TC BANCSHARES, INC. MD&A and Analysis of Financial Condition and Results of Operations (Form 10-Q/A)

General

This discussion and analysis reflects our financial statements and other
relevant statistical data, and is intended to enhance your understanding of our
financial condition and results of operations. The information in this section
has been derived from the accompanying unaudited financial statements and the
notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Historical results of operations and the percentage relationships between amounts included and trends that may appear may not be indicative of trends in operations or results of operations for future periods.

Caution Regarding Forward-Looking Statements

This quarterly report contains certain forward-looking statements, which are
included pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, and reflect management's beliefs and expectations
based on information currently available. These forward-looking statements,
which can be identified by the use of words such as "estimate," "project,"
"believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will,"
"may," "should," "indicate," "would," "contemplate," "continue," "potential,"
"target" and words of similar meaning. These forward-looking statements include,
but are not limited to:

statements of our objectives, intentions and expectations;

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

statements regarding the 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.

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:

the continuing effects of the COVID-19 pandemic on our business, customers, employees and third-party service providers;

general economic conditions, whether nationally or in our market areas, being worse than expected;

changes in the level and direction of loan delinquencies and write-offs and
changes in estimates of the adequacy of the allowance for loan losses, including
after implementation of the credit impairment model for Current Expected Credit
Losses ("CECL");

our ability to access cost-effective financing;

fluctuations in real estate values ​​and residential and commercial real estate market conditions;

demand for loans and deposits in our market area;

our ability to implement and change our business strategies;

competition among depository institutions and other financial institutions;

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking income, the fair value of financial instruments or our level of lending, or increase the level of defaults payment, losses and prepayments on loans we have made and are making;

adverse changes in the securities or sub-mortgage markets;

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

changes in laws, regulations or regulatory policies or practices;

our ability to comply with the many laws and regulations to which we are subject, including the laws of each jurisdiction where we operate;

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the impact of the Dodd-Frank Act and the JOBS Act and related regulations;

changes in the quality or composition of our loan or investment portfolios;

changes in consumer spending and saving habits;

the effects of severe weather conditions, including hurricanes and man-made disasters;

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

the inability of third-party vendors to operate as intended;

the efficiency and effectiveness of our internal control environment;

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

the soundness of other financial institutions;

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

our ability to successfully integrate into our operations any assets,
liabilities, customers, systems and management personnel we may acquire and our
ability to realize related revenue synergies and cost savings within expected
time frames, and any goodwill charges related thereto;

changes in accounting policies and practices, as may be adopted by banking regulators, the Financial Accounting Standards Boardthe SECOND or the
Public Company Accounting Oversight Council;

our ability to retain key employees;

the ability of our management team to focus primarily on running our business rather than diverting management’s attention to responses to the COVID-19 pandemic;

our compensation expense associated with equity allocated or attributed to our employees;

changes in the financial condition, results of operations or future prospects of issuers of securities held by us,

the adverse effects of events beyond our control that may have a destabilizing
effect on financial markets and the economy, such as epidemics and pandemics,
war or terrorist activities, essential utility outages, deterioration in the
global economy, instability in the credit markets, disruptions in our customers'
supply chains or disruptions in transportation; and

each of the factors and risks under the heading “Risk Factors” in the Company’s 2021 Annual Report on Form 10-K and in subsequent filings with the SECOND.

We caution readers that the foregoing list of factors is not exclusive, is not
necessarily in order of importance and readers should not place undue reliance
on any forward-looking statements. Because the Company's ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain, there can be no assurances that future actual results will correspond
to any forward-looking statements and you should not rely on any forward-looking
statements. Additionally, all statements in this Quarterly Report on Form10-Q,
including forward-looking statements, speak only as of the date they are made,
and the Company undertakes no obligation to update any statement in light of new
information or future events, except as required by applicable law.

Critical accounting estimates

For a description of the Company's critical accounting estimates, refer to "Part
II - Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Critical Accounting Estimates" in the Company's 2021
Annual Report. The Company considers its most significant accounting estimates
to be those applied to the Allowance for Loan Losses and income Taxes. There
have been no material changes to the Company's critical accounting estimates
since December 31, 2021.

Recent conversion and reorganization from one mutual to another

The Company, a Georgia corporation, was formed on March 5, 2021 to serve as the
bank holding company for the Bank. The Bank is a federally chartered savings
bank headquartered in Thomasville, Georgia that has served the banking needs of
our customers since 1934. On July 20, 2021, the Bank completed a mutual-to-stock
conversion in a series of transactions by which it reorganized its corporate
structure from a mutual savings bank to a federal stock savings bank, and became
a wholly-owned subsidiary of the Company. In connection with the reorganization
and conversion, the Company sold 4,898,350 shares of its common stock at a price
of $10.00 per

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share, which we refer to as the “share offering”, and on July 21, 2021the common shares of the Company began trading on NASDAQ Stock Exchange under the symbol “TCBC”.

Before the reorganization and conversion, the Company conducted no operations
other than organizational activities. In this Quarterly Report on Form 10-Q,
unless the context indicates otherwise, all references to "we," "us" and "our"
refer to the Company and the Bank, except that if the discussions relate to a
period before July 20, 2021, these terms refer solely to the Bank.


Insight

We are a full service community bank that provides a variety of services to
individual and commercial accounts in our market areas. Our business consists
primarily of taking deposits from the general public and investing those
deposits, together with funds generated from our operations, in one- to
four-family residential real estate loans, commercial and multi-family
residential real estate loans, commercial and industrial loans, construction and
land development loans and consumer loans. At September 30, 2022, we had total
assets of $406.2 million, loans, net of the allowance for loan losses and
deferred fees of $311.5 million, total deposits of $315.9 million and total
equity of $84.6 million. During 2019, the Bank elected to be treated as a
"covered savings association" which allows us to engage in the same activities
as a national bank.

Our primary deposit products are personal checking accounts, business checking
accounts, savings accounts, money market accounts and certificates of deposit.
Our lending products include single-family residential loans, construction
loans, land development loans and SBA/USDA guaranteed loans.

We expect to continue to focus on originating one- to four-family residential
real estate loans, commercial and multi-family residential real estate loans,
commercial and industrial loans, construction and land development loans and
consumer loans. Although in recent years, we have increased our focus,
consistent with what we believe to be conservative underwriting standards, on
originating higher yielding commercial real estate and commercial and industrial
loans.

We also invest in securities, which have historically consisted primarily of
mortgage-backed securities issued by U.S. government sponsored enterprises. In
recent years, we have originated single-family owner-occupied loans for sale
into the secondary market and for our own portfolio. We intend to continue this
activity in the future in order to generate fee income.

As a general matter, our interest-bearing liabilities reprice or mature more
quickly than our interest-earning assets, which can result in interest expense
increasing more rapidly than increases in interest income as interest rates
increase. Therefore, increases in interest rates may adversely affect our net
interest income and net economic value, which in turn would likely have an
adverse effect on our results of operations. To help manage interest rate risk,
we promote core deposit products and we are continuing to diversify our loan
portfolio by adding more commercial-related loans. We will seek to continue to
increase our core checking accounts during 2022.

Planned increase in expenditure

The completion of the conversion and stock offering, which resulted in us
becoming an SEC public reporting company, has increased our noninterest expenses
due to the increased costs of operating as a public company. In September, our
shareholders approved a stock-based benefit plan, which we anticipate will
further increase our noninterest expenses as the Board grants awards under the
TC Bancshares, Inc. 2022 Equity Incentive Plan.

Comparison of the financial situation at September 30, 2022 and December 31, 2021

Total Assets. Total assets increased $25.3 million, or 6.6%, to $406.2 million
at September 30, 2022 from $380.9 million at December 31, 2021. The increase was
principally due to an increase in net loans of $45.2 million partially offset by
a decrease in cash and cash equivalents of $18.2 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $18.2 million at
September 30, 2022, compared to December 31, 2021. These funds were deployed to
finance loan growth of $45.2 million after $26.6 million in funds provided by
deposit growth. The remaining funding was provided by maturities of certificates
of deposits with other banks.

Total Loans. Loans increased $45.5 million, or 16.8%, to $316.9 million at
September 30, 2022 from $271.4 million at December 31, 2021. Commercial real
estate loans increased $16.2 million, or 18.0%, to $106.0 million at September
30, 2022 from $89.8 million at December 31, 2021, due to new loan originations.
Multi-family real estate loans increased $4.9 million, or 24.7%, to $24.9
million at September 30, 2022, from $19.9 million at December 31, 2021, also due
to new loan originations. Due to the rapid rise in secondary market rates,
residential loans increased as customers chose to utilize our in-house portfolio
adjustable rate mortgages. As

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a result, residential loans increased $27.8 million, or 28.3%, to $126.2 million
at September 30, 2022, from $98.4 million at December 31, 2021, due to new loan
originations. Commercial and industrial loans increased $1.2 million, or 7.4% to
$17.1 million at September 30, 2022 from $15.9 million at December 31, 2021.
Home equity loans also increased $0.2 million, or 1.6%, to $11.7 million at
September 30, 2022, from $11.5 million at December 31, 2021.

Construction and land development loans decreased $4.7 million, or 13.8%, to
$29.7 million at September 30, 2022 from $34.4 million at December 31, 2021.
This decrease is attributable to several construction loans converting to
permanent financing.

Allowances for Loan Losses. The amount of our allowance for loan losses is based
on management's evaluation of the collectability of the loan portfolio,
including the nature of the portfolio, credit concentrations, trends in
historical loss experience, specific impaired loans, and economic conditions.
Allowances for impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. Because of uncertainties
associated with regional economic conditions, collateral values, and future cash
flows on impaired loans, it is reasonably possible that management's estimate of
probable loan losses inherent in the loan portfolio and the related allowance
may change materially in the near-term. The allowance is increased by a
provision for loan losses, which is charged to expense and reduced by full and
partial charge-offs, net of recoveries. Changes in the allowance relating to
impaired loans are charged or credited to the provision for loan losses.

During the nine months ended September 30, 2022, eight loans totaling $3.2MM
were downgraded from pass to substandard, two loans totaling $3MM were upgraded
from substandard to pass and five loans totaling $5.0MM were upgraded from
Special Mention to a rating of Acceptable and removed from the Watchlist. The
largest loan downgraded was a $2.9MM loan for a hotel located in Savannah, GA in
which the borrower has made timely payments of principal and interest. The
largest loan upgraded was a $2.9MM loan for the renovations of an existing
commercial property located in Montgomery, AL. The property had experienced
lower rental rates than anticipated and an extension of the interest only period
was requested in 2020. The property stabilized in 2021 and occupancy improved
such that the borrower has been able to service the debt in 2022. Loan loss
provision of $38,000 was recorded for the nine months ended September 30, 2022
compared to $107,000 for the nine months ended September 30, 2021. The Company
had 25 impaired loans totaling $1.4 million at September 30, 2022 compared to 27
impaired loans totaling $1.5 million at December 31, 2021. At September 30,
2022, there were no specific reserves and $24,000 of the allowance was
unallocated. We had net recoveries of $27,000 during the nine months ended
September 30, 2022, compared to net recoveries of $21,000 for the nine months
ended September 30, 2021. None of the charge-offs taken in 2022 related to the
COVID-19 pandemic. Management believes that the allowance for loan losses, which
was $4.3 million, or 1.37% of gross loans, at September 30, 2022, is adequate to
cover losses inherent in the loan portfolio.

Investment Securities. Investment securities, all of which are
available-for-sale, decreased $1.4 million, or -3.1%, to $44.2 million at
September 30, 2022 from $45.6 million at December 31, 2021. This decrease
resulted from investments made in U.S. treasuries of $5.0 million less paydowns
on mortgage-backed securities of $2.5 million and additional unrealized losses
on our investments of $4.1 million during the nine months ended September 30,
2022. Unrealized losses on our investments increased to $4.6 million at
September 30, 2022 from $485,000 at December 31, 2021. This increase in
unrealized losses was not due to a decrease in credit quality, but rather from
an aggregate increase of 300 basis points in the federal funds target range by
the Federal Open Market Committee ("FOMC") during the nine months ended
September 30, 2022, the first increases in the federal funds target range by the
FOMC since 2018.

Other Real Estate Owned. In July 2021, an SBA guaranteed owner occupied property
securing a commercial real estate loan was moved to other real estate owned
resulting in a $1.0 million increase in other real estate owned. In August 2022,
the selling price of the property was reduced to $985,000 less 10% selling costs
resulting in a write-down of this property to $886,500 of which 75% is
guaranteed by the SBA and 25%, or $41,675 was recognized by the Bank.

Bank Owned Life Insurance. Our investment in bank owned life insurance increased
$0.2 million, or 1.8%, to $11.3 million at September 30, 2022 from $11.2 million
at December 31, 2021. We invest in bank owned life insurance to provide us with
a funding offset for our benefit plan obligations. Bank owned life insurance
also generally provides us noninterest income that is non-taxable. Federal
regulations generally limit our investment in bank owned life insurance to 25%
of our Tier 1 capital plus our allowance for loan losses. Our investment in bank
owned life insurance at September 30, 2022 was 16.3% of our Tier 1 capital plus
our allowance for loan losses.

Deposits. Total deposits increased $26.6 million, or 9.2%, to $315.9 million at
September 30, 2022 from $289.3 million at December 31, 2021.
Non-interest-bearing demand accounts increased $10.7 million, or 29.7%, to $46.6
million at September 30, 2022, from $35.9 million at December 31, 2021.
Interest-bearing demand accounts increased $13.7 million, or 9.4%, to $160.6
million at September 30, 2022, from $146.8 million at December 31, 2021. Savings
accounts increased $318,000, or .9%, to $34.3 million at September 30, 2022 from
$34.0 million at December 31, 2021. Certificates of deposit increased $1.8
million, or 2.5%, to $74.3 million at September 30, 2022 from $72.5 million at
December 31, 2021.

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Accrued interest payable and other liabilities. Accrued interest payables and
other liabilities increased $893,000, or 18.6%, to $5.7 million at September 30,
2022, from $4.8 million at December 31, 2021. Of this amount, first mortgage
loan escrows increased $639,000, or 331.1% to $832,000 at September 30, 2022,
from $193,000 at December 31, 2021.

Shareholders' Equity. Total shareholders' equity decreased $2.2 million, or
2.5%, to $84.6 million at September 30, 2022 from $86.8 million at December 31,
2021. The decrease resulted primarily from the $3.2 million, or 1,839.1%,
increase in the unrealized loss after taxes on our investment securities
available for sale of $3.4 million at September 30, 2022, from $0.2 million at
December 31, 2021. This decrease was not due to a change in credit quality but
resulted from the increase in the federal funds rates as noted above. Also
contributing to the decrease, the Company purchased $734,000 of its own stock
that is held in treasury and reported as a reduction in equity. Additionally,
the Company declared $245,000 of cash dividends to shareholders in June 2022 and
paid on July 15, 2022. These decreases were partially offset by net income of
$2.0 million for the nine months ended September 30, 2022.

Comparison of operating results for the three months ended September 30, 2022
and 2021

General. Net income increased $105,000, or 17.6%, to $703,000 for the three
months ended September 30, 2022, compared to $598,000 for the three months ended
September 30, 2021. The increase in net income resulted primarily from a
$625,000 increase in net interest income partially offset by a $318,000 decrease
in gains on sale of mortgage loans and a $221,000 increase in other expense.

Interest Income. Interest and dividend income increased $676,000, or 20.0%, to
$4.0 million for the three months ended September 30, 2022 from $3.4 million for
the three months ended September 30, 2021. This increase was primarily due to
increases in interest income on the loan portfolio of $433,000, or 13.5%, as
well as increases in interest and dividends on taxable investment securities
available for sale of $107,000 and interest on deposits with other banks and
federal funds sold of $135,000. The average balance of loans, including loans
held for sale, increased $45.0 million, or 16.8%, to $313.1 million for the
three months ended September 30, 2022, from $268.1 million for the three months
ended September 30, 2021, and the average yield on loans decreased to 4.62% for
the three months ended September 30, 2022 from 4.75% for three months ended
September 30, 2021. The average balance of investment securities increased $14.1
million, or 44.2%, to $45.9 million for the three months ended September 30,
2022, from $31.9 million for the three months ended September 30, 2021, while
the average yield on investment securities increased 55 basis points to 1.93%
for the three months ended September 30, 2022, from 1.38% for the three months
ended September 30, 2021. The average balance of other interest-earning deposits
decreased $25.2 million, or -43.3%, to $33.0 million for three months ended
September 30, 2022, from $58.2 million for the three months ended September 30,
2021, while the average yield on other interest-earning deposits increased 184
basis points to 2.16% for the three months ended September 30, 2022, from 0.32%
for the three months ended September 30, 2021.

Interest Expense. Total interest expense increased $51,000, or 21.7%, to
$284,000 for the three months ended September 30, 2022 from $233,000 for the
three months ended September 30, 2021. The increase was primarily due to an
increase in interest rates offered on money market accounts and certificate of
deposits due to the federal funds target range increasing 300 basis points to
3.25% on September 30, 2022, from 0.25% on September 30, 2021. The average
balance of interest-bearing deposits increased $13.8 million, or 5.3%, to $274.8
million for the three months ended September 30, 2022, from $261.0 million for
the three months ended September 30, 2021, with a 6 basis point increase in the
average cost of interest-bearing deposits to 0.41% for the three months ended
September 30, 2022, from 0.35% for the three months ended September 30, 2021.
The average balances of FHLB advances decreased $797,000, or 100%, to $0 for the
three months ended September 30, 2022. For the three months ended September 30,
2021, the average cost of FHLB advances was 0.50%.

Net Interest Income. Net interest income increased $625,000, or 19.9%, to $3.8
million for the three months ended September 30, 2022 from $3.1 million for the
three months ended September 30, 2021. Our average interest-earning assets
increased $34.5 million, or 9.6%, period over period. This increase was due
primarily to increases in our loan portfolio of $45.0 million and securities of
$14.0 million, partially offset by a $25.2 million decrease in the average
balance of our interest-earning deposits with other banks. Our interest rate
spread increased to 3.68% for the three months ended September 30, 2022 from
3.38% for the three months ended September 30, 2021, and our net interest margin
increased to 3.80% for the three months ended September 30, 2022 from 3.47% for
the three months ended September 30, 2021. The increases in interest rate spread
and net interest margin were primarily the result of the mix of our interest
earning assets. As stated earlier, average loans which is our highest yielding
asset increased $45.0 million from September 30, 2021, and our interest-bearing
deposits, which are our lowest yield assets, decreased $25.2 million from
September 30, 2021. The cost on our earning assets increased 24 bps; whereas,
the yield on our interest-bearing liabilities increased only 6 bps.

Provision for Loan Losses. We recorded $38,000 in provision for loan losses for
the three months ended September 30, 2022, compared to a $107,000 provision for
the three months ended September 30, 2021. Provisions for loan losses are
charged to operations to establish an allowance for loan losses at a level
necessary to absorb known and inherent losses in our loan portfolio that are
both probable and reasonably estimable at the date of the financial statements.
In evaluating the level of the allowance for loan losses, management analyzes
several qualitative loan portfolio risk factors including, but not limited to,
management's ongoing review and grading of loans, facts and issues related to
specific loans, historical loan loss and delinquency experience, trends in past
due and

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non-accrual loans, existing risk characteristics of specific loans or loan
pools, the fair value of underlying collateral, current economic conditions and
other qualitative and quantitative factors which could affect potential credit
losses. See the section entitled "Allowance for Loan Losses" in this Item 2, and
Note 3 of the Consolidated Financial Statements in Item 1 of this Quarterly
Report on Form 10-Q.

The allowance for loan losses was $4.3 million, or 1.37% of total loans, at
September 30, 2022, and $4.2 million, or 1.54%, of total loans at December 31,
2021, and $4.2 million, or 1.57% of total loans, at September 30, 2021.
Classified (substandard, doubtful and loss) loans decreased to $4.2 million at
September 30, 2022 compared to $4.3 million at December 31, 2021 and $4.7
million at September 30, 2021. We had $524,000 of nonperforming loans at
September 30, 2022, compared to $414,000 at December 31, 2021 and $690,000 at
September 30, 2021. Net recoveries for the three months ended September 30, 2022
and 2021 were $27,000 and $21,000, respectively. We had no loans in deferral at
September 30, 2022, or December 31, 2021.

Other income. Other income information is as follows.

                                        For the three months
                                         ended September 30,               Change
                                        2022            2021        Amount      Percent
                                                    (Dollars in thousands)
Service charges on deposit accounts   $     144       $     152     $    (8 )       (5.3 )%
Gain on sale of loans                       219             537        (318 )      (59.2 )%
Other                                        75              88         (13 )      (14.8 )%
Total non-interest income             $     438       $     777     $  (339 )      (43.6 )%



Other income decreased $339,000, or 43.6%, to $438,000 for the three months
ended September 30, 2022 from $777,000 for the three months ended September 30,
2021. The decrease was primarily due to a $318,000 decrease in gain on sale of
mortgage loans into the secondary market to $219,000 for the three months ended
September 30, 2022, compared to $537,000 for the three months ended September
30, 2021. This decrease is primarily due to the decrease in mortgage loan
refinancings and home purchases sold into the secondary market as interest rates
have increased since December 31, 2021.


Other expenses. Other expenditure information is as follows.

                                              For the three months
                                               ended September 30,                  Change
                                              2022             2021          Amount        Percent
                                                            (Dollars in thousands)
Salaries and employee benefits             $     1,987       $   1,892     $       95           5.0 %
Occupancy and equipment                            213             217             (4 )        (1.8 )%
Advertising                                         67              58              9          15.5 %
Audit and examination                              159             107             52          48.6 %
Checking account related expenses                  138             168            (30 )       (17.9 )%
Consulting and advisory fees                        24              79            (55 )       (69.6 )%
Data processing fees                               115             133            (18 )       (13.5 )%
Director fees                                      105              68             37          54.4 %
Legal                                              131              48             83         172.9 %
Other real estate loss/(gain) on sale               27               2             25
and write-downs                                                                             1,250.0 %
Other                                              284             257             27          10.5 %
Total non-interest expense                 $     3,250       $   3,029     $      221           7.3 %



Other expense increased $221,000, or 9.5%, to $3.25 million for the three months
ended September 30, 2022, from $3.03 million for the three months ended
September 30, 2021. The increase was due primarily to a $95,000 and $83,000
increase in salaries and employee benefits and legal fees, respectively. In
addition, audit and examination expenses increased $52,000, or 48.6%, to
$159,000 for the three months ended September 30, 2022 from $107,000 for the
three months ended September 30, 2021. The increase in salaries and benefits was
attributable to additional staff hired. The increases in legal and audit and
examination fees were attributable to expenses associated with the additional
SEC filing and compliance requirements of being a public company.

Income Tax Expense. Income tax expense increased $29,000 to $212,000 for the
three months ended September 30, 2022, compared to $183,000 for the three months
ended September 30, 2021. The increase resulted from the $134,000 increase in
income before income taxes. For the three months ended September 30, 2022,
income before taxes was $915,000, compared to $781,000 for the three months
ended September 30, 2021. Our effective tax rate was 23.2% for the three months
ended September 30, 2022 and 23.5% for the three months ended September 30,
2021.

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Average balances, interest and average returns/costs

The following table sets forth for the periods indicated, information regarding
average balances of assets and liabilities as well as the total dollar amounts
of interest income from average interest-earning assets and interest expense on
average interest-bearing liabilities, resultant yields, interest rate spread,
net interest margin (otherwise known as net yield on interest-earning assets),
and the ratio of average interest-earning assets to average interest-bearing
liabilities. All average balances are daily average balances. Non-accruing loans
have been included in the table as loans carrying a zero yield. Loan fees are
included in interest income on loans and are not material. No tax-equivalent
yield adjustments have been made, as the effects would be immaterial.

                                                                      For 

the term has ended September 30,

                             2022                            2022                                            2021
                          Yield/rate         Average         Interest       Average          Average         Interest       Average
                            At 9-30          Balance         Earned/         Yield/          Balance         Earned/         Yield/
                             2022          Outstanding         Paid           Rate         Outstanding         Paid           Rate
                                                                    (Dollars in thousands)
Interest-earning
assets:
Loans receivable                 4.46 %   $     313,134     $    3,644           4.62 %   $     268,161     $    3,210           4.75 %
Securities
available-for-sale               2.11 %          45,940            223           1.93 %          31,880            111           1.38 %
Interest-earning
deposits                         3.15 %          33,006            180           2.16 %          58,169             47           0.32 %
Other interest-earning
assets                           4.11 %             926              2           0.86 %             284              5           6.98 %
Total interest-earning
  assets                         4.12 %         393,006     $    4,049           3.97 %         358,494     $    3,373           3.73 %
Non-interest-earning
assets                                           20,030                                          10,197
Total assets                              $     413,036                                   $     368,691
Interest-bearing
liabilities:
Savings and money
market
  accounts                       0.58 %   $     141,281     $      168           0.47 %   $     141,467     $       66           0.19 %
Interest-bearing
checking
  accounts                       0.09 %          58,255             17           0.12 %          42,073             13           0.12 %
Certificate accounts             0.59 %          75,221             99           0.52 %          77,418            153           0.78 %
Total interest-bearing
  deposits                       0.26 %         274,757            284           0.41 %         260,958            232           0.35 %
Borrowings                          - %               -              -              - %             797              1           0.50 %
Total interest-bearing
  liabilities                    0.48 %         274,757            284           0.41 %         261,755            233           0.35 %
Non-interest-bearing
  liabilities                                    52,577                                          65,969
Total liabilities                               327,334                                         327,724
Total equity                                     85,702                                          40,967
Total liabilities and
  equity                                  $     413,036                                   $     368,691
Net interest income                                         $    3,765                                      $    3,140
Net earning assets                        $     118,249                                   $      96,739
Net interest rate
spread(1)                        3.64 %                                          3.68 %                                          3.38 %
Net interest margin(2)                                                           3.80 %                                          3.47 %
Average
interest-earning
  assets to average
  interest-bearing
liabilities                                      143.04 %                                        136.96 %




(1)
Net interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate of
interest-bearing liabilities.
(2)
Net interest margin represents net interest income divided by average total
interest-earning assets.

                                       32
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Rate/volume analysis

The following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes related to
outstanding balances and that due to the changes in interest rates. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.

                                                Quarter Ended
                                                September 30,
                                                2022 vs. 2021
                                          Increase/
                                         (decrease)             Total
                                           due to             increase/
                                      Volume       Rate      (decrease)
                                               (In thousands)
Interest-earning assets:
Loans receivable                     $    538     $ (104 )   $       434
Securities available for sale              49         63             112
Interest-earning deposits                 (20 )      153             133
Other interest-earning assets              11        (14 )            (3 )
Total interest-earning assets             578         98             676
Interest-bearing liabilities:
Savings and money market accounts           -        102             102
Interest-bearing checking accounts          5         (1 )             4
Certificate accounts                       (4 )      (50 )           (54 )
Total interest-bearing deposits             1         51              52
Borrowings                                 (1 )                       (1 )
Total interest-bearing liabilities          -         51              51

Change in net interest income $578 $47 $625

Comparison of operating results for the nine months ended September 30, 2022 and 2021

General. Net income increased $60,000, or 3.1%, to $1,993,000 for the nine
months ended September 30, 2022, compared to $1,933,000 for the nine months
ended September 30, 2021. The increase in net income resulted primarily from a
$1.3 million increase in net interest income that was reduced primarily by a
decrease in gain on sale of mortgage loans of $814,000 and an increase in other
expenses of $543,000.

Interest Income. Interest and dividend income increased $1,139,000, or 11.6%, to
$11.0 million for the nine months ended September 30, 2022 from $9.8 million for
the nine months ended September 30, 2021. This increase was primarily due to an
increase in interest on our loan portfolio of $629,000, and interest income and
dividends on taxable investment securities available for sale of $292,000 as
well as interest on deposits with other banks and federal funds sold of
$218,000. The average balance of loans, including loans held for sale, increased
$26.5 million, or 9.95%, to $292.8 million for the nine months ended September
30, 2022, from $266.3 million for the nine months ended September 30, 2021, and
the average yield on loans decreased 14 basis points to 4.59% for the nine
months ended September 30, 2022, from 4.73% for the nine months ended September
30, 2021. The average balance of investment securities increased $22.6 million,
or 95.29%, to $46.4 million for the nine months ended September 30, 2022, from
$23.7 million for the nine months ended September 30, 2021, while the average
yield on investment securities increased 11 basis points to 1.61% for the nine
months ended September 30, 2022, from 1.50% for the nine months ended September
30, 2021. The average balance of other interest-earning deposits decreased $16.7
million, or 26.48%, to $46.3 million for nine months ended September 30, 2022,
from $63.0 million for the nine months ended September 30, 2021, and the average
yield on other interest-earning deposits increased 73 basis points to 1.03% for
the nine months ended September 30, 2022, from 0.30% for the nine months ended
September 30, 2021.

Interest Expense. Total interest expense decreased $209,000, or 14.9%, to
$625,000 for the nine months ended September 30, 2022 from $834,000 for the nine
months ended September 30, 2021. The decrease was primarily due to lower
interest rates offered on all deposit products even though the federal funds
target range increased 300 basis points to 3.25% on September 21, 2022 from
0.25% on January 1, 2022. The average balance of interest-bearing deposits
decreased $2.3 million, or 0.85%, to $268.1 million for the nine months ended
September 30, 2022, from $270.4 million for the nine months ended September 30,
2021 with an 8 basis point decline in the average cost of interest-bearing
deposits to 0.31% for the nine months ended September 30, 2022, from 0.40% for
the nine months

                                       33
--------------------------------------------------------------------------------


ended September 30, 2021. The average balances of FHLB advances decreased $6.3
million, or 100%, to $0 for the nine months ended September 30, 2022. For the
nine months ended September 30, 2021, the average cost of FHLB advances was
0.83%.

Net Interest Income. Net interest income increased $1.4 million, or 14.9%, to
$10.4 million for the nine months ended September 30, 2022 from $9.0 million for
the nine months ended September 30, 2021. Our average interest-earning assets
increased $32.8 million, or 9.28%, period over period. This increase was due
primarily to increases in our loan portfolio of $26.5 million and investment
securities available for sale of $22.6 million offset by a decrease in
interest-earning deposits with other banks of $16.7 million. Our interest rate
spread increased to 3.49% for the nine months ended September 30, 2022 from
3.32% for the nine months ended September 30, 2021, and our net interest margin
increased to 3.58% for the nine months ended September 30, 2022 from 3.41% for
the nine months ended September 30, 2021. The increases in interest rate spread
and net interest margin were primarily the result of the mix of our earning
assets. As stated earlier average loans which is our highest yielding asset
increased $26.5 million and our interest-bearing deposits, which are our lowest
yield assets, decreased $16.7 million from December 31, 2021. The yield on our
earning assets increased 8 bps; whereas, the yield on our interest-bearing
liabilities decreased 9 bps as we paid off our FHLB advances in 2021.

Provision for Loan Losses. Provisions for loan losses are charged to operations
to establish an allowance for loan losses at a level necessary to absorb known
and inherent losses in our loan portfolio that are both probable and reasonably
estimable at the date of the financial statements. In evaluating the level of
the allowance for loan losses, management analyzes several qualitative loan
portfolio risk factors including, but not limited to, management's ongoing
review and grading of loans, facts and issues related to specific loans,
historical loan loss and delinquency experience, trends in past due and
non-accrual loans, existing risk characteristics of specific loans or loan
pools, the fair value of underlying collateral, current economic conditions and
other qualitative and quantitative factors which could affect potential credit
losses. See the section entitled "Allowance for Loan Losses" in this Item 2, and
Note 3 of the Consolidated Financial Statements in Item 1 of this Quarterly
Report on Form 10-Q.

We recorded $98,000 in provision for loan losses for the nine months ended
September 30, 2022 compared to $123,000 for the nine months ended September 30,
2021. The allowance for loan losses was $4.3 million, or 1.37% of total loans at
September 30, 2022, and $4.2 million, or 1.54% of total loans at December 31,
2021, and $4.1 million, or 1.56% of total loans, at September 30, 2021.
Classified (substandard, doubtful and loss) loans decreased to $4.2 million at
September 30, 2022 compared to $4.3 million at December 31, 2021 and $4.6
million at September 30, 2021. We had $524,000 of nonperforming loans at
September 30, 2022, compared to $414,000 at December 31, 2021 and $690,000 at
September 30, 2021. Net recoveries for the nine months ended September 30, 2022
and 2021 were $55,000 and $38,000, respectively. We had no loans in deferral at
September 30, 2022 or December 31, 2021.

Other income. Other income information is as follows.

                                         For the nine
                                         months ended
                                         September 30,               Change
                                       2022        2021       Amount      Percent
                                                 (Dollars in thousands)

Service charges on deposit accounts $415 $421 $ (6 )

  (1.4 )%
Gain on sale of loans                     825       1,639        (814 )      (49.7 )%
Other                                     307         237          70         29.5 %
Total non-interest income             $ 1,547     $ 2,297     $  (750 )      (32.7 )%



Other income decreased $750,000, or 32.7%, to $1,547,000 for the nine months
ended September 30, 2022, from $2,297,000 for the nine months ended September
30, 2021. The decrease was primarily due to a $814,000 decrease in gain on sale
of mortgage loans into the secondary market to $9825,000 for the nine months
ended September 30, 2022, compared to $1,639,000 for the nine months ended
September 30, 2021. This decrease is primarily due to the decrease in mortgage
loan refinancings and home purchases as interest rates have increased since
December 31, 2021.


                                       34
--------------------------------------------------------------------------------

Other expenses. Other expenditure information is as follows.

                                                For the nine
                                                months ended
                                                September 30,                   Change
                                             2022          2021          Amount        Percent
                                                          (Dollars in thousands)
Salaries and employee benefits             $  5,695     $    5,562     $      133           2.4 %
Occupancy and equipment                         624            617              7           1.1 %
Advertising                                     197            170             27          15.9 %
Audit and examination                           410            306            104          34.0 %
Checking account related expenses               424            416              8           1.9 %
Consulting and advisory fees                     91            135            (44 )       (32.6 )%
Data system conversion costs                      -              1             (1 )      (100.0 )%
Data processing fees                            346            337              9           2.7 %
Director fees                                   226            231             (5 )        (2.2 )%
Legal                                           247             37            210         567.6 %
Other real estate loss/(gain) on sale
and write-downs                                  59              4             55       1,375.0 %
Other                                           893            853             40           4.7 %
Total non-interest expense                 $  9,212     $    8,669     $      543           6.3 %



Other expense increased $543,000, or 6.3%, to $9.2 million for the nine months
ended September 30, 2022, from $8.7 million for the nine months ended September
30, 2021. The increase was due primarily to a $148,000 and $104,000 increase in
legal and audit and examination expenses, respectively, which are attributable
to expenses associated with the additional SEC filing and compliance
requirements of being a public company. In addition, salaries and employee
benefits increased $133,000 increased due to hiring additional staff.

Income Tax Expense. Income tax expense increased $18,000 to $602,000 for the
nine months ended September 30, 2022, compared to $584,000 for the nine months
ended September 30, 2021. The increase resulted from a $79,000 increase in
income before income taxes. For the nine months ended September 30, 2022, income
before taxes was $2,596,000 compared to $2,517,000 for the nine months ended
September 30, 2021. Our effective tax rate was 23.2% both the nine months ended
September 30, 2022 and 2021.

                                       35
--------------------------------------------------------------------------------

Average balances, interest and average returns/costs

The following table sets forth for the periods indicated, information regarding
average balances of assets and liabilities as well as the total dollar amounts
of interest income from average interest-earning assets and interest expense on
average interest-bearing liabilities, resultant yields, interest rate spread,
net interest margin (otherwise known as net yield on interest-earning assets),
and the ratio of average interest-earning assets to average interest-bearing
liabilities. All average balances are daily average balances. Non-accruing loans
have been included in the table as loans carrying a zero yield. Loan fees are
included in interest income on loans and are not material. No tax-equivalent
yield adjustments have been made, as the effects would be immaterial.


                                                                   For the 

nine months ended September 30,

                             2022                            2022                                           2021
                          Yield/rate         Average        Interest       Average          Average         Interest       Average
                            At 9-30          Balance         Earned/        Yield/          Balance         Earned/         Yield/
                             2022          Outstanding        Paid           Rate         Outstanding         Paid           Rate
                                                                    (Dollars in thousands)
Interest-earning
assets:
Loans receivable                 4.46 %   $     292,803     $  10,051           4.59 %   $     266,312     $    9,422           4.73 %
Securities
available-for-sale               2.11 %          46,355           558           1.61 %          23,737            266           1.50 %
Interest-earning
deposits                         3.15 %          46,322           356           1.03 %          63,006            140           0.30 %
Other interest-earning
assets                           4.11 %             926            20           2.89 %             530             18           4.54 %
Total interest-earning
  assets                         4.12 %         386,406        10,985           3.80 %         353,585          9,846           3.72 %
Non-interest-earning
assets                                           18,839                                         20,616
Total assets                              $     405,245                                  $     374,201
Interest-bearing
liabilities:
Savings and money
market
  accounts                       0.58 %   $     135,444           311           0.31 %   $     138,760            206           0.20 %
Interest-bearing
checking
  accounts                       0.09 %          58,705            44           0.10 %          51,076             35           0.09 %
Certificate accounts             0.59 %          73,938           271           0.49 %          80,543            554           0.92 %
Total interest-bearing
  deposits                       0.26 %         268,087           626           0.31 %         270,379            795           0.39 %
Borrowings                          - %               -             -              -             6,299             39           0.83 %
Total interest-bearing
  liabilities                    0.48 %         268,087           626           0.31 %         276,678            834           0.40 %
Non-interest-bearing
  liabilities                                    50,910                                         57,148
Total liabilities                               318,997                                        333,826
Total equity                                     86,248                                         40,375
Total liabilities and
  equity                                  $     405,245                                  $     374,201
Net interest income                                         $  10,359                                      $    9,012
Net earning assets                        $     118,319                                  $      76,907
Net interest rate
spread(1)                        3.64 %                                         3.49 %                                          3.32 %
Net interest margin(2)                                                          3.58 %                                          3.41 %
Average
interest-earning
  assets to average
  interest-bearing
  liabilities                                    144.13 %                                       127.80 %





(1)
Net interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate of
interest-bearing liabilities.
(2)
Net interest margin represents net interest income divided by average total
interest-earning assets.

                                       36
--------------------------------------------------------------------------------

Rate/volume analysis

The following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes related to
outstanding balances and that due to the changes in interest rates. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.

                                             Nine Months Ended
                                               September 30,
                                               2022 vs. 2021
                                         Increase/
                                         (decrease)            Total
                                           due to            increase/
                                     Volume       Rate      (decrease)
                                               (In thousands)
Interest-earning assets:
Loans receivable                     $   937     $ (308 )   $       629
Securities available for sale            253         39             292
Interest-earning deposits                (37 )      253             216
Other interest-earning assets             13        (11 )             2

Total interest-bearing assets 1,166 (27 ) 1,139 Interest-bearing debt: Savings and money market accounts (5 ) 110

             105
Interest-bearing checking accounts         5          4               9
Certificate accounts                     (45 )     (238 )          (283 )

Total interest-bearing deposits (45 ) (124 ) (169 ) Borrowings

                               (39 )        -             (39 )

Total interest-bearing liabilities (84 ) (124 ) (208 ) Change in net interest income $1,250 $97 $1,347

CASH AND CAPITAL RESOURCES

Liquidity

Our liquidity is a measure of our ability to fund loans, pay withdrawals of
deposits, and other cash outflows in an efficient, cost-effective manner. Our
short-term sources of liquidity include maturity, repayment and sales of assets,
excess cash and cash equivalents, new deposits, other borrowings, and new
advances from the Federal Home Loan Bank. There has been no material adverse
change during the nine months ended September 30, 2022 in our ability to fund
our operations.

Our primary sources of funds are deposits, principal and interest payments on
loans and securities, proceeds from the sale of loans, and proceeds from
maturities of securities. We also have the ability to borrow from the Federal
Home Loan Bank of Atlanta. At September 30, 2022, we had $48.8 million in
borrowing capacity with the Federal Home Loan Bank of Atlanta, and had no
advances outstanding. In addition, we have $19.5 million in unsecured federal
funds lines of credit through our correspondent banks and $5.8 million secured
borrowing capacity through the Federal Reserve Bank of Atlanta. No amounts were
outstanding on these lines of credit at September 30, 2022.

We are committed to maintaining a strong liquidity position. We monitor our
liquidity position on a daily basis. We anticipate that we will have sufficient
funds to meet our current funding commitments. Based on our current strategy to
increase our loan portfolio, we will seek to increase core deposits and use
Federal Home Loan Bank of Atlanta advances as well as brokered certificates of
deposit as needed.

Capital Requirements

At September 30, 2022, the Bank's Tier 1 capital as a percentage of the Bank's
total assets was 16.30%, and total qualifying capital as a percentage of
risk-weighted assets was 23.86%. As of September 30, 2022, the Bank was
classified as "well capitalized" for regularity capital purposes. Note 6 to the
Financial Statements describes the regulatory capital requirements applicable to
the Bank.

                                       37
--------------------------------------------------------------------------------

Off-balance sheet arrangements and global contractual obligations

Commitments. Note 5 to the financial statements describes off-balance sheet risky financial instruments that we enter into in the normal course of our business to meet the financing needs of our customers.

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

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