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plan Approximate Maximum
Dollar Value or Number
of Shares That May Yet
be Purchased Under
Publicly Announced Plans
January 1 - January 31, 2021 321 $ 23.52 321 19,987
February 1 - February 28, 2021 — $ — — 19,987
March 1 - March 31, 2021 17,126 $ 26.75 17,126 2,861 ⁽²⁾
Total 17,447 $ 26.69 17,447 ⁽¹⁾

Total
Number of
Shares
Purchased

Average Price
Paid Per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plan

Approximate Maximum
Dollar Value or Number
of Shares That May Yet
be Purchased Under
Publicly Announced Plans

July 1 - July 31, 2021

—

$
—

–

83,458

August 1 - August 31, 2021

263

$
22.05

263

83,195

September 1 - September 30, 2021

2,602

$
23.56

2,602

80,593
⁽²⁾
Total

2,865

$
23.42

2,865
⁽¹⁾

(1)
~~(1)~~
All shares were purchased pursuant to the publicly announced repurchase program that was approved by the Board of Directors on May ~~28, 2020.~~14, 2021. The repurchase program ~~has no expiration date.~~expires on March 31, 2022.
(2)
~~(2)~~
Represents the maximum number of shares available for repurchase under the May ~~28, 2020~~14, 2021 plan at ~~March 31,~~September 30, 2021.

~~ITEM~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM~~ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM~~ITEM 5. OTHER INFORMATION

None.
44

ITEM 6. ~~EXHIBITS~~EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed below.

Exhibit

number
Description
31.1
Certification of Curtis T. Evatt, President and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2
Certification of John W. Hobbs, Executive Vice President and Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32
32
Certification of Curtis T. Evatt, President and Chief Executive Officer, and John W. Hobbs, Executive Vice President and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101~~
101
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2021, formatted in XBRL (Extensible Business Reporting Language):
(i)
Consolidated Balance Sheets
(ii)
Consolidated Statements of Income and Comprehensive Income
(iii)
Consolidated Statements of Changes In Shareholders’ Equity
(iv)
Consolidated Statements of Cash Flows, and
(v)
Notes to The Consolidated Financial Statements

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Oconee Federal Financial Corp.
Date: November 12, 2021
~~Date: May 14, 2021~~
/s/ Curtis T. Evatt
Curtis T. Evatt
President and Chief Executive Officer
/s/ John W. Hobbs
John W. Hobbs
Executive Vice President and Chief Financial Officer

41

Federal		32-0330122
(State of Other Jurisdiction of Incorporation)		(I.R.S Employer Identification Number)

201 East North Second Street, Seneca, South Carolina		29678
(Address of Principal Executive Officers)		(Zip Code)



~~Securities registered pursuant to Section 12(b) of the Act:~~

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	OFED	The NASDAQ Stock Market, LLC

PART I
ITEM 1. FINANCIAL STATEMENTS
	March 31, 2021 (unaudited)			June 30, 2020
ASSETS
Cash and due from banks	$	4,607		$	4,673
Interest-earning deposits		30,274			29,843
Fed funds sold		—			66
Total cash and cash equivalents		34,881			34,582
Securities available-for-sale		125,181			90,726
Loans		339,538			355,667
Allowance for loan losses		(1,339	)		(1,346	)
Net loans		338,199			354,321
Loans held for sale, at fair value		352			92
Premises and equipment, net		9,095			9,367
Real estate owned, net		—			159
Accrued interest receivable
Loans		1,008			1,074
Investments		392			364
Restricted equity securities, at cost		1,058			1,249
Bank owned life insurance		19,826			19,482
Goodwill		2,593			2,593
Core deposit intangible		151			211
Loan servicing rights		386			458
Deferred tax assets		884			365
Other assets		466			539
Total assets	$	534,472		$	515,582

LIABILITIES
Deposits
Noninterest - bearing	$	45,966		$	43,995
Interest - bearing		395,225			377,097
Total deposits		441,191			421,092
Federal Home Loan Bank advances		5,000			5,000
Accrued interest payable and other liabilities		602			1,185
Total liabilities		446,793			427,277

SHAREHOLDERS’ EQUITY
Common stock, $0.01 par value, 100,000,000 shares authorized;
6,551,909 and 6,530,074 shares outstanding, respectively		66			65
Treasury stock, at par, 951,932 and 924,618 shares, respectively		(10	)		(9	)
Additional paid-in capital		6,803			7,342
Retained earnings		80,624			79,071
Accumulated other comprehensive income		458			2,243
Unearned ESOP shares		(262	)		(407	)
Total shareholders’ equity		87,679			88,305
Total liabilities and shareholders’ equity	$	534,472		$	515,582

	September 30, 2021			June 30,
	(unaudited)			2021
ASSETS
Cash and due from banks	$	4,052		$	9,026
Interest-earning deposits		14,473			21,575
Fed funds sold		102			48
Total cash and cash equivalents		18,627			30,649
Securities available-for-sale		151,482			139,061
Loans		337,891			339,089
Allowance for loan losses		(1,339	)		(1,339	)
Net loans		336,552			337,750
Loans held for sale, at fair value		—			164
Premises and equipment, net		8,899			8,972
Accrued interest receivable
Loans		963			939
Investments		409			437
Restricted equity securities, at cost		1,034			1,408
Bank owned life insurance		20,050			19,937
Goodwill		2,593			2,593
Core deposit intangible		116			134
Loan servicing rights		291			305
Deferred tax assets		1,024			787
Other assets		551			580
Total assets	$	542,591		$	543,716

LIABILITIES
Deposits
Noninterest - bearing	$	56,922		$	53,250
Interest - bearing		392,512			386,680
Total deposits		449,434			439,930
Federal Home Loan Bank advances		5,000			15,000
Accrued interest payable and other liabilities		590			686
Total liabilities		455,024			455,616

SHAREHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000,000 shares authorized; 6,563,409 and 6,563,409 shares outstanding, respectively		66			66
Treasury stock, at par, 973,139 and 970,274 shares, respectively		(10	)		(10	)
Additional paid-in capital		6,401			6,400
Retained earnings		81,127			80,915
Accumulated other comprehensive income		144			941
Unearned ESOP shares		(161	)		(212	)
Total shareholders' equity		87,567			88,100
Total liabilities and shareholders' equity	$	542,591		$	543,716


Large accelerated filer	☐	☐	Accelerated filer	☐
Non-accelerated filer	☒	☒	Smaller reporting company	☒
			Emerging growth company	☐

PART I.		2
ITEM 1.	FINANCIAL STATEMENTS	2
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3332
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4339
ITEM 4.	CONTROLS AND PROCEDURES	4339
PART II.		4340
ITEM 1.	LEGAL PROCEEDINGS	4340
ITEM 1A.	RISK FACTORS	4340
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4440
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	4440
ITEM 4.	MINE SAFETY DISCLOSURES	4440
ITEM 5.	OTHER INFORMATION	4440
ITEM 6.	INDEX TO EXHIBITS	4541
SIGNATURES		4541
EXHIBITS		4642

	Common Stock		Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (loss)			Unearned ESOP Shares			Total
Balance at December 31, 2019	$	65	$	(8	)	$	10,215		$	78,392		$	699		$	(507	)	$	88,856
Net income		—		—			—			946			—			—			946
Other comprehensive income		—		—			—			—			1,204			—			1,204
Purchase of 42,981 shares of treasury stock ⁽¹⁾		—		(1	)		(1,109	)		—			—			—			(1,110	)
Stock-based compensation expense		—		—			20			—			—			—			20
Dividends		—		—			—			(593	)		—			—			(593	)
ESOP shares earned		—		—			66			—			—			50			116
Balance at March 31, 2020	$	65	$	(9	)	$	9,192		$	78,745		$	1,903		$	(457	)	$	89,439

Balance at December 31, 2020	$	65	$	(9	)	$	7,272		$	80,315		$	2,087		$	(314	)	$	89,416
Net income		—		—			—			870			—			—			870
Other comprehensive loss		—		—			—			—			(1,629	)		—			(1,629	)
Purchase of 17,447 shares of treasury stock ⁽²⁾		—		(1	)		(523	)		—			—			—			(524	)
Stock-based compensation expense		—		—			17			—			—			—			17
Common Stock Issued		1		—			—			—			—			—			1
Dividends		—		—			—			(561	)		—			—			(561	)
ESOP shares earned		—		—			37			—			—			52			89
Balance at March 31, 2021	$	66	$	(10	)	$	6,803		$	80,624		$	458		$	(262	)	$	87,679

	Nine Months Ended
	March 31,			March 31,
	2021			2020
Cash Flows From Operating Activities
Net income	$	3,214		$	2,971
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for real estate owned		21			117
Depreciation and amortization, net		1,367			932
Net accretion of purchase accounting adjustments		(160	)		(50	)
Deferred income tax (benefit)/expense		(54	)		403
Net (gain)/loss on sale of real estate owned		(26	)		120
Change in loan servicing asset		72			278
Net gain on sales of securities		(109	)		(125	)
Mortgage loans originated for sale		(11,431	)		(9,603	)
Mortgage loans sold		11,348			8,623
Gain on sales of mortgage loans		(177	)		(103	)
Change in fair value of equity securities		11			98
Increase in cash surrender value of bank owned life insurance		(344	)		(348	)
Gain on payoff of purchased credit impaired loans		(195	)		(309	)
ESOP compensation expense		293			301
Stock based compensation expense		58			59
Net change in operating assets and liabilities:
Accrued interest receivable and other assets		111			289
Accrued interest payable and other liabilities		(583	)		(1	)
Net cash provided by operating activities		3,416			3,652

Cash Flows From Investing Activities
Purchases of premises and equipment		(217	)		(1,798	)
Purchases of securities available-for-sale		(64,054	)		(21,627	)
Proceeds from maturities, paydowns and calls of securities available-for-sale		18,706			16,708
Proceeds from sales of securities available-for-sale		7,923			14,762
Sales of restricted equity securities		191			818
Purchases of restricted equity securities		—			(213	)
Proceeds from sale of real estate owned		216			279
Loan originations and repayments, net		16,425			7,282
Net cash (used)/provided in investing activities		(20,810	)		16,211

Cash Flows from Financing Activities
Net change in deposits		20,099			(12,743	)
Proceeds from notes payable to FHLB		—			5,000
Repayment of notes payable to FHLB		—			(19,000	)
Dividends paid		(1,640	)		(1,661	)
Purchase of treasury stock		(772	)		(2,037	)
Proceeds from sale of common stock, net of issuance costs		6			—
Net cash provided/(used) by financing activities		17,693			(30,441	)

Change in cash and cash equivalents		299			(10,578	)

Cash and cash equivalents, beginning of period		34,582			36,690
Cash and cash equivalents, end of period	$	34,881		$	26,112

Three months ended March 31, 2021		Beginning Balance		Provision			Charge-offs		Recoveries		Ending Balance
Real estate loans:
One-to-four family	$	1,027	$	(3	)	$	—	$	—	$	1,024
Multi-family		4		—			—		—		4
Home equity		36		5			—		—		41
Nonresidential		117		6			—		—		123
Agricultural		4		—			—		—		4
Construction and land		94		(3	)		—		—		91
Total real estate loans		1,282		5			—		—		1,287
Commercial and industrial		28		(5	)		—		—		23
Consumer and other loans		29		—			—		—		29
Total loans	$	1,339	$	—		$	—	$	—	$	1,339

Nine months ended March 31, 2021		Beginning Balance		Provision			Charge-offs			Recoveries		Ending Balance
Real estate loans:
One-to-four family	$	1,032	$	(6	)	$	(2	)	$	—	$	1,024
Multi-family		4		—			—			—		4
Home equity		34		12			(5	)		—		41
Nonresidential		75		48			—			—		123
Agricultural		4		—			—			—		4
Construction and land		105		(14	)		—			—		91
Total real estate loans		1,254		40			(7	)		—		1,287
Commercial and industrial		65		(42	)		—			—		23
Consumer and other loans		27		2			—			—		29
Total loans	$	1,346		—		$	(7	)	$	—	$	1,339

Three months ended March 31, 2020	Beginning Balance		Provision			Charge-offs		Recoveries		Ending Balance
Real estate loans:
One-to-four family	$	993	$	6		$	—	$	—	$	999
Multi-family		4		—			—		—		4
Home equity		33		3			—		—		36
Nonresidential		77		(14	)		—		—		63
Agricultural		4		—			—		—		4
Construction and land		94		10			—		—		104
Total real estate loans		1,205		5			—		—		1,210
Commercial and industrial		66		(7	)		—		—		59
Consumer and other loans		25		2			—		—		27
Total loans	$	1,296	$	—		$	—	$	—	$	1,296

Nine months ended March 31, 2020	Beginning Balance		Ending Provision			Charge-offs			Recoveries		Ending Balance
Real estate loans:
One-to-four family	$	995	$	4		$	—		$	—	$	999
Multi-family		4		—			—			—		4
Home equity		24		12			—			—		36
Nonresidential		87		(24	)		—			—		63
Agricultural		3		1			—			—		4
Construction and land		94		10			—			—		104
Total real estate loans		1,207		3			—			—		1,210
Commercial and industrial		67		(8	)		—			—		59
Consumer and other loans		23		5			(1	)		—		27
Total loans	$	1,297	$	—		$	(1	)	$	—	$	1,296

	Ending Allowance on Loans:				Loans:
At June 30, 2020	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Real estate loans:
One-to-four family	$	—	$	1,032	$	1,832	$	282,099
Multi-family		—		4		—		704
Home equity		—		34		—		5,763
Nonresidential		—		75		562		19,521
Agricultural		—		4		—		1,187
Construction and land		—		105		—		29,096
Total real estate loans		—		1,254		2,394		338,370
Commercial and industrial ⁽¹⁾		—		65		—		8,135
Consumer and other loans		—		27		—		6,768
Total loans	$	—	$	1,346	$	2,394	$	353,273

	March 31, 2021
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no recorded allowance:
Real estate loans:
One-to-four family	$	1,771	$	1,748	$	—	$	1,790	$	26
Multi-family		—		—		—		—		—
Home equity		—		—		—		—		—
Nonresidential		—		—		—		281		—
Agricultural		—		—		—		—		—
Construction and land		—		—		—		—		—
Total real estate loans		1,771		1,748		—		2,071		26
Commercial and industrial		—		—		—		—		—
Consumer and other loans		—		—		—		—		—
Total	$	1,771	$	1,748	$	—	$	2,071	$	26

With recorded allowance:
Real estate loans:
One-to-four family	$	—	$	—	$	—	$	—	$	—
Multi-family		—		—		—		—		—
Home equity		—		—		—		—		—
Nonresidential		—		—		—		—		—
Agricultural		—		—		—		—		—
Construction and land		—		—		—		—		—
Total real estate loans		—		—		—		—		—
Commercial and industrial		—		—		—		—		—
Consumer and other loans		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—

Totals:
Real estate loans	$	1,771	$	1,748	$	—	$	2,071	$	26
Consumer and other loans		—		—		—		—		—
Total	$	1,771	$	1,748	$	—	$	2,071	$	26

	March 31, 2021
	Balance		Stated Interest Rate
FHLB advances due February 2023 through January 2025	$	5,000	1.40% - 1.59%
Total	$	5,000

	Fair Value Measurements
	March 31, 2021				June 30, 2020
	(Level 2)		(Level 3)		(Level 2)		(Level 3)
Financial assets:
Securities available-for-sale:
FHLMC common stock	$	167	$	—	$	178	$	—
Certificates of deposit		2,558		—		2,592		—
Municipal securities		19,474		—		21,643		—
CMOs		8,462		—		10,106		—
U.S. Government agency mortgage-backed securities		83,453		—		55,173		—
U.S. Treasury and Government agency bonds		11,067		—		1,034		—
Total securities available-for-sale		125,181		—		90,726		—
Loan servicing rights		—		386		—		458
Total financial assets	$	125,181	$	386	$	90,726	$	458

	Fair Value Measurements (Level 3)
	Three Months Ended					Nine Months Ended
	March 31, 2021		March 31, 2020			March 31, 2021			March 31, 2020
	Loan Servicing Rights		Loan Servicing Rights			Loan Servicing Rights			Loan Servicing Rights
Balance at beginning of period:	$	386	$	781		$	458		$	868
Unrealized net losses included in net income		—		(191	)		(72	)		(278	)
Balance at end of period:	$	386	$	590		$	386		$	590

	Options			Weighted- Average Exercise Price/Share		Aggregate Intrinsic Value ⁽¹⁾
Outstanding - June 30, 2020		164,319		$	14.18
Granted		—			—
Exercised		(42,418	)		11.58
Forfeited		—			—
Outstanding - March 31, 2021		121,901		$	15.09	$	1,340
Fully vested and exercisable at March 31, 2021		112,401		$	14.15	$	1,340
Expected to vest in future periods		9,500
Fully vested and expected to vest - March 31, 2021		121,901		$	15.09	$	1,340

	For the Three Months Ended
	March 31, 2021								March 31, 2020
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans	$	344,551		$	3,612		4.19	%	$	356,416		$	4,174		4.68	%
Investment securities		96,824			294		1.21			67,393			368		2.18
Investment securities, tax-free		15,189			86		2.26			16,675			93		2.23
Other interest-earning assets		34,619			25		0.29			21,138			84		1.59
Total interest-earning assets		491,183			4,017		3.27			461,622			4,719		4.09
Noninterest-earning assets		40,712								40,715
Total assets	$	531,895							$	502,337

Liabilities and equity:
Interest-bearing liabilities:
NOW and demand deposits	$	72,015		$	27		0.15	%	$	57,242		$	47		0.33
Money market deposits		86,465			38		0.18			76,843			127		0.66	%
Regular savings and other deposits		38,865			12		0.13			29,765			18		0.24
Certificates of deposit		193,300			322		0.68			208,684			713		1.37
Total interest-bearing deposits		390,645			399		0.41			372,534			905		0.97
Other Borrowings		5,000			19		1.54			3,294			13		1.58
Total interest-bearing liabilities		395,645			418		0.43			375,828			918		0.98
Noninterest bearing deposits		45,454								34,090
Other noninterest-bearing
liabilities		990								2,106
Total liabilities		442,089								412,024
Equity		89,806								90,313
Total liabilities and equity	$	531,895							$	502,337
												$	3,801
Net interest income				$	3,599		2.84	%							3.11	%
Interest rate spread							2.93	%							3.29	%
Net interest margin
Average interest-earning assets to
average interest-bearing liabilities		1.24	x							1.23	x

	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan			Approximate Maximum Dollar Value or Number of Shares That May Yet be Purchased Under Publicly Announced Plans
January 1 - January 31, 2021		321	$	23.52		321			19,987
February 1 - February 28, 2021		—	$	—		—			19,987
March 1 - March 31, 2021		17,126	$	26.75		17,126			2,861	⁽²⁾
Total		17,447	$	26.69		17,447	⁽¹⁾

Exhibit number	Description

31.1	Certification of Curtis T. Evatt, President and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

31.2	Certification of John W. Hobbs, Executive Vice President and Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32
32	Certification of Curtis T. Evatt, President and Chief Executive Officer, and John W. Hobbs, Executive Vice President and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101~~
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2021, formatted in XBRL (Extensible Business Reporting Language):
	(i)	Consolidated Balance Sheets
	(ii)	Consolidated Statements of Income and Comprehensive Income
	(iii)	Consolidated Statements of Changes In Shareholders’ Equity
	(iv)	Consolidated Statements of Cash Flows, and
	(v)	Notes to The Consolidated Financial Statements


~~Date: May 14, 2021~~
		/s/ Curtis T. Evatt
		Curtis T. Evatt
		President and Chief Executive Officer

		/s/ John W. Hobbs
		John W. Hobbs
		Executive Vice President and Chief Financial Officer