SSB Bancorp, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - SSB Bancorp, Inc.	tv500404_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - SSB Bancorp, Inc.	tv500404_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - SSB Bancorp, Inc.	tv500404_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - SSB Bancorp, Inc.	tv500404_ex31-1.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 000-55898

SSB Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		82-2776224
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

8700 Perry Highway Pittsburgh, Pennsylvania		15237
(Address of Principal Executive Offices)		(Zip Code)

(412) 837-6955

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 requirements for the past 90 days.

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

YES x 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company x
(Do not check if smaller reporting company)		Emerging growth company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

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. ¨

As of August 10, 2018 there were 2,248,250 outstanding shares of the registrant’s common stock, of which 1,236,538 shares are owned by SSB Bancorp, MHC.

SSB Bancorp, Inc.

Form 10-Q

Table of Contents

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	3

	Consolidated Statements of Net Income for the Three Months Ended June 30, 2018 and 2017, and the Six Months Ended June 30, 2018 and 2017	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 2018 and 2017, and the Six Months Ended June 30, 2018 and 2017	5

	Consolidated Statements of Changes in Stockholders’ Equity as of June 30, 2018	6

	Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2018 and 2017, and the Six Months Ended June 30, 2018 and 2017	7

	Notes to Financial Statements	8 – 32

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

	SIGNATURES	48

Item 1. Financial Statements

SSB Bancorp, Inc.

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2018			2017
	(unaudited)
ASSETS
Cash and due from banks	$	3,277,225		$	2,558,134
Interest-bearing deposits with other financial institutions		4,009,030			13,919,932
Cash and cash equivalents		7,286,255			16,478,066

Certificates of deposit		1,091,000			943,000
Securities available for sale		2,984,828			2,616,350
Securities held to maturity (fair value of $8,095, and $9,494, respectively)		7,994			9,797
Loans		151,438,484			141,615,982
Allowance for loan losses		(1,090,016	)		(1,041,445	)
Net loans		150,348,468			140,574,537
Accrued interest receivable		611,673			476,417
Federal Home Loan Bank stock, at cost		2,310,300			2,162,600
Premises and equipment, net		4,369,554			4,358,006
Bank-owned life insurance		2,393,777			2,358,519
Deferred tax asset, net		334,747			328,169
Prepaid reorganization and stock issuance costs		-			837,944
Other assets		844,070			762,086
TOTAL ASSETS	$	172,582,666		$	171,905,491

LIABILITIES
Deposits:
Noninterest-bearing demand	$	544,749		$	440,871
Interest-bearing demand		12,865,210			23,167,923
Money market		13,706,855			14,597,811
Savings		14,337,093			12,524,304
Time		83,460,988			81,699,115
Total deposits		124,914,895			132,430,024

Federal Home Loan Bank advances		26,166,200			26,416,200
Advances by borrowers for taxes and insurance		994,624			688,451
Accrued interest payable		229,484			206,597
Other liabilities		6,483			52,621
TOTAL LIABILITIES		152,311,686			159,793,893

STOCKHOLDERS' EQUITY
Preferred Stock: $0.01 par value per share: 5,000,000 shares authorized and no shares issued or outstanding		-			-
Common Stock: 20,000,000 shares authorized and 2,248,250 shares issued and outstanding at $0.01 par value		22,483			-
Paid-in capital		8,758,385			-
Retained earnings		12,396,111			12,135,085
Unearned Employee Stock Ownership Plan (ESOP)		(859,277	)		-
Accumulated other comprehensive loss		(46,722	)		(23,487	)
TOTAL NET STOCKHOLDERS' EQUITY		20,270,980			12,111,598

TOTAL LIABILITIES AND STOCKHOLERS' EQUITY	$	172,582,666		$	171,905,491

See accompanying notes to the unaudited financial statements.

SSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF NET INCOME

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
	(unaudited)				(unaudited)
INTEREST INCOME
Loans, including fees	$	1,719,472	$	1,508,089	$	3,288,453	$	3,029,841
Interest-bearing deposits with other financial institutions		22,028		9,464		33,907		17,455
Certificates of deposit		4,224		3,868		7,494		14,019
Investment securities:		-						-
Taxable		44,680		25,876		86,827		49,506
Exempt from federal income tax		8,294		9,590		16,879		19,429
Total interest income		1,798,698		1,556,887		3,433,560		3,130,250

INTEREST EXPENSE
Deposits		504,663		427,496		973,701		837,214
Federal Home Loan Bank advances		155,588		135,457		309,641		260,129
Total interest expense		660,251		562,953		1,283,342		1,097,343

NET INTEREST INCOME		1,138,447		993,934		2,150,218		2,032,907
Provision for loan losses		25,000		94,993		65,000		119,993

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,113,447		898,941		2,085,218		1,912,914

NONINTEREST INCOME
Securities gains, net		-		350		-		350
Provision for loss on loans held for sale		-		-		-		-
Gain on sale of loans		70,659		156,057		94,679		189,707
Loan servicing fees		34,109		20,171		68,829		39,255
Earnings on bank-owned life insurance		17,826		16,232		35,258		23,935
Other		12,113		4,517		27,695		11,041
Total noninterest income		134,707		197,327		226,461		264,288

NONINTEREST EXPENSE
Salaries and employee benefits		452,062		388,024		827,595		710,655
Occupancy		96,048		59,346		187,109		120,549
Professional fees		163,402		112,014		412,599		120,594
Federal deposit insurance		43,500		45,000		88,500		62,000
Data processing		73,013		79,928		150,086		137,730
Director fees		37,794		19,960		70,288		37,540
Contributions and donations		16,550		15,809		32,850		27,401
Other		118,277		79,791		237,823		167,934
Total noninterest expense		1,000,646		799,872		2,006,850		1,384,403

Income before income taxes		247,508		296,396		304,829		792,799
Provision for income taxes		33,732		86,204		43,803		286,107

NET INCOME	$	213,776	$	210,192	$	261,026	$	506,692

EARNINGS PER COMMON SHARE
Basic	$	0.10	$	N/A	$	N/A	$	N/A
Diluted	$	0.10	$	N/A	$	N/A	$	N/A

AVERAGE COMMON SHARES OUTSTANDING
Basic		2,161,221		N/A		N/A		N/A
Diluted		2,161,221		N/A		N/A		N/A
DIVIDENDS DECLARED PER COMMON SHARE	$	-	$	N/A	$	N/A	$	N/A
COMPREHENSIVE INCOME	$	213,390	$	N/A	$	N/A	$	N/A

See accompanying notes to the unaudited financial statements.

SSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended ended June 30,						Six months ended ended June 30,
	2018			2017			2018			2017
	(unaudited)						(unaudited)
Net income	$	213,776		$	210,192		$	261,026		$	506,692
Other comprehensive income (loss):
Net change in unrealized gain (loss) on available-for-sale securities		(891	)		41,637			(29,813	)		52,698
Income tax effect		505			(13,925	)		6,578			(17,686	)
Reclassification adjustment for net securities (gains) losses recognized in income		-			(350	)		-			(350	)
Income tax effect included in provision for income taxes		-			119			-			119

Other comprehensive income (loss), net of tax		(386	)		27,481			(23,235	)		34,781

Total comprehensive income	$	213,390		$	237,673		$	237,791		$	541,473

SSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

	Common Stock		Paid-in capital			Retained earnings		Unearned Employee Stock Ownership Plan			Accumulated other comprehensive loss			Total
Balance as of January 1, 2017	$	-	$	-		$	11,542,127	$	-		$	(47,388	)	$	11,494,739

Reclassification of certain income tax effects from accumulated other comprehensive loss		-		-			3,860		-			(3,860	)		-

Net income		-		-			589,098		-			-			589,098

Other comprehensive income		-		-			-		-			27,761			27,761

Balance as of January 1, 2018		-		-			12,135,085		-			(23,487	)		12,111,598

Net income		-		-			261,026		-			-			261,026

Other comprehensive loss		-		-			-		-			(23,235	)		(23,235	)

Net proceeds from stock offering (2,248,250 shares issued)		22,483		8,759,795			-		-			-			8,782,278

Purchase of ESOP shares (88,131 shares purchased)		-		-			-		(881,310	)		-			(881,310	)

Amortizaton of ESOP		-		(1,410	)		-		22,033			-			20,623

Balance as of June 30, 2018	$	22,483	$	8,758,385		$	12,396,111	$	(859,277	)	$	(46,722	)	$	20,270,980

SSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30,
	2018			2017
	(unaudited)
OPERATING ACTIVITIES
Net income	$	261,026		$	506,692
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		65,000			119,993
Provision for loss on loans held for sale		-			-
Depreciation		76,089			26,988
Net amortization of investment securities		-			-
Amortization (accretion) of security premiums and discounts		5,591			6,497
Origination of loans held for sale		(4,849,800	)		(7,202,360	)
Proceeds from sale of loans		4,944,480			7,392,067
Gain on sale of loans		(94,680	)		(189,707	)
Deferred income tax provision (benefit)		8,901			17,917
Investment securities gains, net		-			(350	)
(Increase) decrease in accrued interest receivable		(135,256	)		188
Increase (decrease) in accrued interest payable		22,887			17,980
Amortization of ESOP		20,623			-
Increase in bank owned life insurance		(35,258	)		(23,935	)
Other, net		700,519			(643,225	)
Net cash provided by (used in) operating activities		990,122			28,745

INVESTING ACTIVITIES
Purchase of certificates of deposit		(248,000	)		-
Redemption of certificates of deposit		100,000			250,000
Investment securities available for sale:
Purchases		(557,780	)		-
Proceeds from sales		-			313,643
Proceeds from principal repayments, calls, and maturities		154,300			168,215
Investment securities held to maturity:
Proceeds from principal repayments, calls, and maturities		1,803			2,502
Redemption of Federal Home Loan Bank stock		24,100			230,700
Purchase of Federal Home Loan Bank stock		(171,800	)		(736,800	)
Purchases of loans		-			(6,541,123	)
Increase in loans receivable, net		(9,838,931	)		(7,234,473	)
Proceeds from sale of portfolio loans		-			6,934,868
Proceeds from sale of other real estate owned		-			-
Purchases of premises and equipment		(87,637	)		(1,230,916	)
Purchase of bank-owned life insurance		-			-
Net cash (used for) provided by investing activities		(10,623,945	)		(7,843,384	)

FINANCING ACTIVITIES
Increase (decrease) in deposits, net		(7,515,129	)		5,350,030
Increase in advances by borrowers for taxes and insurance		306,173			177,460
Net proceeds from stock offering		8,782,278			-
Purchase of ESOP shares		(881,310	)
Repayment of Federal Home Loan Bank advance		(6,250,000	)		-
Proceeds from Federal Home Loan Bank advances		6,000,000			6,250,000
Net cash provided by (used in) financing activities		442,012			11,777,490

Increase (decrease) in cash and cash equivalents		(9,191,811	)		3,962,851

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		16,478,066			6,831,479

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	7,286,255		$	10,794,330

SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest	$	1,260,453		$	1,079,363
Income taxes		98,604			225,000

See accompanying notes to the unaudited financial statements.

SSB Bancorp, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

SSB Bancorp, Inc.

SSB Bancorp, Inc. (the “Company”) was incorporated on August 17, 2017 to serve as the subsidiary stock holding company for SSB Bank upon the reorganization of SSB Bank into a mutual holding company structure (the “Reorganization”). The Reorganization was completed effective January 24, 2018, with SSB Bank becoming the wholly-owned subsidiary of SSB Bancorp, Inc., and SSB Bancorp, Inc. becoming the majority-owned subsidiary of SSB Bancorp, MHC. In connection with the Reorganization, the Company sold 1,011,712 shares of common stock at an offering price of $10 per share. The Company’s stock began being quoted for listing on the OTC Bulletin Board on January 25, 2018, under the symbol “SSBP”. Also, in connection with the Reorganization, the Bank established an employee stock ownership plan (the “ESOP”), which purchased 88,131 shares of the Company’s common stock at a price of $10 per share. In the Reorganization, the Company also issued 1,236,538 shares of its common stock to SSB Bancorp, MHC.

SSB Bank

SSB Bank (the “Bank”) provides a variety of financial services to individuals and corporate customers through its offices in Pittsburgh, Pennsylvania. The Bank’s primary deposit products are passbook savings accounts, money market accounts, and certificates of deposit. Its primary lending products are commercial mortgage loan and single-family residential loans. The Bank is subject to regulation and supervision by the Federal Deposit Insurance Corporation (FDIC) and the Pennsylvania Department of Banking and Securities.

The interim financial statements at June 30, 2018, and for the three and six months ended June 30, 2018 and 2017, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments reflected in the accompanying interim financial statements. The results of operations for the three or six months ended June 30, 2018, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2018, or any other period. The financial statements at December 31, 2017, are audited.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Balance Sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

For further information, refer to the financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The consolidated financial statements include the accounts of SSB Bancorp, Inc. and SSB Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Financial information for the periods before the Reorganization on January 24, 2018 is that of SSB Bank only.

RECENT ACCOUNTING STANDARDS

On April 5, 2012, the Jumpstart Our Business Startups Act (the "JOBS Act") was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies and define an "emerging growth company." As an emerging growth company, the Company may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-issuer companies. If such standards would not apply to non-issuer companies, no deferral would be applicable. The Company has elected to take advantage of the benefits of extended transition periods. Accordingly, the Company’s financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. The effective dates of the following recent accounting standards reflect those that relate to non-issuer companies.

RECENT ACCOUNTING STANDARDS (Continued)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this Update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, a company should apply a five-step approach to revenue recognition. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early application is permitted, but only for annual reporting periods beginning after December 15, 2016. The Update is not expected to have a significant impact on the Company’s financial statements, as substantially all of the Company’s revenues are scoped out of the guidance.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments. Among other things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (g) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Update is not expected to have a significant impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. The amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Update is not expected to have a significant impact on the Company’s consolidated financial statements.

RECENT ACCOUNTING STANDARDS (Continued)

In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should 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 allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. For public business entities that do not meet the definition of an SEC filer, ASU 2016-13 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the financial statements, as any adjustment will be dependent on the composition of the loan portfolio at the time of adoption. The Company is currently in the early stages of implementing processes to comply with the requirements of the Update.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323), Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This Update adds an SEC paragraph to the Codification following an SEC Staff Announcement about applying Staff Accounting Bulletin Topic 11.M. Specifically, this announcement applies to ASU 2014-09, Revenue from Contracts with Customers (Topic 606); ASU 2016-02, Leases (Topic 842); and ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. A registrant should evaluate Updates that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those Updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact that adoption of the Updates referenced in this announcement are expected to have on the financial statements, then in addition to making a statement to that effect, that registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted. In this regard, the SEC staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies that the registrant expects to apply, if determined, and a comparison to the registrant’s current accounting policies. Also, a registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments in this Update are effective immediately.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The Update is not expected to have a significant impact on the Company’s consolidated financial statements.

RECENT ACCOUNTING STANDARDS (Continued)

In February 2018, the FASB issued Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides the option to reclassify certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (Tax Reform Act), enacted on December 22, 2017. ASU 2018-02 was issued in response to concerns regarding current guidance in GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date, even in situations in which the related income tax effects were originally recognized in other comprehensive income, rather than net income, and as a result the stranded tax effects would not reflect the appropriate tax rate. The amendments of ASU 2018-02 allow an entity to make a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects, which is the difference between the historical corporate income tax rate of 34.0 percent and the newly enacted corporate income tax rate of 21.0 percent. ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 31, 2018; however, entities are allowed to early adopt the amendments of ASU 2018-02 in any interim period for which the financial statements have not yet been issued. The amendments of ASU 2018-02 may be applied either at the beginning of the period (annual or interim) of adoption or retrospectively to each of the period(s) in which the effect of the change in the U.S. federal corporate tax rate in the Tax Reform Act is recognized. The Company chose to early adopt the new standard for the year ended December 31, 2017, as allowed. The amount of the reclassification for the Company was $3,860.

SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized gains and losses, and fair values of securities available for sale are as follows:

	June 30, 2018 (unaudited)
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Mortgage-backed securities in government-sponsored entities	$	1,009,946	$	97	$	(15,002	)	$	995,041
Obligations of state and political subdivisions		1,540,709		514		(43,980	)		1,497,243
Corporate bonds		300,666		-		(1,309	)		299,357
U.S. treasury securities		193,050		187		(50	)		193,187
Total	$	3,044,371	$	798	$	(60,341	)	$	2,984,828

	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Mortgage-backed securities in government-sponsored entities	$	524,873	$	-	$	(5,615	)	$	519,258
Obligations of state and political subdivisions		1,626,608		852		(27,582	)		1,599,878
Corporate bonds		300,952		1,399		(453	)		301,898
U.S. treasury securities		193,647		1,669		-			195,316
Total	$	2,646,080	$	3,920	$	(33,650	)	$	2,616,350

The amortized cost and fair value of investment securities available for sale by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities provide for periodic payments of principal and interest and have contractual maturities ranging from less than 1 year to 25 years. Due to expected repayment terms being significantly less than the underlying mortgage pool contractual maturities, estimated lives of these securities could be significantly shorter.

	June 30, 2018 (unaudited)
	Amortized		Fair
	Cost		Value

Due within one year or less	$	393,223	$	392,316
Due after one year through five years		706,218		697,923
Due after five years through ten years		504,076		474,042
Due after ten years		1,440,854		1,420,547
Total	$	3,044,371	$	2,984,828

SECURITIES AVAILABLE FOR SALE (Continued)

For the three months ended June 30, 2018, there were no sales of investment securities available for sale. For the three months ended June 30, 2017, there were 2 municipal bonds sold with a total amortized cost of $315,811 and an associated gain on sale of $350.

For the six months ended June 30, 2018, there were no sales of investment securities available for sale. For the six months ended June 30, 2017, there were 2 municipal bonds sold with a total amortized cost of $315,811 and an associated gain on sale of $350.

SECURITIES HELD TO MATURITY

The amortized cost, gross unrealized gains and losses, and fair values of securities held to maturity are as follows:

	June 30, 2018 (unaudited)
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Mortgage-backed securities in government-sponsored entities	$	7,994	$	101	$	-	$	8,095
Total	$	7,994	$	101	$	-	$	8,095

	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Mortgage-backed securities in government-sponsored entities	$	9,797	$	-	$	(303	)	$	9,494
Total	$	9,797	$	-	$	(303	)	$	9,494

The amortized cost and fair value of mortgage-backed securities by contractual maturity are shown below. Mortgage-backed securities provide for periodic payments of principal and interest and have contractual maturities ranging up to 10 years. Due to expected repayment terms being less than the underlying mortgage pool contractual maturities, estimated lives of these securities could be significantly shorter.

	June 30, 2018 (unaudited)
	Amortized		Fair
	Cost		Value

Due after one year through five years	$	6,395	$	6,447
Due after five years through ten years		1,599		1,648

Total	$	7,994	$	8,095

UNREALIZED LOSSES ON SECURITIES

The following tables show the Bank’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position:

	June 30, 2018 (unaudited)
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses

U.S. treasury securities	$	86,531	$	(50	)	$	-	$	-		$	86,531	$	(50	)
Mortgage-backed securities in government-sponsored entities		918,607		(15,002	)		-		-			918,607		(15,002	)
Obligations of state and political subdivisions		995,050		(13,849	)		397,608		(30,131	)		1,392,658		(43,980	)
Corporate bonds		299,357		(1,309	)		-		-			299,357		(1,309	)
Total	$	2,299,545	$	(30,210	)	$	397,608	$	(30,131	)	$	2,697,153	$	(60,341	)

	Decmeber 31, 2017
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses

Mortgage-backed securities in government-sponsored entities	$	519,258	$	(5,615	)	$	9,494	$	(303	)	$	528,752	$	(5,918	)
Obligations of state and political subdivisions		1,044,275		(7,238	)		405,521		(20,344	)		1,449,796		(27,582	)
Corporate bonds		199,898		(453	)		-		-			199,898		(453	)

Total	$	1,763,431	$	(13,306	)	$	415,015	$	(20,647	)	$	2,178,446	$	(33,953	)

Management reviews the Bank’s investment positions monthly. There were 12 investments that were temporarily impaired as of June 30, 2018, with aggregate depreciation of 2 percent from the Bank’s amortized cost basis. There were 20 investments that were temporarily impaired as of December 31, 2017, with aggregate depreciation of less than 2 percent from the Bank’s amortized cost basis. Management has asserted that at June 30, 2018 and December 31, 2017, the declines outlined in the above table represent temporary declines and the Bank does not intend to sell and does not believe it will be required to sell these securities before recovery of their cost basis, which may be at maturity.

The Bank has concluded that any impairment of its investment securities portfolio outlined in the above table is not other than temporary and the declines are the result of interest rate changes, sector credit rating changes, or company-specific rating changes that are not expected to result in the non-collection of principal and interest during the period.

LOANS

The Bank’s loan portfolio summarized by category is as follows:

	June 30,			December 31,
	2018			2017
	(unaudited)
Mortgage loans:
One-to-four family	$	75,762,450		$	75,858,226
Commercial		54,673,503			50,122,058
		130,435,953			125,980,284

Commercial and industrial		16,804,956			11,455,554
Consumer		4,060,747			4,014,258
		151,301,656			141,450,096

Third-party loan acquisition and other net origination costs		359,157			385,883
Discount on loans previously held for sale		(222,329	)		(219,997	)
Allowance for loan losses		(1,090,016	)		(1,041,445	)

Total	$	150,348,468		$	140,574,537

The Bank’s primary business activity is with customers located in Pittsburgh and surrounding communities. The Bank’s loan portfolio consists predominantly of one-to-four family mortgage and commercial mortgage loans. These loans are typically secured by first-lien positions on the respective real estate properties and are subject to the Bank’s underwriting policies.

During the normal course of business, the Bank may sell a portion of a loan as a participation loan in order to manage portfolio risk. In order to be eligible for sales treatment, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties, and no loan holder can have the right to pledge or exchange the entire loan. The Bank had transferred $7,698,798 and $8,129,670 in participation loans as of June 30, 2018 and December 31, 2017, respectively, to other financial institutions. As of June 30, 2018, and December 31, 2017, all these loans were being serviced by the Bank.

ALLOWANCE FOR LOAN LOSSES

The allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the balance sheet date. The following tables present, by portfolio segment, the changes in the allowance for loan losses and the recorded investment in loans for the three and six months ended June 30, 2018 (unaudited) and 2017 (unaudited), respectively:

Three months ended	Mortgage					Commercial		Consumer
June 30, 2018:	One-to-Four			Mortgage		and		and
Allowance for loan losses:	Family			Commercial		Industrial		HELOC			Total
Beginning balance	$	514,729		$	410,127	$	86,102	$	54,058		$	1,065,016
Charge-offs		-			-		-		-			-
Recoveries		-			-		-		-			-
Provision (credit)		(43,291	)		27,492		48,778		(7,979	)		25,000
Ending balance	$	471,438		$	437,619	$	134,880	$	46,079		$	1,090,016

Three months ended	Mortgage					Commercial		Consumer
June 30, 2017:	One-to-Four			Mortgage		and		and
Allowance for loan losses:	Family			Commercial		Industrial		HELOC		Total
Beginning balance	$	511,611		$	237,731	$	61,548	$	34,849	$	845,739
Charge-offs		-			-		-		-		-
Recoveries		-			-		-		-		-
Provision (credit)		(23,602	)		87,210		8,918		22,467		94,993
Ending balance	$	488,009		$	324,941	$	70,466	$	57,316	$	940,732

Six months ended	Mortgage					Commercial		Consumer
June 30, 2018:	One-to-Four			Mortgage		and		and
Allowance for loan losses:	Family			Commercial		Industrial		HELOC			Total
Beginning balance	$	513,846		$	383,535	$	80,854	$	63,210		$	1,041,445
Charge-offs		(16,429	)		-		-		-			(16,429	)
Recoveries		-			-		-		-			-
Provision (credit)		(25,979	)		54,084		54,026		(17,131	)		65,000
Ending balance	$	471,438		$	437,619	$	134,880	$	46,079		$	1,090,016

Six months ended	Mortgage					Commercial		Consumer
June 30, 2017:	One-to-Four			Mortgage		and		and
Allowance for loan losses:	Family			Commercial		Industrial		HELOC		Total
Beginning balance	$	498,410		$	228,763	$	59,439	$	34,127	$	820,739
Charge-offs		-			-		-		-		-
Recoveries		-			-		-		-		-
Provision (credit)		(10,401	)		96,178		11,027		23,189		119,993
Ending balance	$	488,009		$	324,941	$	70,466	$	57,316	$	940,732

ALLOWANCE FOR LOAN LOSSES (Continued)

The following tables summarize the loan portfolio and allowance for loan losses by the primary segments of the loan portfolio as of June 30, 2018 (unaudited), and December 31, 2017.

	Mortgage One-to-Four Family		Mortgage Commercial		Commercial and Industrial		Consumer and HELOC		Total
June 30, 2018
Allowance for loan losses:
Loans deemed impaired		33,422		-		-		2,349		35,771

Loans not deemed impaired		438,016		437,619		134,880		43,730		1,054,245

Ending Balance		471,438		437,619		134,880		46,079		1,090,016

June 30, 2018
Loans:
Loans deemed impaired		2,356,695		1,109,833		114,780		47,710		3,629,018

Loans not deemed impaired		73,405,755		53,563,670		16,690,176		4,013,037		147,672,638

Ending Balance		75,762,450		54,673,503		16,804,956		4,060,747		151,301,656

	Mortgage One-to-Four Family		Mortgage Commercial		Commercial and Industrial		Consumer and HELOC		Total
December 31, 2017
Allowance for loan losses:
Loans deemed impaired		23,870		-		-		-		23,870

Loans not deemed impaired		489,976		383,535		80,854		63,210		1,017,575

Ending Balance		513,846		383,535		80,854		63,210		1,041,445

December 31, 2017
Loans:
Loans deemed impaired		2,508,658		1,122,740		8,251		29,245		3,668,894

Loans not deemed impaired		73,349,568		48,999,318		11,447,303		3,985,013		137,781,202

Ending Balance		75,858,226		50,122,058		11,455,554		4,014,258		141,450,096

ALLOWANCE FOR LOAN LOSSES (Continued)

The following tables present impaired loans by class as of June 30, 2018 (unaudited), and December 31, 2017, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary.

	June 30, 2018						December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance

With no allowance recorded:
Mortgage loans:
One-to-four family	$	1,999,943	$	1,999,943	$	-	$	2,356,007	$	2,356,007	$	-
Commercial		1,109,833		1,109,833		-		1,122,740		1,122,740		-
Commercial and Industrial		114,780		114,780		-		8,251		8,251		-
Consumer and HELOC		47,710		47,710		-		29,245		29,245		-

With an allowance recorded:
Mortgage loans:
One-to-four family		356,752		356,752		33,422		152,651		152,651		23,870
Commercial		-		-		-		-		-		-
Commercial and Industrial		-		-		-		-		-		-
Consumer and HELOC		-		-		-		-		-		-

Total mortgage loans:
One-to-four family		2,356,695		2,356,695		33,422		2,508,658		2,508,658		23,870
Commercial		1,109,833		1,109,833		-		1,122,740		1,122,740		-
Commercial and Industrial		114,780		114,780		-		8,251		8,251		-
Consumer and HELOC		47,710		47,710		-		29,245		29,245		-

Total	$	3,629,018	$	3,629,018	$	33,422	$	3,668,894	$	3,668,894	$	23,870

ALLOWANCE FOR LOAN LOSSES (Continued)

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated.

	Three Months Ended June 30, 2018				Three Months Ended June 30, 2017
	(unaudited)				(unaudited)
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

With no allowance recorded:
Mortgage loans:
One-to-four family	$	1,955,312	$	-	$	1,959,165	$	14,469
Commercial		1,111,225		-		203,382		96,606
Commercial and industrial		114,780		-		-		-
Consumer and HELOC		47,478		207		-		-

With an allowance recorded:
Mortgage loans:
One-to-four family		370,205		2,301		141,141		1,968
Commercial		-		-		-		-
Commercial and industrial		-		-		-		-
Consumer and HELOC		-		-		-		-

Total mortgage loans:
One-to-four family		2,325,517		2,301		2,100,306		16,437
Commercial		1,111,225		-		203,382		96,606
Commercial and industrial		114,780		-		-		-
Consumer and HELOC		47,478		207		-		-

Total	$	3,599,000	$	2,508	$	2,303,688	$	113,043

	Six Months Ended June 30, 2018				Six Months Ended June 30, 2017
	(unaudited)				(unaudited)
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

With no allowance recorded:
Mortgage loans:
One-to-four family	$	1,916,664	$	432	$	2,052,984	$	26,431
Commercial		1,115,593		466		203,382		96,606
Commercial and industrial		84,221		-		-		-
Consumer and HELOC		45,365		207		-		-

With an allowance recorded:
Mortgage loans:
One-to-four family		384,309		5,720		142,089		3,981
Commercial		-		-		-		-
Commercial and industrial		-		-		-		-
Consumer and HELOC		-		-		-		-

Total mortgage loans:
One-to-four family		2,300,973		6,152		2,195,073		30,412
Commercial		1,115,593		466		203,382		96,606
Commercial and industrial		84,221		-		-		-
Consumer and HELOC		45,365		207		-		-

Total	$	3,546,152	$	6,825	$	2,398,455	$	127,018

ALLOWANCE FOR LOAN LOSSES (Continued)

Aging Analysis of Past-Due Loans by Class

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories:

	June 30, 2018 (unaudited)
					90 Days								90 Days or
	30-59 Days		60-89 Days		or Greater		Total Past				Total Loans		Greater Still
	Past Due		Past Due		Past Due		Due		Current		Receivable		Accruing

Mortgage loans:
One-to-four family	$	272,378		898,353		1,518,040		2,688,771	$	73,073,679	$	75,762,450	$	-
Commercial		-		-		1,109,833		1,109,833		53,563,670		54,673,503		-
Commercial and industrial		49,130		-		114,780		163,910		16,641,046		16,804,956		-
Consumer and HELOC		11,464		-		36,246		47,710		4,013,037		4,060,747		-
Total	$	332,972	$	898,353	$	2,778,899	$	4,010,224	$	147,291,432	$	151,301,656	$	-

	December 31, 2017
					90 Days								90 Days or
	30-59 Days		60-89 Days		or Greater		Total Past				Total Loans		Greater Still
	Past Due		Past Due		Past Due		Due		Current		Receivable		Accruing

Mortgage loans:
One-to-four family	$	982,168	$	399,992	$	1,900,116	$	3,282,276	$	72,575,950	$	75,858,226	$	-
Commercial		656,640		-		1,122,740		1,779,380		48,342,678		50,122,058		-
Commercial and industrial		301,783		-		8,251		310,034		11,145,519		11,455,554		-
Consumer and HELOC		662		14,386		29,245		44,293		3,969,965		4,014,258		-
Total	$	1,941,253	$	414,378	$	3,060,352	$	5,415,983	$	136,034,112	$	141,450,096	$	-

ALLOWANCE FOR LOAN LOSSES (Continued)

The following table presents the loans on nonaccrual status, by class:

	June 30,		December 31,
	2018		2017
	(unaudited)
Mortgage loans:
One-to-four family	$	2,224,277	$	2,108,086
Commercial		1,109,833		1,122,740
Commercial and industrial		114,780		8,251
Consumer and HELOC		47,710		29,245
Total	$	3,496,600	$	3,268,322

Credit Quality Information

The Bank categorizes loans into risk categories based on 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. The Bank analyzes commercial loans individually by classifying the loans as to their credit risk. The Bank uses a nine-grade internal loan rating system for commercial mortgage loans and commercial and industrial loans as follows:

Loans rated 1, 2, 3, 4, and 5: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 6: Loans in this category are considered “special mention.” These loans have a potential weakness that deserves management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Loans rated 7: Loans in this category are considered “substandard.” These loans have a well-defined weakness based on objective evidence that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans rated 8: Loans in this category are considered "doubtful" and have all the weaknesses inherent in a loan rated 7. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loans rated 9: Loans in this category are considered "loss" and are considered to be uncollectible or of such value that continuance as an asset is not warranted.

ALLOWANCE FOR LOAN LOSSES (Continued)

Credit Quality Information (Continued)

The risk category of loans by class is as follows:

	June 30, 2018 (unaudited)				December 31, 2017
	Mortgage		Commercial and		Mortgage		Commercial and
	Commercial		Industrial		Commercial		Industrial

Loans rated 1 - 5	$	53,282,196	$	16,686,373	$	48,764,928	$	11,434,756
Loans rated 6		329,417		12,054		234,390		20,798
Loans rated 7		1,061,890		106,529		1,122,740		-
Ending balance	$	54,673,503	$	16,804,956	$	50,122,058	$	11,455,554

There were no loans classified as doubtful or loss at June 30, 2018, or December 31, 2017.

For one-to-four family mortgage and consumer and HELOC loans, the Bank evaluates credit quality based on whether the loan is considered to be performing or nonperforming. Loans are generally considered to be nonperforming when they are placed on nonaccrual or become 90 days past due. The following table presents the balances of loans by class based on payment performance:

	June 30, 2018 (unaudited)				December 31, 2017
	Mortgage		Consumer		Mortgage		Consumer
	One-to-Four		and		One-to-Four		and
	Family		HELOC		Family		HELOC

Performing	$	73,538,173	$	4,013,037	$	73,750,140	$	3,985,013
Nonperforming		2,224,277		47,710		2,108,086		29,245
Total	$	75,762,450	$	4,060,747	$	75,858,226	$	4,014,258

Troubled Debt Restructurings

There were no loans modified as troubled debt restructurings during the six months ended June 30, 2018.

During the three months ended June 30, 2017 (unaudited), the Bank modified one loan as a troubled debt restructuring. The loan was a one-to-four family mortgage and had a pre- and post-modification balance of $83,309. The concession granted by the Bank was an extension of the maturity date. There were no additional loans modified as troubled debt restructures in the six months ended June 20, 2017.

As of June 30, 2018 and December 31, 2017, the Bank allocated $7,266 and $23,870, respectively, within the allowance for loan losses related to all loans modified as troubled debt restructurings.

The Bank did not have any loans modified as a troubled debt restructuring in the preceding 12 months that subsequently defaulted in the current reporting period.

EMPLOYEE STOCK OWNERSHIP PLAN

The Bank established a tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of its employees in conjunction with the Reorganization effective on January 24, 2018. Eligible employees become 20% vested in their accounts after two years of service, 40% after three years of service, 60% after four years of service, 80% after five years of service and 100% after six years of service, or earlier, upon death, disability or attainment of normal retirement age.

The ESOP purchased 88,131 shares of Company common stock, which was funded by a loan from the Company. Unreleased ESOP shares collateralize the loan payable, and the cost of the shares is recorded as a contra-equity account in the stockholders’ equity of the Company. Shares are to be released as debt payments are made by the ESOP to the loan. The ESOP’s sources of repayment of the loan can include dividends, if any, on the unallocated stock held by the ESOP and discretionary contributions from the Company to the ESOP and earnings thereon.

Compensation expense is equal to the fair value of the shares committed to be released and unallocated ESOP shares are excluded from outstanding shares for purposes of computing earnings per share. $20,623 in compensation expense has been recognized during the three months ended June 30, 2018.

REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measure of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The regulations require a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6%, a minimum total capital ratio of 8%, and a minimum leverage ratio of 4% for all banking organizations. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonuses. The capital conservation buffer and certain deductions from and adjustments to regulatory capital and risk-weighted assets are being phased in over several years. The required minimum conservation buffer was 1.875% as of January 1, 2018 and will increase to 2.5% on January 1, 2019. Management believes that the Bank’s capital levels will remain characterized as “well-capitalized” throughout the phase-in periods.

REGULATORY CAPITAL REQUIREMENTS (Continued)

As of June 30, 2018, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum capital ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed the Bank’s category. Management believes that the Bank meets all capital adequacy requirements to which it is subject. The Bank’s actual capital amounts and ratios are also presented in the table below.

	June 30,					December 31,
	2018					2017
	Amount		Ratio			Amount		Ratio
	(unaudited)
Common Equity Tier 1 capital
(to risk-weighted assets)
Actual	$	20,317,702		15.33	%	$	12,135,085		9.47	%
For capital adequacy purposes		5,965,605		4.50	%		5,718,465		4.50	%
To be well capitalized		8,616,985		6.50	%		8,325,005		6.50	%

Tier 1 capital
(to risk-weighted assets)
Actual	$	20,317,702		15.33	%	$	12,135,085		9.47	%
For capital adequacy purposes		7,954,140		6.00	%		7,684,620		6.00	%
To be well capitalized		10,605,520		8.00	%		10,246,160		8.00	%

Total capital
(to risk-weighted assets)
Actual	$	21,407,718		16.15	%	$	13,176,530		10.29	%
For capital adequacy purposes		10,605,520		8.00	%		10,246,160		8.00	%
To be well capitalized		13,256,900		10.00	%		12,807,700		10.00	%

Tier 1 capital
(to average assets)
Actual	$	20,317,702		11.92	%	$	12,135,085		7.85	%
For capital adequacy purposes		6,820,423		4.00	%		6,186,160		4.00	%
To be well capitalized		8,525,529		5.00	%		7,732,700		5.00	%

10.

COMMITMENTS

In the normal course of business, the Bank makes various commitments that are not reflected in the Bank’s financial statements. The Bank offers such products to enable its customers to meet their financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the Balance Sheets. The Bank’s exposure to credit loss in the event of nonperformance by the other parties to the financial instruments is represented by the contractual amounts as disclosed. The Bank minimizes its exposure to credit loss under these commitments by subjecting them to credit approval and review procedures and collateral requirements as deemed necessary.

Off-balance sheet commitments consist of the following:

	June 30,
	2018
	(unaudited)

Commitments to extend credit	$	4,320,750
Construction unadvanced funds		3,722,580
Unused lines of credit		8,476,097

	$	16,519,427

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. These commitments consisted primarily of mortgage loan commitments. The Bank uses the same credit policies in making loan commitments and conditional obligations as it does for on-balance sheet instruments. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, as deemed necessary, is based upon management’s credit evaluation in compliance with the Bank’s lending policy guidelines.

In August 2017, the Bank entered into employment agreements with three executives that provide for a base salary and certain other benefits. The initial terms of the agreements are for three years with annual renewals thereafter. In the event of the executive’s termination without cause, as defined, the executive will receive a lump-sum cash payment equal to the amount remaining under the contract. Additional benefits are payable upon a change in control, as defined.

11.

FAIR VALUE MEASUREMENTS

The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad pricing levels are as follows:

Level I:

Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II:

Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III:

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the use of observable market data, when available.

Fair values for securities are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique that is widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark-quoted securities. Fair values of securities determined by quoted prices in active markets, when available, are classified as Level I. At June 30, 2018 and December 31, 2017, fair value measurements were obtained from a third-party pricing service and not adjusted by management. Transfers are recognized at the end of the reporting period, as applicable.

11.

FAIR VALUE MEASUREMENTS (Continued)

The following tables present the assets reported on the Balance Sheets at their fair value by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	June 30, 2018 (unaudited)
	Level I		Level II		Level III		Total

Fair value measurements on a recurring basis:
Mortgage-backed securities in government-sponsored entities	$	-	$	995,041	$	-	$	995,041
Obligations of state and political subdivisions		-		1,497,243		-		1,497,243
Corporate bonds		-		299,357		-		299,357
U.S. treasury securities		193,187		-		-		193,187
Mortgage servicing rights		-		-		232,735		232,735
Impaired loans with reserve		-		-		323,330		323,330

	December 31, 2017
	Level I		Level II		Level III		Total

Fair value measurements on a recurring basis:
Mortgage-backed securities in government-sponsored entities	$	-	$	519,258	$	-	$	519,258
Obligations of state and political subdivisions		-		1,599,878		-		1,599,878
Corporate bonds		-		301,898		-		301,898
U.S. treasury securities		195,316		-		-		195,316
Mortgage servicing rights		-		-		231,977		231,977
Impaired loans with reserve		-		-		112,139		112,139

	June 30, 2018 (unaudited)
	Level I		Level II		Level III		Total

Fair value measurements on a nonrecurring basis:
Other real estate owned	$	-	$	-	$	59,932	$	59,932

	December 31, 2017
	Level I		Level II		Level III		Total

Fair value measurements on a nonrecurring basis:
Other real estate owned	$	-	$	-	$	59,932	$	59,932

11.

FAIR VALUE MEASUREMENTS (Continued)

Other Real Estate Owned

Other real estate owned is measured at fair value, less cost to sell at the date of foreclosure, which establishes a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management. The assets are carried at fair value, less estimated cost to sell. Income and expense from operations and changes in valuation allowance are included in other noninterest expense.

Level III Inputs

The following table provides the significant unobservable inputs used in the fair value measurement process for items valued using Level III techniques:

	Fair Value at				Range
	June 30,			Valuation	(Weighted
	2018		Valuation Techniques	Unobservable Inputs	Average)
	(unaudited)
Other real estate owned	$	59,932	Appraised collateral values	Discount for time since appraisal		10	%
						(10	%)
				Selling costs		10	%
						(10	%)
Impaired loans with reserve		323,330	Discounted cash flows	Discount for evaluation		10	%
						(10	%)
				Selling costs		10	%
						(10	%)
Mortgage servicing rights		232,735	Discounted cash flows	Loan prepayment speeds		8.67	%
						(8.67	%)

	Fair Value at				Range
	December 31,			Valuation	(Weighted
	2017		Valuation Techniques	Unobservable Inputs	Average)

Other real estate owned	$	59,932	Appraised collateral values	Discount for time since appraisal		10	%
						(10	%)
				Selling costs		10	%
						(10	%)
Impaired loans with reserve		112,139	Discounted cash flows	Discount for evaluation		10	%
						(10	%)
				Selling costs		10	%
						(10	%)
Mortgage servicing rights		231,977	Discounted cash flows	Loan prepayment speeds		8.67	%
						(8.67	%)

11.

FAIR VALUE MEASUREMENTS (Continued)

The estimated fair values of the Bank’s financial instruments are as follows:

	June 30, 2018 (unaudited)
	Carrying Value		Fair Value		Level I		Level II		Level III

Financial assets:
Cash and cash equivalents	$	7,286,255	$	7,286,255	$	7,286,255	$	-	$	-
Certificates of deposit		1,091,000		1,079,499		-		1,079,499		-
Investment securities:
Available for sale		2,984,828		2,984,828		193,186		2,791,642		-
Held to maturity		7,994		8,095		-		8,095		-
Loans, net		150,348,468		150,306,468		-		-		150,306,468
Accrued interest receivable		611,673		611,673		-		611,673		-
FHLB Stock		2,310,300		2,310,300		-		-		2,310,300

Financial liabilities:
Deposits		124,914,895		123,180,895		41,453,907		-		81,726,988
FHLB advances		26,166,200		25,836,200		-		25,836,200		-
Accrued interest payable		229,484		229,484		-		229,484		-

	December 31, 2017
	Carrying Value		Fair Value		Level I		Level II		Level III

Financial assets:
Cash and cash equivalents	$	16,478,066	$	16,478,066	$	16,478,066	$	-	$	-
Certificates of deposit		943,000		946,497		-		946,497		-
Investment securities:
Available for sale		2,616,350		2,616,350		195,316		2,421,034		-
Held to maturity		9,797		9,494		-		9,494		-
Loans, net		140,574,537		139,784,862		-		-		139,784,862
Accrued interest receivable		476,417		476,417		-		476,417		-
FHLB Stock		2,162,600		2,162,600		-		-		2,162,600

Financial liabilities:
Deposits		132,430,024		132,189,024		50,730,909		-		81,458,115
FHLB advances		26,416,200		25,602,500		-		25,602,500		-
Accrued interest payable		206,597		206,597		-		206,597		-

Financial instruments are defined as cash, evidence of an ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.

12.

FAIR VALUE OF FINANCIAL INSTRUMENTS

If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas or simulation modeling. Since many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated fair values are based may have a significant impact on the resulting estimated fair values.

12.

FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Since certain assets, such as deferred tax assets and premises and equipment, are not considered financial instruments, the estimated fair value of financial instruments would not represent the full value of the Bank.

Cash and Cash Equivalents, Accrued Interest Receivable, FHLB Stock, and Accrued Interest Payable

The fair value is equal to the current carrying value.

Certificates of Deposit

Securities

Loans, Net

The fair value is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality. Certain collateral dependent impaired loans have been adjusted to fair value based on the loan's collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, along with management's assumptions in various factors, such as selling costs and discounts for time since last appraised.

FHLB Advances

The fair value of FHLB advances is based on the discounted value of contractual cash flows. The discount rates are estimated using rates currently offered for similar instruments with similar remaining maturities.

Deposits

The fair values of certificates of deposit are based on the discounted value of contractual cash flows. The discount rates are estimated using rates currently offered for similar instruments with similar remaining maturities. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of the period end.

Commitments

These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments are presented in Note 10.

13.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the changes in accumulated other comprehensive income (loss) by component, net of tax:

	Net Unrealized Gain (Loss)
	on Securities
	Three months ended June 30,
	2018			2017
	(unaudited)
Accumulated other comprehensive income (loss), beginning of period	$	(46,336	)	$	(40,088	)

Other comprehensive income (loss) on securities before reclassification, net of tax		(386	)		27,712

Amounts reclassified from accumulated other comprehensive income (loss), net of tax		-			(231	)

Net other comprehensive income (loss)		(386	)		27,481

Accumulated other comprehensive income (loss), end of period	$	(46,722	)	$	(12,607	)

	Net Unrealized Gain (Loss)
	on Securities
	Six months ended June 30,
	2018			2017
	(unaudited)
Accumulated other comprehensive income (loss), beginning of period	$	(23,487	)	$	(47,388	)

Other comprehensive income (loss) on securities before reclassification, net of tax		(23,235	)		35,012

Amounts reclassified from accumulated other comprehensive income (loss), net of tax		-			(231	)

Net other comprehensive income (loss)		(23,235	)		34,781

Accumulated other comprehensive income (loss), end of period	$	(46,722	)	$	(12,607	)

14.

EARNINGS PER SHARE

Earnings per common share for the three months ended June 30, 2018 are represented in the following table.

Earnings per common share for the six months ended June 30, 2018 is not presented as the Company’s initial public offering was completed on January 24, 2018; therefore, per share results would not be meaningful.

	Three months ended June 30,
	2018
	(unaudited)

Net Income	$	213,776

Shares outstanding for basic EPS:
Average shares outstanding		2,248,250
Less: Average unearned ESOP shares		87,030
		2,161,221
Additional dilutive shares		-

Shares oustanding for basic and diluted EPS		2,161,221

Basic and diluted income per share	$	0.10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition at June 30, 2018 and December 31, 2017 and results of operations for the three and six months ended June 30, 2018 and 2017 is intended to assist in understanding the financial condition and results of operations of SSB Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q. Financial information for the periods before the Company’s Reorganization on January 24, 2018 is that of SSB Bank only.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, 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 current beliefs and expectations of management 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:

general economic conditions, either nationally or in our market areas, that are worse than expected;

changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses;

our ability to access cost-effective funding;

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

demand for loans and deposits in our market area;

our ability to continue to implement our business strategies;

competition among depository and other financial institutions;

inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets;

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cautionary Note Regarding Forward-Looking Statements (Continued)

adverse changes in the securities markets;

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

our ability to manage market risk, credit risk and operational risk in the current economic conditions;

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

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

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 or the Securities and Exchange Commission;

our ability to retain key employees;

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

changes in the financial condition, results of operations or future prospects of issuers of securities that we own;

political instability;

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

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

failures or breaches of our IT security systems;

the inability of third-party providers to perform as expected; and

our ability to successfully introduce new products and services, enter new markets, and capitalize on growth opportunities.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. The Company is not obligated to update any forward looking statements, except as may be required by applicable law or regulation.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Critical Accounting Policies

Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes the accounting policies discussed below to be the most critical accounting policies, which involve the most complex or subjective decisions or assessments.

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes that specific loans, or portions of loans, are uncollectible. The allowance for loan losses is evaluated on a regular basis, and at least quarterly, by management. Management reviews the nature and volume of the loan portfolio, local and national conditions that may adversely affect the borrower’s ability to repay, loss experience, the estimated value of any underlying collateral, and other relevant factors. The evaluation of the allowance for loan losses is characteristically subjective as estimates are required that are subject to continual change as more information becomes available.

The allowance consists of general and specific reserve components. The specific reserves are related to loans that are considered impaired. Loans that are classified as impaired are measured in accordance with accounting guidance (ASC 310-10-35). The general reserve is allocated for non-impaired loans and includes evaluation of changes in the trend and volume of delinquency, our internal risk rating process and external conditions that may affect credit quality.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and the financial condition of the borrower. Loans that experience payment shortfalls and insignificant payment delays are typically not considered impaired. Management looks at each loan individually and considers all the circumstances around the shortfall or delay including the borrower’s prior payment history, borrower contact regarding the reason for the delay or shortfall and the amount of the shortfall. Collateral dependent loans are measured against the fair value of the collateral, while other loans are measured by the present value of expected future cash flows discounted at the loan’s effective interest rate. All loans are measured individually.

Loan segments are reviewed and evaluated for impairment based on the segment’s characteristic loss history and local economic conditions and trends within the segment that may affect the repayment of the loans.

From time to time, we may choose to restructure the contractual terms of certain loans either at the borrower or Bank’s request. We review all scenarios to determine the best payment structure with the borrower to improve the likelihood of repayment. Management reviews modified loans to determine if the loan should be classified as a trouble debt restructuring. A trouble debt restructuring is when a creditor, for economic or legal reasons related to a debtor’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Management considers the borrower’s ability to repay when a request to modify existing loan terms is presented. A transfer of assets to repay the loan balance, a modification of loan terms or a combination of these may occur. If an appropriate arrangement cannot be made, the loan is referred to legal counsel, at which time foreclosure will begin. If a loan is accruing at the time of restructuring, we review the loan to determine if it should be placed on non-accrual. It is our policy to keep a troubled debt restructured loan on non-accrual status for at least six months to ensure the borrower can repay, at that time management may consider its return to accrual status.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Critical Accounting Policies (Continued)

Troubled debt restructured loans are considered to be impaired.

Income Taxes. SSB Bank accounts for income taxes in accordance with accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. U.S. GAAP requires that we use the Balance Sheet Method to determine the deferred income, which affects the differences between the book and tax bases of assets and liabilities, and any changes in tax rates and laws are recognized in the period in which they occur. Deferred taxes are based on a valuation model and the determination on a quarterly basis whether all or a portion of the deferred tax asset will be recognized.

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. SSB Bank estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of revenue or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology utilized by SSB Bank can be found in Note 14 to the 2017 Financial Statements included in the Company’s Annual Report on Form 10-K filed on April 17, 2018.

Investment Securities. Available for sale and held to maturity securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and our intent and ability to hold the security to recovery. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the statements of income. At June 30, 2018, we believe the unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Comparison of Financial Condition at June 30, 2018 and December 31, 2017

Total Assets. Total assets increased by $677,000, or 0.4% from $171.9 million at December 31, 2017 to $172.6 million at June 30, 2018. The increase was due primarily to an increase in net loans of $9.8 million, or 6.9% to $150.3 million at June 30, 2018 from $140.6 million at December 31, 2017. There were also small increases to certificates of deposit, securities available for sale, accrued interest receivable, Federal Home Loan Bank stock, premises and equipment, bank-owned life insurance, the deferred tax asset, and other assets. The increases were partially offset by a decrease in cash and cash equivalents of $9.2 million, or 55.8%, from $16.5 million at December 31, 2017, to $7.3 million at June 30, 2018. Also, prepaid reorganization and stock issuance costs decreased from $838,000 at December 31, 2017 to zero dollars at June 30, 2018, as the stock issuance was completed in 2018.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $9.2 million, or 55.8%, to $7.3 million at June 30, 2018 from $16.5 million at December 31, 2017. The decrease in cash was the result of using excess liquidity to fund loan demand.

Net Loans. Net loans increased $9.8 million, or 6.9%, to $150.3 million at June 30, 2018, from $140.6 million at December 31, 2017. This was driven by increases in commercial mortgage loans and commercial and industrial loans. Commercial mortgages increased $4.6 million, or 9.1%, from $50.1 million at December 31, 2017 to $54.7 million at June 30, 2018. Commercial and industrial loans increased $5.3 million, or 46.7%, from $11.5 million at December 31, 2017 to $16.8 million at June 30, 2018.

Available for Sale Securities. Securities available for sale increased by $368,000, or 14.1%, to $3.0 million at June 30, 2018, from $2.6 million at December 31, 2017. The increase was due to the purchase of a collateralized mortgage obligation of $542,000. The increase was offset by the maturity of one municipal bond of $85,000 as well as $27,000 in gross unrealized losses during the period.

Deposits. Total deposits decreased to $124.9 million at June 30, 2018 from $132.4 million at December 31, 2017. The decrease of $7.5 million, or 5.7%, was mostly because of a decrease in interest-bearing demand accounts to $12.9 million at June 30, 2018 from $23.2 million at December 31, 2017. This decrease was due primarily to SSB Bancorp stock subscription funds having been deposited in a business checking account pending the completion of the Reorganization in January 2018. Money market accounts decreased by $891,000 to $13.7 million at June 30, 2018 from $14.6 million at December 31, 2017. Partially offsetting the decreases, savings accounts increased $1.8 million, or 14.5%, to $14.3 million at June 30, 2018 from $12.5 million at December 31, 2017. Also, time deposits increased by $1.8 million, or 2.2% to $83.5 million at June 30, 2018, from $81.7 million at December 31, 2017.

Federal Home Loan Bank Advances. Federal Home Loan Bank advances decreased by $250,000, or 1.0% to $26.2 million at June 30, 2018, from $26.4 million at December 30, 2017. One Federal Home Loan Bank advance of $6.3 million matured during the period and was replaced with another Federal Home Loan Bank advance of $6.0 million.

Stockholders’ Equity. Stockholders’ equity increased by $8.2 million, or 67.4%, to $20.3 million at June 30, 2018 from $12.1 million at December 31, 2017. The increase was due to $8.8 million of paid in capital from the net proceeds of the stock offering completed on January 24, 2018. Additionally, retained earnings increased by $261,000, or 2.2%, to $12.4 million at June 30, 2018, from $12.1 million at December 31, 2017. The increase was partially offset by $859,000 in unearned compensation related to the Employee Stock Ownership Plan and an additional $23,000 in accumulated other comprehensive loss.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Comparison of Operating Results for the Three Months Ended June 30, 2018 and 2017

Net Income. Net income totaled $214,000 for the three months ended June 30, 2018, compared to net income of $210,000 for the three months ended June 30, 2017, an increase of $4,000 or 1.7%. The increase was driven by an increase in net interest income of $145,000, or 14.5%, to $1.1 million for the three months ended June 30, 2018, from $994,000 for the three months ended June 30, 2017. Additionally, the provision for loan losses for the three months ended June 30, 2018, was $25,000 compared to $95,000 for the three months ended June 30, 2017, a decrease of $70,000, or 73.7%. Also, the income tax provision decreased $52,000 or 60.9% to $34,000 for the three months ended June 30, 2018, from $86,000 for the three months ended June 30, 2017. Offsetting these increases to net income was a decrease in noninterest income of $63,000 or 31.7%. There was also an increase in noninterest expense of $201,000, or 25.1%, to $1.0 million for the three months ended June 30, 2018, from $800,000 for the three months ended June 30, 2017.

Interest and Dividend Income. Interest and dividend income increased $242,000, or 15.5%, to $1.8 million for the three months ended June 30, 2018, from $1.6 million for the three months ended June 30, 2017. Interest income on loans increased $215,000, or 14.3%. This increase is primarily attributable to an increase in the average balance of net loans of $14.1 million, or 10.6%. The average balances increased from $133.7 million to $147.8 million when comparing the three months ended June 30, 2017 with the three months ended June 30, 2018. The weighted average yield on net loans increased 15 basis points from 4.52% for the three months ended June 30, 2017 to 4.67% for the three months ended June 30, 2018, primarily due to a rise in adjustable rate loan indexes and a rise in new loan rates.

Interest Expense. Total interest expense increased $97,000, or 17.3%, to $660,000 for the three months ended June 30, 2018, compared to $563,000 for the three months ended June 30, 2017. Interest expense on deposit accounts increased $77,000, or 18.1%, to $505,000 for the three months ended June 30, 2018, compared to $427,000 for the three months ended June 30, 2017. The increase was primarily due to an increase in the average balance of interest bearing deposits of $8.7 million, or 7.6%, from $113.8 million for the three months ended June 30, 2017, to $122.5 million for the three months ended June 30, 2018. Among interest bearing deposits, the largest impact is from an $8.2 million, or 11.1%, increase in time deposits. Additionally, the cost of funds associated with interest-bearing deposits increased 14 basis points from 1.51% for the three months ended June 30, 2017, to 1.65% for the three months ended June 30, 2018, primarily due to a necessary rise in all deposit rates in order to remain competitive.

Interest expense on Federal Home Loan Bank advances increased $20,000 or 14.9%, to $156,000 for the three months ended June 30, 2018, from $135,000 for the three months ended June 30, 2017. The increase was driven by the increase in the average balance of advances of $275,000, or 1.1%, from $25.9 million for the three months ended June 30, 2017 to $26.2 million for the three months ended June 30, 2018. The average cost of these borrowings increased 29 basis points from 2.09% for the three months ended June 30, 2017 to 2.38% for the three months ended June 30, 2018.

Net Interest Income. Net interest income increased $145,000, or 14.5%, when comparing the two periods. This was due to an increase in interest income of $242,000 when comparing the two periods, while interest expense increased by $97,000 over the two periods. Average interest-earning assets for the three months ended June 30, 2017 was $143.9 million, and it increased $15.5 million to $159.4 million for the three months ended June 30, 2018, an increase of 10.8%. Net interest earning assets increased $6.5 million, or 158.7%, to $10.7 million for the three months ended June 30, 2018, from $4.1 million for the three months ended June 30, 2017. Additionally, interest rate spread increased 3 basis points from 2.72% to 2.75%, and net interest margin increase 9 basis points from 2.77% to 2.86% when comparing the two periods.

Provision for Loan Losses. The provision for loan losses decreased $70,000, or 73.7%, to $25,000 for three months ended June 30, 2018, from $95,000 for the three months ended June 30, 2017. During the three months ended June 30, 2017, the bank made an adjustment to the allowance for loan losses due to a management change to FAS 5 factors. This resulted in a larger than typical provision of $95,000 which accounts for the significant decrease in the provision when comparing the two periods.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Comparison of Operating Results for the Three Months Ended June 30, 2018 and 2017 (Continued)

The allowance for loan losses reflects the estimate we believe appropriate to cover inherent probable losses. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could change based upon the risk characteristics of the various portfolio segments, experience with losses, the impact of economic conditions on borrowers and other relevant factors.

Non-Interest Income. Non-interest income decreased $63,000, or 31.7% to $135,000 for the three months ended June 30, 2018, from $197,000 for the comparable three months ended June 30, 2017. The decrease was primarily due to a decrease in gains on sale of loans of $85,000, or 54.7%, to $71,000 for the three months ended June 30, 2018, from $156,000 for the three months ended June 30, 2017. This is due to the decrease in one-to-four family mortgage refinances due to a rise in interest rates. Partially offsetting this decrease was a $14,000 increase in loan servicing fees, a $2,000 increase in earnings on bank-owned life insurance, and an $8,000 increase in other noninterest income when comparing the two periods.

Non-Interest Expense. Non-interest expense increased $201,000, or 25.1%, to $1.0 million for the three months ended June 30, 2018, compared to $800,000 for the three months ended June 30, 2017. Professional fees increased $51,000 to $163,000 for the three months ended June 30, 2018, from $112,000 for the comparable three months ended June 30, 2017. The increase is principally due to additional accounting and auditing expenses associated with our public company reporting requirements. Salaries and employee benefits increased $64,000, or 16.5%, to $452,000 for the three months ended June 30, 2018 from $388,000 for the three months ended June 30, 2017. The increase was associated with the addition of staff due to the opening of a new branch and increased staffing in lending, business development, and marketing. Additionally, due to the addition of a second branch occupancy expenses increased $37,000, or 61.8%, to $96,000 for the three months ended June 30, 2018, from $59,000 for the three months ended June 30, 2017. Lastly, director fees increased by $18,000 to $38,000 from $20,000 when comparing the two periods.

Income Taxes. The income tax provision decreased from $86,000 for the three months ended June 30, 2017 to $34,000 for the three months ended June 30, 2018, a decrease of $52,000 or 60.9%. The effective tax rate was 14% for the three months ended June 30, 2018, and 29% for the three months ended June 30, 2017. The lower effective tax rate was a result of the Job and Tax Cuts Act enacted into law in December 2017.

Comparison of Operating Results for the Six Months Ended June 30, 2018 and 2017

Net Income. Net income totaled $261,000 for the six months ended June 30, 2018, compared to net income of $507,000 for the six months ended June 30, 2017, a decrease of $246,000 or 48.5%. The decrease was driven by an increase in noninterest expense of $622,000, or 45.0%, to $2.0 million for the six months ended June 30, 2018, from $1.4 million for the six months ended June 30, 2017. There was also a decrease in noninterest income of $38,000, or 14.31%, to $226,000 for the six months ended June 30, 2018, from $264,000 for the six months ended June 30, 2017. The decreases were partially offset by an increase in net interest income of $117,000, or 5.8%, to $2.2 million for the six months ended June 30, 2018, from $2.0 million for the six months ended June 30, 2017. Also, the provision for income taxes decreased by $242,000, or 84.7%, to $44,000 for the six months ended June 30, 2018, from $286,000 for the six months ended June 30, 2017.

Interest and Dividend Income. Interest and dividend income increased $303,000, or 9.7%, to $3.4 million for the six months ended June 30, 2018, from $3.1 million for the six months ended June 30, 2017. Interest income on loans increased $258,000, or 8.5%. This increase is primarily attributable to an increase in the average balance of net loans of $14.4 million, or 11.0%. The average balances increased from $130.7 million to $145.1 million when comparing the six months ended June 30, 2017 with the six months ended June 30, 2018. Partially offsetting the increase in volume, the weighted average yield on net loans decreased 10 basis points from 4.67% for the six months ended June 30, 2017 to 4.57% for the six months ended June 30, 2018, primarily due to a $93,000 interest recovery in January, 2017.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Comparison of Operating Results for the Six Months Ended June 30, 2018 and 2017 (Continued)

Interest Expense. Total interest expense increased $186,000, or 17.0%, to $1.3 million for the six months ended June 30, 2018, compared to $1.1 million for the six months ended June 30, 2017. Interest expense on deposit accounts increased $136,000, or 16.3%, to $974,000 for the six months ended June 30, 2018, compared to $837,000 for the six months ended June 30, 2017. The increase was primarily due to an increase in the average balance of interest bearing deposits of $10.1 million, or 9.0%, from $112.1 million for the six months ended June 30, 2017, to $122.2 million for the six months ended June 30, 2018. Among interest bearing deposits, the largest impact is from an $9.3 million, or 12.7%, increase in time deposits. Additionally, the cost of funds associated with interest-bearing deposits increased 10 basis points from 1.51% for the six months ended June 30, 2017, to 1.61% for the six months ended June 30, 2018, primarily due to a necessary rise in all deposit rates in order to stay competitive.

Interest expense on Federal Home Loan Bank advances increased $50,000 or 19.0%, to $310,000 for the six months ended June 30, 2018, from $260,000 for the six months ended June 30, 2017. The increase was driven by the increase in the average balance of advances of $1.7 million, or 6.8%, from $24.6 million for the six months ended June 30, 2017 to $26.3 million for the six months ended June 30, 2018. The average cost of these borrowings increased 24 basis points from 2.13% for the six months ended June 30, 2017 to 2.37% for the six months ended June 30, 2018, primarily due to the replacement of a maturing lower-cost Federal Home Loan Bank advance with a higher-cost advance.

Net Interest Income. Net interest income increased $117,000, or 5.8%, when comparing the two periods. This was due to an increase in interest income of $303,000 when comparing the two periods, while interest expense increased by $186,000 over the two periods. Average interest-earning assets for the six months ended June 30, 2017 was $141.4 million, and it increased $16.9 million to $158.3 million for the six months ended June 30, 2018, an increase of 11.9%. Net interest earning assets increased $5.1 million, or 108.8%, to $9.8 million for the six months ended June 30, 2018, from $4.7 million for the six months ended June 30, 2017. Additionally, interest rate spread decreased 22 basis points from 2.85% to 2.63%, and net interest margin decreased 16 basis points from 2.90% to 2.74% when comparing the two periods.

Provision for Loan Losses. The provision for loan losses decreased $55,000, or 45.8%, to $65,000 for six months ended June 30, 2018, from $120,000 for the six months ended June 30, 2017. During the six months ended June 30, 2017, the bank made some adjustments to the allowance for loan losses resulting in a larger than typical provision of $95,000 which accounts for the significant decrease in the provision when comparing the two periods.

Non-Interest Income. Non-interest income decreased $38,000, or 14.3% to $226,000 for the six months ended June 30, 2018, from $264,000 for the comparable six months ended June 30, 2017. The decrease was primarily due to a decrease in gains on sale of loans of $95,000, or 50.1%, to $95,000 for the six months ended June 30, 2018, from $190,000 for the six months ended June 30, 2017. Partially offsetting this decrease was a $30,000 increase in loan servicing fees, an $11,000 increase in earnings on bank-owned life insurance, and a $17,000 increase in other noninterest income when comparing the two periods.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Comparison of Operating Results for the Six Months Ended June 30, 2018 and 2017 (Continued)

Non-Interest Expense. Non-interest expense increased $622,000, or 45.0%, to $2.0 million for the six months ended June 30, 2018, compared to $1.4 million for the six months ended June 30, 2017. Professional fees increased $292,000 to $413,000 for the six months ended June 30, 2018, from $121,000 for the comparable six months ended June 30, 2017. The increase is principally due to additional accounting and auditing expenses associated with our public company reporting requirements. Salaries and employee benefits increased $117,000, or 16.5%, to $828,000 for the six months ended June 30, 2018 from $711,000 for the six months ended June 30, 2017. The increase was associated with the addition of staff due to the opening of a new branch and increased staffing in lending, business development, and marketing. Additionally, due to the addition of a second branch occupancy expenses increased $67,000, or 55.2%, to $187,000 for the six months ended June 30, 2018, from $121,000 for the six months ended June 30, 2017. Lastly, director fees increased by $33,000 to $70,000 from $38,000 when comparing the two periods.

Income Taxes. The income tax provision decreased from $286,000 for the six months ended June 30, 2017 to $44,000 for the six months ended June 30, 2018, a decrease of $242,000 or 84.7%. The effective tax rate was 14% for the six months ended June 30, 2018, and 36% for the six months ended June 30, 2017. The lower effective tax rate was a result of the Job and Tax Cuts Act enacted into law in December 2017.

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

Our interest rate risk profile is considered liability-sensitive, which means that if interest rates rise our deposits and other interest-bearing liabilities would be expected to reprice to higher interest rates faster than would our loans and other interest-earning assets. We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. In recent years, we have implemented the following strategies to manage our interest rate risk:

increasing lower cost core deposits and limiting our reliance on higher cost funding sources, such as time deposits; and

diversifying our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments, and selling one- to four-family residential mortgage loans, which have fixed interest rates and longer terms.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

By following these strategies, we believe that we are better positioned to react to increases in market interest rates.

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

Economic Value of Equity. We analyze our sensitivity to changes in interest rates through an economic value of equity (“EVE”) model. EVE represents the difference between the present value of assets and the present value of liabilities. The EVE ratio represents the dollar amount of our EVE divided by the present value of our total assets for a given interest rate scenario. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. We estimate what our EVE would be at a specific date. We then calculate what the EVE would be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate EVE under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates and that interest rates decrease 100 basis points from current market rates.

The following table presents the estimated changes in our EVE that would result from changes in market interest rates at June 30, 2018. All estimated changes presented in the table are within the policy limits approved by our board of directors.

Basis Point ("bp")									EVE as Percent of Economic
Change in Interest			Estimated Increase (Decrease) in EVE						Value of Assets
Rates (1)	Estimated EVE		Dollar Change			Percent Change			EVE Ratio (2)			Change

+400bp	$	14,793	$	(5,929	)		(28.61	)%		9.65	%		(2.37	)%
+300bp		15,961		(4,761	)		(22.98	)%		10.14	%		(1.89	)%
+200bp		17,560		(3,162	)		(15.26	)%		10.82	%		(1.20	)%
+100bp		19,277		(1,445	)		(6.97	)%		11.52	%		(0.50	)%
0		20,722		-			0.00	%		12.02	%		0.00	%
-100bp		20,947		225			1.09	%		11.90	%		(0.12	)%

(1)

Assumes instantaneous parallel changes in interest rates.

(2)

EVE ratio represents the EVE divided by the economic value of assets.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will differ from actual results.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity and Capital Resources

Liquidity. Liquidity is the ability to meet current and future financial obligations of a short-term nature that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund investing activities and current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and advances from the Federal Home Loan Bank of Pittsburgh. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing deposits in other financial institutions. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. At June 30,2018, the Company had cash and cash equivalents of $7.3 million. As of June 30, 2018 the Bank had $26.2 million in outstanding borrowings from the Federal Home Loan Bank of Pittsburgh and had $56.7 million of available borrowing capacity.

At June 30, 2018, the Bank had $16.5 million of loan commitments outstanding which includes $8.5 million of unused lines of credit and $3.7 million of unadvanced construction funds. We have no other material commitments or demands that are likely to affect our liquidity. If loan demand was to increase faster than expected, or any unforeseen demand or commitment was to occur, we could access our borrowing capacity with the Federal Home Loan Bank of Pittsburgh.

Time deposits due within one year of June 30, 2018 totaled $23.3 million. If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and Federal Home Loan Bank of Pittsburgh advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we paid on time deposits at June 30, 2018. We believe, however, based on past experience that a significant portion of our time deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

SSB Bancorp, Inc. is a separate legal entity from SSB Bank and must provide for its own liquidity to pay any dividends to its stockholders and for other corporate purposes. SSB Bancorp, Inc.’s primary source of liquidity is dividend payments it may receive from SSB Bank. SSB Bank’s ability to pay dividends to SSB Bancorp, Inc. is governed by applicable laws and regulations. At June 30, 2018, SSB Bancorp, Inc. (on an unconsolidated basis) had liquid assets of $3.6 million.

Capital Resources. At June 30, 2018, SSB Bank exceeded all regulatory capital requirements and it was categorized as “well capitalized.” We are not aware of any conditions or events since the most recent notification that would change our category.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. The following tables present our contractual obligations as of the dates indicated.

			Payments Due by Period
Contractual Obligations	Total		Less Than One Year		One to Three Years		Three to Five Years		More Than Five Years
	(In thousands)
At June 30, 2018:
Long-term debt obligations	$	26,166	$	3,042	$	13,124	$	-	$	10,000

At December 31, 2017:
Long-term debt obligations	$	26,416	$	9,292	$	7,124	$	-	$	10,000
Operating lease obligations		4		4		-		-		-

Off-Balance Sheet Arrangements. We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and unused lines of credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in Item 2 of this quarterly report under “Management of Market Risk.”

Item 4.

Controls and Procedures

Under the supervision and with the participation of our senior management, including our principal executive officer and principal financial officer, SSB Bancorp, Inc. evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on form 10-Q. Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report on form 10-Q, with the exception of the information below, our disclosure controls and procedures were effective. Discussed below are the remediation efforts regarding material weaknesses related to (1) the allowance for loan losses and the identification and reporting of problem loans, and (2) the recognition of interest income on loans that have been sold or participated out to others.

With the oversight and participation of senior management, we have taken steps to remediate the underlying causes of these material weaknesses as follows:

Allowance for loan losses and the identification and reporting of problem loans – We have instituted a monthly review and updating of the qualitative factors used in determining the allowance for loan losses, instituted a monthly review of changes to classified loans (including those designated as nonaccrual or as troubled debt restructurings) for accuracy and completeness and required that any changes to the allowance for loan losses be approved by the Chief Executive Officer and the Chief Financial Officer, among other steps.

Item 4.

Controls and Procedures (Continued)

Recognition of interest income on sold and participated loans – We have created a contra-asset account to offset the daily accrual of interest income on sold and participated loans. We are also addressing with our core processor identified deficiencies related to report production inaccuracies and have agreed to utilize an upgraded application starting in March 2019. Until resolved to our satisfaction or until we change core processing applications, all fields and accrual information will be monitored monthly and documented within our financial reporting package.

Enhancing disclosure controls and procedures includes developing and/or revising formal policies and improving relevant procedures. The material weaknesses identified above will not be considered fully remediated until the new or revised policies and procedures have been in place and in operation for a sufficient time so that they may be tested and determined by senior management to be effective.

Except as disclosed above, there were no other changes made in our internal control over financial reporting during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, SSB Bancorp, Inc.’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

We are not involved in any pending legal proceedings as a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. At June 30, 2018, we were not involved in any legal proceedings the outcome of which we believe would be material to our financial condition or results of operations.

Item 1A.

Risk Factors

Not applicable, as the Company is a “smaller reporting company.”

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Not applicable.

(b)

Not applicable.

(c)

The Company did not repurchase any shares of its common stock during the quarter ended June 30, 2018.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibit
Number		Description

3.1		Articles of Incorporation of SSB Bancorp, Inc. ⁽¹⁾

3.2		Bylaws of SSB Bancorp, Inc. ⁽²⁾

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.0		The following materials for the quarter ended June 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

(1)

Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-220403).

(2)

Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-220403).

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.

		SSB BANCORP, INC.

Date: August 14, 2018		/s/ J. Daniel Moon, IV
		J. Daniel Moon, IV
		President and Chief Executive Officer

Date: August 14, 2018		/s/ Benjamin A. Contrucci
		Benjamin A. Contrucci
		Chief Financial Officer

SSB Bancorp, Inc. - FORM 10-Q - August 14, 2018

Attached files

SSB Bancorp, Inc. Reports