This discussion and analysis reflects our financial statements and other
relevant statistical data, and is intended to enhance your understanding of our
financial condition and results of operations. The information in this section
has been derived from the audited financial statements, which appear beginning
on page F-1 of this annual report. You should read the information in this
section in conjunction with the business and financial information regarding the
Company and the Bank provided in this annual report.

                                       36

  Table of Contents

General

COVID-19 Impacts

The effects of the COVID-19 pandemic and the governmental and societal response to the virus have had a negative impact on overall economic conditions.

The Federal and state governments have worked to contain the spread of COVID-19.
The result of these containment strategies has had an enormous impact on the
economy and has had a negative impact on some borrowers' ability to make timely
loan payments. In recent months, a number of restrictive government initiatives
designed to combat the effects of the COVID-19 pandemic have been eased on a
national level and in Louisiana, as well as the rollout of three COVID-19
vaccines, allowing businesses to reopen at varying capacity levels, which has
bolstered commercial activity and employment to some degree. However, another
resurgence in infections and reimplementation of new and/or additional
restrictions at the national and local level to combat the COVID-19 pandemic may
present additional negative impacts to the economy and our customers. The
duration and severity of the COVID-19 pandemic remain impossible to predict. The
Federal Reserve Board and other various regulatory agencies have issued joint
guidance to financial institutions to work with borrowers affected by the
coronavirus. The Company instituted a loan deferment program whereby short-term
deferrals of payments were allowed. Deferred payments are due at the time the
loan is paid off. As of December 31, 2021 all of the loans modified by us have
resumed normal monthly payments. We did not report these loans as delinquent and
continued to recognize interest income during the deferral period. No increase
in the allowance for loan losses was deemed necessary on these loans. These
loans will continue to be monitored to determine collectability and accrual and
delinquency status will be updated as deemed appropriate.

Under Section 4013 of the Coronavirus Aid, Relief and Economic Security
("CARES") Act, loans less than 30 days past due as of December 31, 2019 were
considered current for COVID-19 modifications. A financial institution could
then suspend the requirements under GAAP for loan modifications related to
COVID-19 that would otherwise be categorized as a troubled debt restructuring
("TDR"), and suspend any determination of a loan modified as a result of
COVID-19 as being a TDR, including the requirement to determine impairment for
accounting purposes. Financial institutions wishing to utilize this authority
were required to make a policy election, which applies to any COVID-19
modification made between March 1, 2020 and the earlier of either December 31,
2020 or the 60th day after the end of the COVID-19 national emergency.
Similarly, the Financial Accounting Standards Board has confirmed that
short-term modifications made on a good-faith basis in response to COVID-19 to
loan customers who were current prior to any relief are not TDRs. Lastly, prior
to the enactment of the CARES Act, the banking regulatory agencies provided
guidance as to how certain short-term modifications would not be considered
TDRs, and have subsequently confirmed that such guidance could be applicable for
loans that do not qualify for favorable accounting treatment under Section 4013
of the CARES Act. Based on this guidance, the Company does not believe that TDRs
will significantly change as a result of the modifications granted. The full
impact on our lending and other business activities as a result of new
government and regulatory policies, programs and guidelines, as well as
regulators' reaction to such activities, remains uncertain.

                                       37

  Table of Contents

Hurricane Ida Impacts

On August 29, 2021, Hurricane Ida made landfall in southeast Louisiana between
New Orleans and Baton Rouge. The Company did not sustain any significant damage
to its locations, and our employees had no significant issues. Banking locations
in the impacted markets closed as necessary prior to the hurricane's landfall
and in our immediate market area in and around Metairie, Eureka Homestead and
many banks, temporarily closed these office locations. We immediately staffed
our disaster recovery location in Baton Rouge for five days after the hurricane
made landfall and re-opened our main office in Metairie and our loan production
office in New Orleans after five days. Our borrowers were not significantly
affected by the event.

Overview

Our business consists primarily of taking deposits and securing borrowings and
investing those funds, together with funds generated from operations, in one- to
four-family residential real estate loans, including non-owner-occupied
properties, construction loans for owner-occupied, one- to four-family
residential real estate and home equity loans. To a lesser extent, we also
originate multifamily, commercial real estate and consumer loans. At December
31, 2021, $70.9 million, or 94.0% of our total loan portfolio, was comprised of
one- to four-family residential real estate loans, $8.5 million of which were
non-owner-occupied loans, $4.6 million of which were construction loans and
$410,000 of which were home equity loans.

The significant majority of loans we originate are conforming one- to
four-family residential real estate loans, and in the low interest rate
environment in recent years, almost all of these loans have been long-term,
fixed rate loans. In order to address our interest rate risk, in recent years we
have sold a significant portion of these conforming, fixed-rate, long-term loans
on an industry-standard, servicing-released basis, as well as increasing the
percentage of adjustable rate residential loans in portfolio.

We offer a variety of deposit accounts, including savings accounts (passbook and
money market) and certificates of deposit. We utilize advances from the FHLB for
funding and asset/liability management purposes. At December 31, 2021, we had
$18.2 million in advances outstanding with the FHLB.

We do not offer checking accounts which may impact our ability to attract and
grow core deposits. We have always been dependent, in part, on retail
certificates of deposit as a funding source for our loans, and we accept jumbo
certificates of deposit through an online service, as well as municipal and
brokered certificates of deposit. We have used these non-retail funding sources,
as well as advances from the FHLB, to fund our loan growth. Pursuant to our
business strategy, we are seeking to increase our core deposits, which we
consider our savings and money market accounts and our retail certificates of
deposit, by more aggressively marketing and pricing our deposit products.

For the year ended December 31, 2021 we had net income of $146,000 compared to a
net loss of $103,000 for 2020, an increase of $249,000. The increase in the net
income resulted primarily from increases in net interest income of $242,000 and
noninterest income of $68,000, offset, in part, by a decrease in income tax
benefit of $62,000.

Eureka Farm is subject to extensive regulation and scrutiny by its primary federal regulator, the Office of the Comptroller of the Currency
(“OCC”).

Our executive and administrative office is located at 1922 Veterans Memorial
Boulevard, Metairie, Louisiana 70005, and our telephone number at this address
is (504) 834-0242. Our website address is www.eurekahomestead.com. Information
on our website is not incorporated into this annual report and should not be
considered part of this annual report.

                                       38

  Table of Contents

Business Strategy

Our primary objective is to create long-term value for our shareholders by operating a profitable, community-focused financial institution dedicated to serving the banking needs of our customers with an emphasis on personalized and efficient customer service. . Highlights of our current business strategy include:

Continue to focus on one to four family residential real estate loans,

including our original practice for retention in our portfolio,

non-owner real estate loans. We have been, and will continue to be,

primarily a one to four family residential real estate lender for borrowers

? our market area. From December 31, 2021, $70.9 millioni.e. 94.0% of our total

loan portfolio, made up of residential real estate loans from one to four families,

including $8.5 millioni.e. 11.2% of our total portfolio of loans,

non-owner real estate loans. We expect one to four families

residential real estate lending will remain our core lending business.

Maintain the quality of our assets through prudent loan underwriting. We

? intend to maintain strict, quality-driven loan underwriting and credit

monitoring process. AT December 31, 2021 and December 31, 2020we did not have

non-performing assets.

Attract and retain customers in our market area and increase our “core”

deposits consisting of savings accounts and retail certificates of deposit. We

? intend to put more emphasis on our savings and money market accounts and

retail certificates of deposit through more aggressive marketing and pricing

these products, thereby reducing our reliance on non-retail certificates

to pay.

Remain an institution with a community vocation and rely on quality service

to maintain and retain local customers. We were established in 1884

and operated continuously in the New Orleans metropolitan area since

? this time. Thanks to the goodwill we have developed over the years to provide

fast and efficient banking services, we believe we have been able to

attract a solid clientele of local merchants on which we hope to continue to

develop our banking business.

Critical accounting policies

The discussion and analysis of the financial condition and results of operations
are based on our financial statements, which are prepared in conformity with
generally accepted accounting principles used in the United States of America.
The preparation of these financial statements requires management to make
estimates and assumptions affecting the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities, and the reported
amounts of income and expenses. We consider the accounting policies discussed
below to be critical accounting policies. The estimates and assumptions that we
use are based on historical experience and various other factors and are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions, resulting in a
change that could have a material impact on the carrying value of our assets and
liabilities and our results of operations.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company”, we may delay the adoption of new or revised accounting statements applicable to public companies until such statements become effective.

                                       39

  Table of Contents

to private companies. We intend to take advantage of this extended transition period. Accordingly, our financial statements may not be comparable to those of companies that comply with these new or revised accounting standards.

The following represent our significant accounting policies:

Allowance for Loan Losses. The allowance for loan losses is the estimated amount
considered necessary to cover inherent, but unconfirmed, credit losses in the
loan portfolio at the balance sheet date. The allowance is established through
the provision for loan losses which is charged against income. In determining
the allowance for loan losses, management makes significant estimates and has
identified this policy as one of our most critical accounting policies.

Management performs a quarterly evaluation of the allowance for loan losses.
Consideration is given to a variety of factors in establishing this estimate
including, but not limited to, current economic conditions, delinquency
statistics, geographic and industry concentrations, the adequacy of the
underlying collateral, the financial strength of the borrower, results of
internal loan reviews and other relevant factors. This evaluation is inherently
subjective as it requires material estimates that may be susceptible to
significant change.

The analysis has two components, specific and general allowances. The specific
allowance is for unconfirmed losses related to loans that are determined to be
impaired. Impairment is measured by determining the present value of expected
future cash flows or, for collateral-dependent loans, the fair value of the
collateral, adjusted for market conditions and selling expenses. If the fair
value of the loan is less than the loan's carrying value, a charge is recorded
for the difference. The general allowance, which is for loans reviewed
collectively, is determined by segregating the remaining loans by type of loan,
risk weighting (if applicable) and payment history. We also analyze historical
loss experience, delinquency trends, general economic conditions and geographic
and industry concentrations. This analysis establishes historical loss
percentages and qualitative factors that are applied to the loan groups to
determine the amount of the allowance for loan losses necessary for loans that
are reviewed collectively. The qualitative component is critical in determining
the allowance for loan losses as certain trends may indicate the need for
changes to the allowance for loan losses based on factors beyond the historical
loss history. Not incorporating a qualitative component could misstate the
allowance for loan losses. Actual loan losses may be significantly more than the
allowances we have established which could result in a material negative effect
on our financial results. Effective January 1, 2023, we will adopt the CECL
standard for determining the amount of our allowance for credit losses, which
may increase our allowance for loan and lease losses upon adoption and cause our
historic allowance for loan and lease losses not to be indicative of how we will
maintain our allowance for credit losses beginning January 1, 2023. Please
see Note 1 - Nature of Operations, Principles of Consolidation, Use of Estimates
and Summary of Significant Accounting Policies on page F-7 of the Consolidated
Financial Statements for further details.

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. We estimate
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 gain or loss
recorded. A more detailed description of the fair values measured at each level
of the fair value

                                       40

  Table of Contents

The hierarchy and methodology used by the Bank can be found in Note 18 to the consolidated financial statements, “Fair values ​​of financial instruments”.

Comparison of the financial situation at December 31, 2021 and December 31, 2020

Total Assets.  Total assets increased $3.7 million, or 3.7%, to $103.6 million
at December 31, 2021 from $99.9 million at December 31, 2020. The increase
resulted primarily from increases in cash and cash equivalents of $3.4 million
and net loans of $6.1 million, offset in part by decreases in interest-bearing
deposits in banks of $1.7 million, investment securities available-for-sale of
$721,000 and loans held-for-sale of $3.2 million.

Cash and Cash Equivalents. Cash and cash equivalents increased $3.4 million, or
85.1%, to $7.3 million at December 31, 2021 from $4.0 million at December 31,
2020.

Interest-Bearing Deposits in Banks. Interest-bearing deposits in banks decreased
$1.7 million, or 18.4%, to $7.7 million at December 31, 2021 from $9.5 million
at December 31, 2020.

The balance of these two balance sheet items was an increase of $1.6 million
mainly due to the increase in deposits not yet used to make loans.

Net Loans.  Net loans increased $6.1 million, or 8.7%, to $75.9 million at
December 31, 2021 from $69.9 million at December 31, 2020. During the year ended
December 31, 2021, one- to four-family residential real estate loans increased
$4.8 million, or 7.2%, to $70.9 million from $66.1 million at December 31, 2020,
multifamily loans decreased $97,000, or 3.4%, to $2.8 million from $2.9 million
at December 31, 2020, commercial real estate loans increased $1.1 million, or
306.6%, to $1.5 million from $364,000 at December 31, 2020 and consumer loans
increased $25,000, or 11.7%, to $239,000 from $214,000 at December 31, 2020.

The increase in net loans was due primarily to increases in commercial real
estate loan participations with another local bank and in one- to four-family
residential real estate loans, principally in non-conforming and construction
loans earning higher interest rates than similar conforming loans, which are
generally sold. The decreases in multifamily loans were due to normal
repayments.

AT December 31, 2021we have had $9.0 million outstanding loan commitments, all of which represented the balance of funds remaining to be disbursed on outstanding construction loans.

Securities Available-for Sale.  Investment securities available-for-sale,
consisting of government-sponsored mortgage-backed securities and SBA 7a Pools
backed by real estate and equipment loans, decreased $721,000, or 11.9%, to $5.3
million at December 31, 2021 from $6.1 million at December 31, 2020 as a result
of principal repayments of $1.7 million exceeding securities purchases of $1.0
million during the year.

Bank-Owned Life Insurance. At December 31, 2021, our investment in bank owned
life insurance was $4.2 million, an increase of $88,000, or 2.1%, from $4.1
million at December 31, 2020. We invest in bank-owned life insurance to provide
us with a funding offset for our benefit plan obligations. Bank-owned life
insurance also generally provides us noninterest income that is non-taxable.
Federal regulations generally limit our investment in bank-owned life insurance
to 25% of our Tier 1 capital plus our allowance for loan losses. Our investment
in bank-owned life insurance at December 31, 2021 was 20.8% of our Tier 1
capital plus our allowance for loan losses.

                                       41

Contents

Deposits.  Deposits increased $4.5 million, or 8.0%, to $61.0 million at
December 31, 2021 from $56.4 million at December 31, 2020. Savings accounts and
money market accounts increased $1.3 million, or 45.0%, to $4.1 million at
December 31, 2021 from $2.9 million at December 31, 2020. Certificates of
deposit increased $3.3 million, or 6.1%, to $56.8 million at December 31, 2021
from $53.6 million at December 31, 2020. The increase in certificates of deposit
resulted primarily from an increase in certificates of deposit derived from an
online service of $3.2 million, from brokers of $1.9 million and from local
retail depositors, offset in part by a decrease of $1.2 million of certificates
of deposit from municipalities. Depending on market conditions, at times we have
utilized non-retail funding sources to fund our loan origination and growth and
to replace Federal Home Loan Bank advances, as well as in order to get
longer-term funding not always available in the local market in to help reduce
interest rate risk.

Certificates of deposit that are scheduled to mature in less than one year from
December 31, 2021 total $18.8 million at December 31, 2021. Management expects
that a substantial portion of the maturing certificates of deposit will be
renewed. However, if a substantial portion of these deposits is not retained, we
may utilize FHLB advances or raise interest rates on deposits to attract new
accounts, which may result in higher levels of interest expense.

Borrowings. Borrowings, consisting entirely of Federal Home Loan Bank advances,
decreased $1.2 million or 6.3% to $18.2 million at December 31, 2021 from $19.4
million at December 31 2020 due to maturities not renewed.

Total Equity.  Total equity decreased $94,000, or 0.4%, to $21.8 million at
December 31, 2021 from $21.9 million at December 31, 2020. The decrease resulted
primarily from the repurchase of 22,500 shares of the Company's common stock
during the year offset, in part, by the net income of $146,000 in 2021.

Comparison of operating results for the years ended December 31, 2021 and
December 31, 2020

General.  We had net income of $146,000 for the year ended December 31, 2021,
compared to a net loss of ($103,000) for the year ended December 31, 2020, an
increase of $249,000. The increase in net income resulted from increases in net
interest income of $242,000 and noninterest income of $68,000 and decreases in
noninterest expense of $3,000, offset, in part, by a decreases in benefit for
loan losses of $2,000 and income tax benefit of $62,000.

Interest Income.  Interest income decreased $174,000, or 5.8%, to $2.8 million
for the year ended December 31, 2021 from $3.0 million for the year ended
December 31, 2020. This decrease was primarily attributable to decreases in
interest on loans receivable of $86,000, or 3.0%, interest on investment
securities of $23,000, or 29.5%, and interest on interest-bearing deposits in
banks of $65,000, or 79.3%. The average balance of loans increased $3.6 million,
or 5.0%, to $76.6 million for the year ended December 31, 2021 from $73.0
million for the year ended December 31, 2020, and the average yield on loans
decreased 29 basis points to 3.58% during 2021 from 3.87% during 2020. The
average balance of investment securities increased $546,000, or 10.5%, to $5.7
million for the year ended December 31, 2021 from $5.2 million for the year
ended December 21, 2020, while the average yield on investment securities
decreased 54 basis points to 0.96% for 2021 from 1.50% for 2020. The average
balance of other interest-earning assets decreased $4.1 million, or 22.9%, to
$13.9 million for the year ended December 31, 2021 from $18.0 million for the
year ended December 31, 2020, and the average yield on other interest-earning
assets decreased 33 basis points to 0.12% for 2021 from 0.45% for 2020.

Interest Expense. Total interest expense decreased $416,000, or 26.1%, to $1.2
million for the year ended December 31, 2021 from $1.6 million for the year
ended December 31, 2020. The decrease was primarily due to decreases in interest
expense on deposits of $264,000, or 26.1%, and interest expense on

                                       42

Contents

FHLB advances of $152,000, or 26.0%. The average balance of interest-bearing
deposits increased $5.0 million, or 8.9%, to $60.9 million for the year ended
December 31, 2021 from $55.9 million for the year ended December 31, 2020, and
the average cost of interest-bearing deposits decreased 58 basis points to 1.23%
for 2021 from 1.81% for 2020. The average balance of FHLB advances decreased
$3.3 million, or 14.9%, to $19.0 million for the year ended December 31, 2021
from $22.3 million for the year ended December 31, 2020. The average cost of
these advances decreased 34 basis points to 2.28% for 2021 from 2.62% for 2020.

Net Interest Income.  Net interest income increased $242,000, or 17.4%, to $1.6
million for the year ended December 31, 2021 from $1.4 million for the year
ended December 31, 2020. Average net interest-earning assets decreased $1.6
million year to year. This decrease was due primarily to an increase in the
average balance of interest-bearing deposits year to year. Our interest rate
spread increased 38 basis points to 1.44% for the year ended December 31, 2021
from 1.06% for the year ended December 31, 2020, and our net interest margin
increased 25 basis points to 1.70% for the year ended December 31, 2021 from
1.45% for the year ended December 31, 2020. The increases in interest rate
spread and net interest margin were primarily the result of our interest-bearing
liabilities repricing downward at a faster rate than our interest-earning
assets.

Provision for Loan Losses.  We recorded no provision or credit in the provision
for loan losses for the year ended December 31, 2021 and a credit of $2,000 for
the year ended December 31, 2020. The decrease in the credit in the provision
for loan losses in 2021 compared to 2020 resulted from our analysis of the
factors described in "Critical Accounting Policies - Allowance for Loan Losses."
The allowance for loan losses was $858,000, or 1.14% of total loans, at December
31, 2021, compared to $850,000, or 1.22% of total loans, at December 31, 2020.
Classified (substandard, doubtful and loss) loans decreased to $0 at December
31, 2021 from $559,000 at December 31, 2020. There were no non-performing loans
at December 31, 2021 or December 31, 2020. Net recoveries were $8,000 in 2021
compared to $2,000 in 2020, an increase of $6,000.

Noninterest Income. Noninterest income increased $68,000, or 7.0%, to $1.0
million for the year ended December 31, 2021 from $975,000 for the year ended
December 31, 2020. The increase was primarily due to an increases in fees on
loans sold of $62,000 and service charges and other income of $10,000. This
increase was partially offset by a decrease in income from life insurance of
$4,000.

Noninterest Expense.  Noninterest expense decreased $3,000, or 0.1%, to $2.5
million for 2021 from $2.5 million for 2020. The decrease was due primarily to
decreases of $10,000, or 4.8%, in occupancy expense, $38,000, or 33.6%, in data
processing expense, $43,000, or 21.8%, in accounting and consulting expense,
$13,000, or 19.4% in legal fees, and $6,000, or 2.5% in other expenses. These
decreases were offset, in part, by increases of $100,000, or 6.4%, in salaries
and employee benefits, primarily from increased commissions paid on higher loan
volume in 2021, $1,000 or 1.5% in FDIC deposit insurance premiums, and $6,000,
or 7.3% in insurance expense.

In future periods, if we make additional grants of awards under our equity incentive plan, which has been approved by our shareholders, we expect our non-interest expense to increase due to the increase in compensation costs.

Income Tax Expense.  Income tax expense increased $62,000 to an expense of $0
compared to a benefit of $62,000 for 2020. We had no income tax expense in 2021
due to the utilization of net operating loss (NOL) carryforwards from prior
years. The benefit in 2020 resulted from the net loss before income tax expense
in 2020 and the refund of prior year income taxes as allowed by the CARES Act.
We have remaining net operating loss (NOL) carryforwards of $1.8 million which
have no expiration date. At this time we believe that it is more likely than not
that the benefit from a portion of the NOL carryforwards will

                                       43

Contents

not be realized within a reasonable time to offset the amount of net tax operating losses which are the primary cause of our deferred tax asset.

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


                                                                   For the Year Ended December 31,
                                                         2021                                            2020
                                        Average                                         Average
                                       Outstanding                   Yield/ Rate      Outstanding                    Yield/ Rate
                                         Balance        Interest         (1)            Balance         Interest         (1)

                                                                          (Dollars in Thousands)
Interest-earning assets:
Loans, net (1)                        $      76,580    $    2,741            3.58 %  $       72,966    $    2,827            3.87 %
Investment securities                         5,735            55            0.96             5,189            78            1.50
Other interest-earning assets                13,912            17            0.12            18,046            82            0.45
Total interest-earning assets                96,227         2,813            2.92            96,201         2,987            3.10
Noninterest-earning assets                    7,738                                           7,784
Total assets                          $     103,965                                  $      103,985

Interest-bearing liabilities:
Savings/Money Market accounts         $       3,658             6            0.16    $        2,819             7            0.25
Certificates of deposit                      57,273           741            1.29            53,126         1,004            1.89

Total interest-bearing deposits              60,931           747            1.23            55,945         1,011            1.81
Borrowings                                   18,984           433            2.28            22,297           585            2.62
Total interest-bearing liabilities           79,915         1,180          

 1.48            78,242         1,596            2.04
Other noninterest-bearing
liabilities                                   2,050                                           1,677
Total liabilities                            81,965                                          79,919
Equity                                       22,000                                          24,066
Total liabilities and equity          $     103,965                                  $      103,985

Net interest income                                    $    1,633                                      $    1,391
Net interest rate spread (2)                                                 1.44 %                                          1.06 %

Net interest-earning assets (3)       $      16,312                                  $       17,959
Net interest margin (4)                                                      1.70 %                                          1.45 %
Average of interest-earning assets
to interest-bearing liabilities              120.41 %                                        122.95 %

(1) Net lending fees/(costs) of ($387,000) and ($394,000) for 2021 and 2020,

respectively, are included in interest income.

The net interest rate spread represents the difference between the return on (2) average interest-bearing assets and the cost of average interest-bearing assets.

Passives.

(3) Net interest-earning assets represent total interest-earning assets less

total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by total

    interest-earning assets.


Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our
net interest income for the years indicated. The rate column shows the effects
attributable to changes in rate (changes in rate multiplied by prior volume).
The volume column shows the effects attributable to changes in volume (changes
in volume multiplied by prior rate). The total column represents the sum of

the
prior columns. For

                                       44

  Table of Contents

For the purposes of this table, the variations attributable to both price and volume, which cannot be separated, have been allocated proportionally, according to the variations due to the price and the variations due to the volume.

                                                 Years Ended December 31,
                                                       2021 vs. 2020
                                        Increase (Decrease) Due to          Total
                                                                          Increase
                                         Volume              Rate         (Decrease)

                                                      (In thousands)
Interest-earning assets:
Loans, net                            $         129       $    (215)    $        (86)
Investment securities                             9             (32)             (23)
Other interest-earning assets                  (15)             (50)             (65)

Total interest-earning assets                   123            (297)            (174)

Interest-bearing liabilities:
Savings accounts                                  5              (6)              (1)
Certificates of deposit                          85            (348)            (263)
Total deposits                                   90            (354)            (264)

Borrowings                                     (81)             (71)            (152)

Total interest-bearing liabilities                9            (425)       

    (416)

Change in net interest income         $         114       $      128    $         242

There were no out-of-period items or adjustments during the years ended December 31, 2021 or 2020.

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. All directors participate in discussions during the regular board
meetings evaluating the interest rate risk inherent in our assets and
liabilities, and the level of risk that is appropriate. These discussions take
into consideration our business strategy, operating environment, capital,
liquidity and performance objectives consistent with the policy and guidelines
approved by them.

Our asset/liability management strategy attempts to manage the impact of changes
in interest rates on net interest income, our primary source of earnings. Among
the techniques we are using to manage interest rate risk are:

the sale of a significant portion of our individual long-term fixed rate contracts in accordance

four-family residential real estate loan originations and retention of

? non-compliant, construction and short term, fixed rate and adjustable rate

residential real estate loans for one to four families that we issue, subject to

market conditions and periodic review of our asset/liability management needs;

trying to reduce our reliance on certificates of deposit and

? borrowings to support lending and investing activities and increase our

use of our savings accounts and money market accounts, which are less

sensitive to interest rates than certificates of deposit;

                                       45

  Table of Contents

the lengthening of the weighted average maturity of our liabilities by

? longer-term sources of funding such as fixed rate advances from the FHLB with

duration up to 10 years;

use a rate lock program for loans we issue for sale and sale

? loans under best efforts delivery contracts to eliminate warehouses and

pipeline risk; and

? holding relatively short term, variable rate and highly liquid investments

securities.

Our board of directors is responsible for the review and oversight of our
executive management team and other essential operational staff which are
responsible for our asset/liability analysis. These officers act as an
asset/liability committee and are charged with developing and implementing an
asset/liability management plan, and generally meet monthly to review pricing
and liquidity needs and assess our interest rate risk. 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.

We do not engage in hedging activities, such as futures, options or swaps, or investments in high-risk mortgage derivatives, such as residual interest on secured mortgage bonds, interest residuals on real estate mortgage investment conduits or stripped mortgage-backed securities.

Economic Value of Equity and Changes in Net Interest Income. We monitor interest
rate risk through the use of a simulation model that estimates the amounts by
which the fair value of our assets and liabilities (our economic value of equity
or "EVE") would change in the event of a range of assumed changes in market
interest rates. The quarterly reports developed in the simulation model assist
us in identifying, measuring, monitoring and controlling interest rate risk to
ensure compliance within our policy guidelines.

The table below sets forth, as of December 31, 2021, the estimated changes in
our EVE that would result from the designated instantaneous changes in market
interest rates. Computations of prospective effects of hypothetical interest
rate changes are based on numerous assumptions including relative levels of
market interest rates, loan prepayments and deposit decay, and should not be
relied upon as indicative of actual results.

 Change in                           Estimated Increase                NPV as a Percentage of
 Interest                             (Decrease) in NPV               Present Value of Assets (3)
   Rates        Estimated                                                        Increase (Decrease)
  (basis
points) (1)       EVE (2)          Amount          Amount       NPV Ratio (4)       (basis points)
                                       (Dollars in thousands)

   +400        $      12,356    $     (8,177)        (39.82) %          13.90 %                 (563)
   +300               14,337          (6,196)        (30.18)            15.46                   (407)
   +200               16,424          (4,109)        (20.01)            16.97                   (256)
   +100               18,525          (2,008)         (9.78)            18.35                   (118)
     -                20,533                -              -            19.53                       -
   (100)              22,502            1,969           9.59            20.56                     103
   (200)              24,553            4,020          19.58            21.50                     197

(1) Assumes an instantaneous and uniform change in interest rates at all maturities.

(2) EVE is the discounted present value of the expected cash flows of the assets,

off-balance sheet liabilities and contracts.

(3) The present value of assets represents the present value of inflows

cash flow on interest-earning assets.

(4) The NPV ratio represents the NPV divided by the current value of the assets.

                                       46

  Table of Contents

The table above indicates that at December 31, 2021, in the event of a 200 basis
point decrease in interest rates, we would have experienced a 19.58% increase in
EVE. In the event of a 200 basis point increase in interest rates at December
31, 2021, we would have experienced a 20.01% decrease in EVE.

In addition to modeling changes to our EVE, we also analyze estimated changes to
net interest income ("NII") for a prospective twelve-month period under the
interest rate scenarios set forth above. The following tables set forth our NII
model as of December 31, 2021.

                                                       Increase (Decrease)

Change in estimated net interest rates Estimated net interest

     (Basis Points)               Income (1)             Interest Income
                           (Dollars in thousands)

          +400             $                   2,428                  27.19 %
          +300                                 2,313                  21.16
          +200                                 2,191                  14.77
          +100                                 2,059                   7.86
           -                                   1,909                      -
         (100)                                 1,795                 (5.97)
         (200)                                 1,699                (11.00)

(1) The variations calculated assume an immediate shock to the static yield curve.

Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurement. Modeling changes in EVE and NII require making certain
assumptions that may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the EVE and
NII tables presented assume that the composition of our interest-sensitive
assets and liabilities existing at the beginning of a period remains constant
over the period being measured and assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration
or repricing of specific assets and liabilities. Accordingly, although the EVE
and NII tables provide 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
EVE and NII and will differ from actual results.

Calculations of EVE and NII may also not reflect the fair values ​​of financial instruments. For example, a decline in market interest rates may increase the fair value of our loans, deposits and borrowings.

Cash and capital resources

Liquidity describes our ability to meet the financial obligations 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
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 proceeds from maturities of securities. We also have the ability
to borrow from the FHLB. At December 31, 2021, we had $18.2 million outstanding
in advances from the FHLB, and had the capacity to borrow approximately an
additional $18.3 million from the FHLB and an additional $6.6 million on a line
of credit with First National Bankers Bank at this date.

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. The levels of these
assets are dependent on our operating, financing, lending, and investing
activities during any given period.

                                       47

Contents

Our cash flows are comprised of three primary classifications: cash flows from
operating activities, investing activities, and financing activities. Net cash
provided by (used in) operating activities was $3.4 million and ($2.1 million)
for the years ended December 31, 2021 and 2020, respectively. Net cash (used in)
provided by investing activities, which consisted primarily of net change in
loans receivable, net change in interest-bearing deposits and net change in
investment securities, was ($3.6 million) and $502,000 for the years ended
December 31, 2021 and 2020, respectively. Net cash provided by (used in)
financing activities, consisting primarily of and the activity in deposit
accounts and FHLB advances, was $3.6 million and ($6.3 million) for the years
ended December 31, 2021 and 2020, respectively.

We are committed to maintaining a strong liquidity position. We monitor our
liquidity position on a daily basis. We anticipate that we will have sufficient
funds to meet our current funding commitments. Based on our deposit retention
experience and current pricing strategy, we anticipate that a significant
portion of maturing time deposits will be retained. We also anticipate continued
use of FHLB advances.

At December 31, 2021, we exceeded all of our regulatory capital requirements
with a Tier 1 leverage capital level of $19.5 million, or 18.72% of adjusted
total assets, which is above the well-capitalized required level of $5.2
million, or 5.00%; and total risk-based capital of $20.1 million, or 39.49% of
risk-weighted assets, which is above the well-capitalized required level of $5.1
million, or 10.00%. At December 31, 2020, we exceeded all of our regulatory
capital requirements with a Tier 1 leverage capital level of $19.1 million, or
18.94% of adjusted total assets, which is above the well-capitalized required
level of $5.0 million, or 5.0%; and total risk-based capital of $19.7 million,
or 43.41% of risk-weighted assets, which is above the well-capitalized required
level of $4.5 million, or 10.0%. Accordingly, Eureka Homestead was categorized
as well-capitalized at December 31, 2021 and 2020. Management is not aware of
any conditions or events since the most recent notification that would change
our category.

Off-balance sheet commitments. Information on our off-balance sheet commitments appears in point 8 of this report in notes 15 and 16 to the consolidated financial statements.

Recent accounting pronouncements

For a discussion of the impact of recent accounting pronouncements, see Note 1
of the notes to our financial statements beginning on page F-7 of this annual
report. On January 1, 2023 we will adopt the CECL standard for determining the
amount of our allowance for credit losses, which we may increase our allowance
for loan and lease losses upon adoption and cause our historic allowance for
loan and lease losses not to be indicative of how we will maintain our allowance
for credit losses beginning January 1, 2023.

Impact of inflation and price changes

The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles in the United States of
America which require the measurement of financial position and operating
results in terms of historical dollars without considering changes in the
relative purchasing power of money over time due to inflation. The primary
impact of inflation on our operations is reflected in increased operating costs.
Unlike most industrial companies, virtually all of the assets and liabilities of
a financial institution are monetary in nature. As a result, interest rates,
generally, have a more significant impact on a financial institution's
performance than does inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services.

SECTION 7A. Quantitative and qualitative information on market risk

Not required for small filing companies.

                                       48

Contents

© Edgar Online, source Previews