# EDGAR Filing Document

**Accession Number:** 0001571398
**File Stem:** 0001493152-23-010375
**Filing Date:** 2023-3
**Character Count:** 301555
**Document Hash:** 0b894bfd9c46736ae63a24604cae1b2d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-23-010375.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001493152-23-010375

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 165

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** VECTA INC.
- **CENTRAL INDEX KEY:** 0001571398
- **STANDARD INDUSTRIAL CLASSIFICATION:** SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-55005
- **FILM NUMBER:** 23788885

**BUSINESS ADDRESS:**
- **STREET 1:** 56 MAIN STREET
- **CITY:** IRVINGTON
- **STATE:** NY
- **ZIP:** 10533
- **BUSINESS PHONE:** 914-591-8000

**MAIL ADDRESS:**
- **STREET 1:** 56 MAIN STREET
- **CITY:** IRVINGTON
- **STATE:** NY
- **ZIP:** 10533

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Sunnyside Bancorp, Inc.
- **DATE OF NAME CHANGE:** 20130306

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

☒ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the fiscal ended December 31, 2022.

**OR**

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

For the transition period from _______________ to _______________.

Commission file number: **<u>000-55005</u>**

**<u>VECTA INC.</u>**

(Exact name of registrant as specified in its charter)

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| | |
|:---|:---|
| **<u>Maryland</u>** | **<u>46-3001280</u>** |
| (State or other jurisdiction of<br> incorporation or organization) | (I.R.S. Employer<br> Identification Number) |

---

---

| | |
|:---|:---|
| **<u>One World Trade Center, Suite 8500, New York, NY</u>** | **<u>10007</u>** |
| (Address of principal executive offices) | (Zip Code) |

---

Registrant's telephone number, including area code:

**<u>212-280-1000</u>**

Securities registered pursuant to Section 12(b) of the Act: None

---

| | | |
|:---|:---|:---|
| **Title of Each Class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
|  | (Not Applicable) |  |

---

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

**<u>Common Stock, par value $0.01 per share</u>**

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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

---

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

As of March 29, 2023, there were 15,930,976 issued and outstanding shares of the Registrant's Common Stock.

**DOCUMENTS INCORPORATED BY REFERENCE:**

Certain information required by Items 10, 11, 12, 13 and 14 is incorporated by reference into Part III hereof from portions of the Proxy Statement for the Registrant's 2023 Annual Meeting of Shareholders.

(1) Per SEC guidance, this blank checkbox is included on this cover page but no disclosure with respect thereto shall be made until the adoption and effectiveness of related stock exchange listing standards.

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| PART I |  |  |
| ITEM 1. | [Business](#m_001) | 2 |
| ITEM 1A. | [Risk Factors](#AR_001) | 35 |
| ITEM 1B. | [Unresolved Staff Comments](#AR_002) | 35 |
| ITEM 2. | [Properties](#AR_003) | 35 |
| ITEM 3. | [Legal Proceedings](#AR_004) | 35 |
| ITEM 4. | [Mine Safety Disclosures.](#AR_005) | 35 |
| PART II |  |  |
| ITEM 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#AR_007) | 36 |
| ITEM 6. | [\[RESERVED\]](#AR_008) | 37 |
| ITEM 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#AR_009) | 37 |
| ITEM 7A. | [Quantitative and Qualitative Disclosures about Market Risk](#AR_010) | 52 |
| ITEM 8. | [Financial Statements and Supplementary Data](#AR_011) | 52 |
| ITEM 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#AR_012) | 52 |
| ITEM 9A | [Controls and Procedures](#AR_013) | 52 |
| ITEM 9B. | [Other Information](#AR_014) | 53 |
| ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION |  |
| PART III |  |  |
| ITEM 10. | [Directors, Executive Officers and Corporate Governance](#AR_016) | 53 |
| ITEM 11. | [EXECUTIVE COMPENSATION](#AR_017) | 53 |
| ITEM 12. | [SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](#AR_018) | 53 |
| ITEM 13. | [CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](#AR_019) | 54 |
| ITEM 14. | [PRINCIPAL ACCOUNTING FEES AND SERVICES](#AR_020) | 54 |
| ITEM 15. | [Exhibits and Financial Statement Schedules](#AR_022) | 54 |
| ITEM 16. | [FORM 10-K SUMMARY](#AR_023) | 55 |

---

**PART I**

**<u>ITEM 1. Business</u>**

Forward-Looking Statements

This Annual Report on Form 10-K ("Annual Reort") 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 asset quality of our loan and investment portfolios; and

● estimates of our risks and future costs and benefits.

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

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:

● interest rate, liquidity, economic, market, credit, operational and inflation risks associated with our business, including the speed and predictability of changes in these risks;

● our ability to retain deposits and attract new deposits and loans and the composition and terms of such deposits and loans;

● business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the U.S. Federal budget or debt or turbulence or uncertainty in domestic or foreign financial markets;

● increased competition among depository and other financial institutions;

● economic and/or policy changes related to the COVID-19 pandemic;

● 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;

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

● our ability to execute on our business strategy to increase commercial real estate and multi-family lending and commercial lending;

● changes in consumer spending, borrowing and savings habits;

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

● climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;

● geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine, which could impact business and economic conditions in the U.S. and abroad;

● natural disasters, earthquakes, fires, and severe weather;

● changes in our organization, compensation and benefit plans; and

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

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

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Annual Report and other reports filed by us with the SEC. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We will not update the forward-looking information and statements to reflect actual results or changes in the factors affecting the forward-looking information and statements.

Forward-looking information and statements should not be viewed as predictions, and should not be the primary basis upon which investors evaluate us. Any investor in our common stock should consider all risks and uncertainties disclosed in our filings with the SEC, all of which are accessible on the SEC's website at http://www.sec.gov.

**General**

**Vecta Inc.**

Vecta Inc. (formerly known as Sunnyside Bancorp, Inc.) ("Vecta," "Vecta, Inc.,"or the "Company") was incorporated in the State of Maryland in March 2013 for the purpose of becoming the savings and loan holding company for Sunnyside Federal Savings and Loan Association of Irvington, ("Sunnyside Federal" or the "Bank") a federally-chartered savings and loan association and the wholly-owned subsidiary of Vecta Inc. upon consummation of Sunnyside Federal's mutual to stock conversion. The Bank conversion was consummated in July 2013 at which time Sunnyside Bancorp became the registered savings and loan holding company of the Bank. Prior to the Closing Date (as referenced below) of the Merger (as referenced below), other than holding all of the issued and outstanding stock of Sunnyside, Vecta Inc. has not engaged in any material business.

As further disclosed in Note 2 (Business Combination) to the consolidated financial statements included in Item 8 of this Annual Report, on June 1, 2022 (the "Closing Date"), Vecta Partners LLC (formerly known as Rhodium BA Holdings LLC), a Delaware limited liability company ("Vecta Partners"), completed its acquisition of Vecta Inc., pursuant to the Agreement and Plan of Merger, dated as of June 16, 2021, as amended on August 26, 2021 (the "Merger Agreement"), by and among Vecta Partners, Rhodium BA Merger Sub, Inc., a Maryland corporation ("Merger Sub"), Mark Silber, Vecta Inc. and Sunnyside Federal. Pursuant to the Merger Agreement and subject to the terms and conditions thereof, on the Closing Date, Merger Sub merged with and into Vecta Inc. (the "Merger"), with Vecta Inc continuing as the surviving corporation and a wholly-owned subsidiary of Vecta Partners.

The Merger was accounted for under the acquisition method of accounting and accordingly the results of Vecta Inc.'s operations have been included in Vecta Inc.'s December 31, 2022 consolidated financial statements from the date of acquisition, or June 1, 2022.

On June 1, 2022, the Board of Directors of Vecta Inc. authorized and approved a 15-for-1 stock dividend to the existing shareholders of Vecta Inc. The 15-for-1 stock dividend was consummated on July 18, 2022.

On June 29, 2022, Vecta Partners made an additional capital contribution of $4.5 million to Vecta Inc. in exchange for 222,222 shares of Vecta Inc.'s common stock.

On July 18, 2022, Vecta Inc. also increased its authorized shares of common stock to 100,000,000 par value $0.01, and increased its authorized shares of preferred stock to 2,000,000 par value $0.01. As of December 31, 2022, Vecta Inc. had 15,930,976 common shares outstanding and no shares of preferred stock outstanding.

On July 18, 2022, Vecta Inc. also amended its Articles of Incorporation to change its name from "Sunnyside Bancorp, Inc." to Vecta Inc. The name change was effected pursuant to the filing of Articles of Amendment to Vecta Inc.'s Articles of Incorporation with the Maryland State Department of Assessments and Taxation.

At December 31, 2022, Vecta Inc. had consolidated assets of $91.9 million, liabilities of $75.6 million and equity of $16.3 million. For the seven months ended December 31, 2022, the Company recorded a net loss of $203,000.

Vecta Inc. is a registered savings and loan holding company and is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System. Vecta Inc.'s executive and administrative office is located at One World Trade Center Suite 8500 New York, NY 10007, and our telephone number at this address is (212) 280-1000. Our website address is <u>www.vecta.com</u>. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments thereto, that have been filed with the SEC. Information on our website or in any websites linked by our website should not be considered a part of this Annual Report.

**Sunnyside Federal Savings and Loan Association of Irvington**

Sunnyside Federal is a federal savings association that was founded in 1930. In July 2013, we completed our mutual to stock conversion thereby becoming a stock savings association and becoming the wholly owned subsidiary of Vecta Inc. Sunnyside Federal conducts business from its full-service banking office located in Irvington, New York which is located in Westchester County, New York approximately 25 miles north of New York City. We consider our deposit market area to be the Westchester County, New York towns of Irvington, Tarrytown, Sleepy Hollow, Hastings, Dobbs Ferry and Ardsley-on-Hudson, and consider our lending area to be primarily Westchester, Putnam and Rockland Counties, New York.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in commercial and multi-family real estate loans, one- to four-family residential real estate loans, Small Business Administration ("SBA") loans, and to a limited extent, commercial loans, home equity lines of credit, student loans and other loans (consisting primarily of loans secured by deposits and marketable securities). At December 31, 2022, $16.4 million, or 55.2% of our total loan portfolio, was comprised of commercial real estate and multi-family mortgage loans, $9.7 million, or 32.5% of our total loan portfolio was comprised of owner-occupied, one- to four-family residential real estate loans, $2.4 million, or 7.8% of our total loan portfolio, was comprised of student loans, $1.3 million, or 4.5% of our total loan portfolio, was comprised of commercial, home equity and passbook loans.

We also invest in securities, which consist primarily of U.S. government agency obligations and mortgage-backed securities and to a lesser extent, securities of states, counties and political subdivisions.

We offer a variety of deposit accounts, including certificate of deposit accounts, money market accounts, savings accounts, NOW accounts and individual retirement accounts. We can also borrow from the Federal Home Loan Bank of New York ("FHLB") and the Federal Reserve Bank ("FRB") of New York. There were no borrowings outstanding at December 31, 2022.

Our current business strategy includes diversifying our loan portfolio to increase our jumbo residential and non-residential lending, including commercial and multi-family real estate lending, construction and commercial lending and increasing our non-interest income, as ways to improve our profitability in future periods.

Sunnyside Federal is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (the "OCC"). Our executive and administrative office is located at 56 Main Street, Irvington, New York 10533, and our telephone number at this address is (914) 591-8000. Our website address is <u>www.sunnysidefederal.com</u>. Information on our website or in any websites linked by our website should not be considered a part of this Annual Report.

**Market Area and Competition**

We conduct our operations from our full-service banking office located in Irvington, Westchester County, New York, which is located approximately 25 miles north of New York City. Our primary deposit market area includes Irvington and the contiguous towns of Tarrytown, Sleepy Hollow, Hastings, Dobbs Ferry and Ardsley-on-Hudson, all of which are located in Westchester County, New York. Our primary lending market area includes Westchester, Putnam and Rockland counties, New York. We will, on occasion, make loans secured by properties located outside of our primary lending market, especially to borrowers with whom we have an existing relationship and who have a presence within our primary lending area.

At December 31, 2022, $9.7 million, or 32.5%, of our total loan portfolio was comprised of owner-occupied, one-to four family residential real estate loans. Accordingly, a downturn in the residential real estate market in Westchester, Putnam, or Rockland Counties could significantly affect our results of operations.

Westchester County is primarily a suburban community and is the second wealthiest county in the State of New York. Some key statistics, according to the US Census Bureau, on Westchester County for the period of 2017 through 2021 are provided below:

● The homeownership rate in Westchester County was 61.6%, compared to 54.4% in the State of New York;

● The median home value in Westchester County was $559,900, compared to $340,600 in the State of New York;

● The median household income in Westchester County was $105,387 compared to $75,157 in the State of New York;

● Approximately 50.6% of the population of Westchester County held a bachelor's degree or higher, compared to 38.1% in the State of New York; and

● Approximately 9.4% of the population of Westchester County had incomes below poverty level, compared to 13.9% in the State of New York.

Sunnyside Federal also makes loans on a regular basis to residents of Putnam and Rockland Counties, New York. Below are some key statistics, according to the US Census Bureau, on the economic outlook of Putnam and Rockland Counties for the period of 2017 through 2021:

● The homeownership rate in Putnam County and Rockland County was 83.3% and 68.1%, respectively, compared to 54.4% in the State of New York;

● The median home value in Putnam County and Rockland County was $377,800 and $465,200, respectively, compared to $340,600 in the State of New York;

● The median household income in Putnam County and Rockland County was $111,617 and $99,707, respectively, compared to $75,157 in the State of New York;

● Approximately 41.5% and 42.0% of the population of Putnam County and Rockland County, respectively, held a bachelor's degree or higher, compared to 38.1% in the State of New York; and

● Approximately 6.6% and 15.2% of the population of Putnam County and Rockland County, respectively, had incomes below poverty level, compared to 13.9% in the State of New York.

We face significant competition within our market both in making loans and attracting deposits. Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms, consumer finance companies and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies. Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our position as a community bank.

We are a small community savings institution and as of June 30, 2022 (the latest date for which information is available), our market share was 0.03% of total FDIC-insured deposits in Westchester, making us the 28th largest out of 32 financial institutions in Westchester County based upon deposit share as of that date.

**Business Strategy**

Our current business strategy is to operate as a community bank dedicated to serving the needs of our consumer and business customers and emphasizing personalized and efficient customer service. Highlights of our current business strategy include:

● growing our assets and liabilities by increasing our presence in the communities we serve and expanding our service delivery channels;

● utilizing our management's commercial banking experience by diversifying our lending operations to increase our emphasis on commercial and multi-family real estate lending, commercial and construction lending;

● maintaining our strong asset quality profile through conservative loan underwriting;

● managing interest rate risk by emphasizing the origination of shorter-term loans for retention in our portfolio;

● continuing to attract and retain customers in our market area and build our "core" deposits consisting of demand, NOW, savings and money market accounts; and

● opportunistically seek to purchase or sell loans in the future including whole or participations in one to four-family residential real estate loans, commercial and multi-family real estate loans and student loans.

**Lending Activities**

 ****

***General.*** Historically, our principal lending activity has been the origination, for retention in our portfolio, of mortgage loans collateralized by one- to four-family residential real estate located within our primary market area, and at December 31, 2022, $9.7 million, or 32.5%, of our total loan portfolio was comprised of one- to four-family residential real estate loans. We also offer commercial real estate and multi-family real estate loans, which we retain in our portfolio, including non-owner occupied one - to four-family residential real estate loans. At December 31, 2022, $16.4 million, or 55.2% of our total loan portfolio was comprised of commercial and multi-family real estate loans. We intend to grow our commercial and multi-family real estate loan portfolio, subject to favorable market conditions.

We also offer commercial loans that are not real estate secured, home equity lines of credit and other loans. At December 31, 2022, $3.7 million, or 12.3%, of our total loan portfolio was comprised of commercial loans, home equity and other loans. We have, on occasion, purchased loans, including commercial real estate, one- to four-family residential real estate loans and student loans, and at December 31, 2022 purchased loans accounted for $3.0 million of our total loan portfolio. We will opportunistically seek to purchase whole or participations in one- to four-family residential real estate loans and commercial and multi-family real estate loans in the future.

***Loan Portfolio Composition.*** The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated, excluding loans held for sale.

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| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2022 | 2022 |
|  | Amount | Percent |
|  | (Dollars in thousands) | (Dollars in thousands) |
| <u>Real estate loans:</u> |  |  |
| &nbsp;&nbsp;&nbsp;One-to four-family residential | $9676 | 32.5% |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family residential | 16438 | 55.2% |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit | 170 | 0.6% |
| Student loans | 2337 | 7.8% |
| Commercial and other loans | 1171 | 3.9% |
| Total loans receivable | 29792 | 100.0% |
| Less: |  |  |
| Deferred loan fees (costs and premiums) | 2 |  |
| Allowance for loan losses | 79 |  |
| Purchase accounting credit mark | 774 |  |
| Purchase accounting discount | 374 |  |
| Total loans receivable, net | $28563 |  |

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***Loan Portfolio Maturities.*** The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in the year ending December 31, 2022. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **One-to-four**<br>**family**<br>**residential**<br>**real estate**<br>**loans** | **Commercial<br> and multi-**<br>**family**<br>**residential**<br>**real estate**<br>**loans** |<br>**Home**<br> **Equity**<br>**lines of**<br>**credit** |<br><br>**Student**<br>**Loans** |<br><br>**Other**<br>**loans** |<br><br>**Total** |
| Due During the Years Ending December 31, |  |  |  |  |  |  |
| 2023 | $- | $1542677 | $- | $- | $500000 | $2042677 |
| 2024 |  | 1761342 |  | 34729 | 5790 | 1801861 |
| 2025 | 107510 | 610152 |  | 3002 | 148820 | 869484 |
| 2026 to 2027 | 176432 | 3797689 |  | 385003 | 223879 | 4583003 |
| 2028 to 2032 | 1495004 | 6164092 |  | 2646 |  | 7661742 |
| 2033 to 2037 | 2421727 | 175441 | 170468 | 227125 |  | 2994761 |
| 2038 and beyond | 5475416 | 2387043 | - | 1684955 | 291510 | 9838924 |
|  | $9676089 | $16438436 | $170468 | $2337460 | $1169999 | $29792452 |

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***Fixed and Adjustable-Rate Loan Schedule.*** The following table sets forth at December 31, 2022, the dollar amount of all fixed-rate and adjustable-rate loans due after December 31, 2023.

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| | | | |
|:---|:---|:---|:---|
|  | **Fixed** | **Adjustable** | **Total** |
|  | **(In thousands)** | **(In thousands)** | **(In thousands)** |
| Real estate loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;One-to four-family residential | $7979 | $1697 | $9676 |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family residential | 7292 | 7604 | 14896 |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  | 170 | 170 |
| Student Loans | 408 | 1930 | 2338 |
| Other loans | 155 | 515 | 670 |
| Total loans | $15834 | $11916 | $27750 |

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***One- to Four-Family Residential Real Estate Lending*.** The focus of our lending program has historically been the origination and retention in our portfolio of one- to four-family residential real estate loans. At December 31, 2022, $9.7 million, or 32.5% of our total loan portfolio, consisted of one- to four-family residential real estate loans.

We originate both fixed-rate and adjustable-rate one- to four-family residential real estate loans. At December 31, 2022, 82.5% of our one- to four-family residential real estate loans were fixed-rate loans, and 17.5% were adjustable-rate loans.

Because we have not historically sold any of the one- to four-family residential real estate loans that we have originated, we have not originated these loans in conformance with either Fannie Mae or Freddie Mac underwriting guidelines. We may consider selling certain newly originated, longer-term (15 years or greater), one- to four-family residential real estate loans, in an effort to generate fee income and manage interest rate risk. It is expected that these loans will be underwritten according to Freddie Mac guidelines, and we will refer to loans that conform to such guidelines as "conforming loans." We could originate both fixed- and adjustable-rate mortgage loans conforming to Fannie Mae guidelines in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency for Freddie Mac, which as of January 1, 2023 was generally $726,200 for single-family homes in our market area. We may also originate loans above the lending limit for conforming loans, which we will refer to as "jumbo loans."

Virtually all of our one- to four-family residential real estate loans are secured by properties located in our primary lending area, which we define as the New York Counties of Westchester, Putnam and Rockland.

We generally limit the loan-to-value ratios of our mortgage loans to 80% of the sales price or appraised value, whichever is lower.

Our fixed-rate one- to four-family residential real estate loans typically have terms of 15 or 30 years.

Our adjustable-rate one- to four-family residential real estate loans generally have fixed rates for initial terms of three, five or seven years, and adjust annually thereafter at a margin, which in recent years has been 2.50% over the weekly average yield on U.S. treasury securities adjusted to a constant maturity of one year. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest rate of the loan. Our adjustable-rate loans carry terms to maturity of up to 30 years. Certain of our adjustable-rate loans which were originated prior to 2010 can be adjusted upward but cannot be adjusted below the initial interest rate of the loan.

Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they periodically reprice, as interest rates increase the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by the maximum periodic and lifetime rate adjustments permitted by our loan documents. As a result, the effectiveness of adjustable-rate mortgage loans in compensating for changes in general interest rates may be limited during periods of rapidly rising interest rates.

We do not offer "interest only" mortgage loans on permanent one- to four-family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as "Option ARM" loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not offer "subprime loans" on one-to four- family residential real estate loans (*i.e.*, loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios), or "Alt-A" (*i.e.*, loans that generally target borrowers with better credit scores who borrow with alternative documentation such as little or no verification of income).

 ****

***Commercial and Multi-Family Real Estate Lending*.** Consistent with our strategy to expand our loan products and to enhance the yield and reduce the term to maturity of our loan portfolio, we offer commercial and multi-family real estate loans. At December 31, 2022, we had $16.4 million in commercial and multi-family real estate loans, representing 55.2% of our total loan portfolio. Subject to future economic, market and regulatory conditions, we will continue to increase our emphasis on originations and purchases of commercial and multi-family real estate loans.

Generally, our commercial real estate and multi-family loans have terms of up to 10 years and amortize for a period of up to 25 years. Interest rates may be fixed or adjustable, and if adjustable then they are generally based upon a 5 year Treasury or Federal Home Loan Bank index or the Prime rate of interest.

Almost all of our commercial and multi-family real estate loans are collateralized by office buildings, mixed-use properties and multi-family real estate located in our market area.

We consider a number of factors in originating commercial and multi-family real estate loans, including non-owner occupied, one- to four-family residential real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower's experience in owning or managing similar property and the borrower's payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). All commercial and multi-family real estate loans are appraised by outside independent appraisers who are approved by the board of directors on an annual basis. Personal guarantees are generally obtained from the principals of commercial and multi-family real estate loans.

Commercial and multi-family real estate loans, including non-owner occupied, one- to four-family residential real estate loans, entail greater credit risks compared to owner-occupied one- to four-family residential real estate loans because they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial and multi-family real estate than residential properties.

Our loans-to-one borrower limit is 15% of Sunnyside Federal's unimpaired capital, which limit was $1.7 million at December 31, 2022. We generally target commercial and multi-family real estate loans with balances of up to the lesser of $1.5 million or our legal lending limit. At December 31, 2022, our average commercial real estate and multi-family loan had a balance of $567,000. At that same date, our largest commercial real estate relationship totaled $1.7 million and was performing in accordance with its repayment terms.

 ****

***Student Loans.*** We underwrite and purchase private student loans setting maximum debt-to-income ratios, minimum income and minimum FICO scores. The underwritten loans are typically variable rate loans for students who are pursuing undergraduate or post-undergraduate studies. These loans totaled $2.3 million at December 31, 2022 and have repayment terms up to 20 years. Our purchased portfolio is generally for consolidation student loans with repayment terms that do not exceed 10 years. These loans totaled $408,000 at December 31, 2022. At December 31, 2022, student loans totaled $2.3 million and represented 7.8% of our loan portfolio.

Management believes that offering student loans and other loan products helps expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

Student loans and other loans generally have greater risk compared to longer-term loans secured by one- to four-family residential real estate loans.

 ****

***Commercial Loans and Other.*** To a lesser extent, we offer commercial loans that are not real estate secured as well as passbook loans. At December 31, 2022, commercial and other loans totaled $1.2 million, or 3.9% of our loan portfolio.

 ****

***Home Equity Lines of Credit.*** We offer home equity lines of credit secured by a first or second mortgage on residential property. Home equity lines of credit are made with adjustable rates, and with combined loan-to-value ratios of up to 80% on an owner-occupied principal residence.

Home equity lines of credit are generally underwritten using the same criteria that we use to underwrite one- to four-family residential real estate loans. Home equity lines of credit may be underwritten with a loan-to-value ratio of up to 80% when combined with the principal balance of the existing first mortgage loan. Generally, our home equity lines of credit are originated with adjustable-rates based on the floating prime rate of interest and require interest paid monthly during the first five years and principal and interest for an additional 10 years. Home equity lines of credit are available in amounts of up to $250,000.

Home equity lines of credit have greater risk than one- to four-family residential real estate loans secured by first mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those customers. Decreases in real estate values could adversely affect the value of property used as collateral for our loans.

At December 31, 2022, our home equity lines of credit totaled $170,000 and were performing in accordance with their repayment terms.

 ****

***Loan Originations, Purchases and Sales.*** Our loan originations are generated by our loan personnel operating at our banking office. All loans we originate are underwritten pursuant to our policies and procedures. While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon relative borrower demand and the pricing levels as set in the local marketplace by competing banks, thrifts, credit unions, and mortgage banking companies. Our volume of real estate loan originations is influenced significantly by market interest rates, and, accordingly, the volume of our real estate loan originations can vary from period to period.

We have historically retained all of our loans in portfolio, but we may, subject to favorable market conditions, consider selling certain longer-term (15 years or greater), fixed-rate one-to-four family residential real estate loans.

We have, on occasion, purchased commercial real estate and one- to four-family residential real estate loans, and in recent years, student loans. At December 31, 2022, these types of purchased loans accounted for $3.0 million of our total loan portfolio. We will opportunistically seek to purchase loans in the future including whole or participations in one to four-family residential real estate loans, commercial and multi-family real estate loans and student loans.

The following table shows our loan origination, purchases and repayment activities for the seven months ended December 31, 2022.

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| | |
|:---|:---|
|  | Seven Months<br>Ended<br>December 31,<br>2022 |
|  | (In thousands) |
| Total loans at beginning of period | $27986 |
| Loans originated: |  |
| Real estate loans: |  |
| One-to four-family residential | 516 |
| Commercial and multi-family | 3405 |
| Home equity lines of credit | - |
| Total real estate loans | 3921 |
| Student loans |  |
| Other | 225 |
| Total loans originated | $4146 |
| Loans Purchased: |  |
| One-to four-family residential |  |
| Commercial and multi-family |  |
| Student loans | - |
| Total Loans Purchased | $- |
| Loans Sold: |  |
| Commercial and multi-family |  |
| Other | - |
| Total Loans Sold | $- |
| Deduct: |  |
| Principal repayments | $2340 |
| Net loan activity | $1806 |
| Total loans at end of year | $29792 |

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***Loan Approval Procedures and Authority*.** Pursuant to applicable law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of Sunnyside Federal's unimpaired capital and surplus (25% if the amount in excess of 15% is secured by "readily marketable collateral" or 30% for certain residential development loans). At December 31, 2022, our largest credit relationship totaled $1.7 million and was secured by commercial real estate. At December 31, 2022, this relationship was performing in accordance with its repayment terms. Our second largest relationship at this date was a $1.5 million loan secured by commercial real estate that was performing in accordance with its repayment terms.

Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower and property valuations (consistent with our appraisal policy) prepared by outside independent licensed appraisers approved by our board of directors as well as internal evaluations, where permitted by regulations. The loan applications are designed primarily to determine the borrower's ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, financial statements and tax returns.

All commercial and multi-family real estate loans require approval from our Board of Directors.

Generally, we require title insurance on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan. We also require flood insurance if the improved property is determined to be in a flood zone area.

***Collection Procedures.*** When a residential mortgage borrower fails to make required payments on a loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to current status. With respect to residential real estate loans, we generally send a written notice of non-payment to the borrower 15, 30, 60 and 90 days after a loan is first past due. When a loan becomes 90 days past due, the loan is turned over to our attorneys to ensure that further collection activities are conducted in accordance with applicable laws and regulations. All loans past due 90 days are put on non-accrual and reported to the board of directors monthly. If our attorneys do not receive a response from the borrower, or if the terms of any payment plan established are not followed, then foreclosure proceedings will be implemented. Management submits an Asset Classification Report detailing delinquencies to the board of directors on a monthly basis.

***Delinquent Loans.*** The following table sets forth certain information regarding delinquencies in our loan portfolio.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Loans Delinquent for** | **Loans Delinquent for** | **Loans Delinquent for** | **Loans Delinquent for** | | |
|  | **30-89 Days** | **30-89 Days** | **90 Days and Over** | **90 Days and Over** | **Total** | **Total** |
|  | Number | Amount | Number | Amount | Number | Amount |
|  | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) |
| <u>At December 31, 2022</u> |  |  |  |  |  |  |
| Real estate loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;One to four-family residential |  | $- |  | $- |  | $- |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family |  |  | 1 | 234 | 1 | 234 |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |  |  |  |  |  |
| Student | 5 | 172 |  |  | 5 | 172 |
| Commercial and other loans | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;Total | 5 | $172 | 1 | $234 | 6 | $406 |

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***Non-Performing Assets.*** The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

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| | |
|:---|:---|
|  | At December 31,<br>2022 |
|  | (Dollars in thousands) |
| Non-accrual loans: |  |
| Real estate loans: |  |
| &nbsp;&nbsp;&nbsp;One-to four-family residential | $- |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family | 234 |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |
| Student loans | 69 |
| Other | - |
| &nbsp;&nbsp;&nbsp;Total | $303 |
| Accruing loans 90 days or more past due |  |
| Real estate loans: |  |
| &nbsp;&nbsp;&nbsp;One-to four-family residential | $- |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family |  |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |
| Student loans |  |
| Other | - |
| Total loans 90 days or more past due | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-performing loans | $303 |
| Real estate owned |  |
| Other non-performing assets | - |
| Total non-performing assets | $303 |
| Troubled debt restructurings: |  |
| Real estate loans: |  |
| &nbsp;&nbsp;&nbsp;One-to four family residential | $- |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family |  |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |
| Other | - |
| Total | $- |
| Ratios: |  |
| &nbsp;&nbsp;&nbsp;Total non-performing loans to total loans | 1.02% |
| &nbsp;&nbsp;&nbsp;Total non-performing loans to total assets | 0.33% |
| &nbsp;&nbsp;&nbsp;Total non-performing assets to total assets | 0.33% |

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***Classified Assets*.** Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful" and "loss." Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a higher possibility of loss. An asset classified as a loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated "special mention" also may be established and maintained for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. If a classified asset is deemed to be impaired with measurement of loss, Sunnyside Federal will establish a charge-off of the loan pursuant to Accounting Standards Codification Topic 310, "Receivables."

The following table sets forth information regarding classified assets and special mention assets at December 31, 2022.

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| | |
|:---|:---|
|  | At December 31,<br>2022 |
|  | (In thousands) |
| Classification of Assets |  |
| &nbsp;&nbsp;&nbsp;Substandard | $1243 |
| &nbsp;&nbsp;&nbsp;Doubtful |  |
| &nbsp;&nbsp;&nbsp;Loss | - |
| &nbsp;&nbsp;&nbsp;Total Classified Asstes | $1243 |
| Special Mention | $904 |

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Potential problem loans are loans that are currently performing and are not included in non-accrual loans above, but may be delinquent. These loans require an increased level of management attention, because we have serious doubts as to the ability of the borrower to comply with the present loan repayment terms and as a result such loans may be included at a later date in non-accrual loans. At December 31, 2022, we had no potential problem loans that are not accounted for above under "Classified Assets." Please see "Non-Performing Assets" above for a discussion of our special mention loans at December 31, 2022.

***Allowance for Loan Losses*.** We maintain the allowance through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely. Recoveries on loans charged-off are restored to the allowance for loan losses. The allowance for loan losses is maintained at a level believed, to the best of management's knowledge, to cover all known and inherent losses in the portfolio both probable and reasonable to estimate at each reporting date.

The level of allowance for loan losses is based on management's periodic review of the collectability of the loans principally in light of our historical experience, augmented by the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and current and anticipated economic conditions in the primary lending area. We evaluate our allowance for loan losses quarterly. We will continue to monitor all items involved in the allowance calculation closely.

In addition, the regulatory agencies, as an integral part of their examination and review process, periodically review our loan portfolios and the related allowance for loan losses. Regulatory agencies may require us to increase the allowance for loan losses based on their judgments of information available to them at the time of their examination, thereby adversely affecting our results of operations.

For the seven months ended December 31, 2022, we recorded a provision of $69,000. As a result of the Merger, we recorded a credit mark of $895,000, of which, $774,000 is remaining at December 31, 2022. The allowance for loan losses was $79,000 at December 31, 2022. The combined credit mark and allowance for loan losses totaled $853,000 at December 31, 2022 and represented 2.86% of gross loans outstanding. The level of our allowance reflects management's view of the risks inherent in the loan portfolio. Consistent with our business strategy, we intend to increase our originations of commercial and multi-family real estate and commercial loans. These types of loans generally bear higher risk than our one- to four-family residential real estate loans. Accordingly we would expect to increase our allowance for loans losses in the future as the balance of these types of loans increase in our portfolio.

Effective January 1, 2023, we will adopt the CECL standard for determining the amount of our allowance for credit losses, which could 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.

The following table sets forth the analysis of the activity in the allowance for loan losses and credit mark for the period indicated:

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| | | |
|:---|:---|:---|
|  | For the seven months ended | For the seven months ended |
|  | December 31, 2022 | December 31, 2022 |
|  | (In thousands) | (In thousands) |
|  | | Purchase |
|  | Allowance for | Accounting |
|  | Loan Losses | Credit Mark |
| Balance at beginning of period | $- | $895 |
| Charge-offs: |  |  |
| Real estate loans: |  |  |
| &nbsp;&nbsp;&nbsp;One-to four-family residential |  |  |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family |  |  |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |  |
| Student Loans |  | 68 |
| Other loans | - | - |
| &nbsp;&nbsp;&nbsp;Total charge-offs | - | 68 |
| Recoveries: |  |  |
| Real estate loans: |  |  |
| &nbsp;&nbsp;&nbsp;One-to four-family residential |  |  |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family |  |  |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |  |
| Student Loans | 10 |  |
| Other loans | - | - |
| &nbsp;&nbsp;&nbsp;Total recoveries | 10 | - |
| Net Charge-offs | (10) | 68 |
| Provision for loan losses | 69 |  |
| Amortization of credit mark | - | 53 |
| Balance at end of year | $79 | $774 |
| Ratios: |  |  |
| Net charge-offs to average loans outstanding | 0.21% |  |
| Allowance for loan losses plus credit mark to non-accrual loans at the end of year | 281.52% |  |
| Allowance for loan losses plus credit mark to non-performing loans at end of year | 281.52% |  |
| Allowance for loan losses plus credit mark to total loans at end of year | 2.86% |  |

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***Allocation of Allowance for Loan Losses.*** The following tables set forth the allocation of allowance for loan losses and the credit mark by loan category at the dates indicated. The table also reflects each loan category as a percentage of total loans receivable. These allocations are not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category. We did not have an unallocated allowance as of the dates presented.

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| | | | |
|:---|:---|:---|:---|
|  | **At December 31,** | **At December 31,** | **At December 31,** |
|  | **2022** | **2022** | **2022** |
|  | **Amount** | **Percent of Allowance to Total Allowance** | **Percent of Loans in Category to Total Loans** |
| Real estate loans: |  |  |  |
| One-to four-family residential | 0 | 0.0% | 32.5% |
| Commercial and multi-family residential | 56 | 70.9% | 55.2% |
| Home equity lines of credit | 0 | 0.0% | 0.6% |
| Student loans | 23 | 29.1% | 7.8% |
| Other loans | 0 | 0.0% | 3.9% |
| Total allowance for loan losses | 79 | 100.0% | 100.0% |

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| | | | |
|:---|:---|:---|:---|
|  | **At December 31,** | **At December 31,** | **At December 31,** |
|  | **2022** | **2022** | **2022** |
|  | **Amount** | **Percent of Credit Mark to Total Credit Mark** | **Percent of Loans in Category to Total Loans** |
| Real estate loans: |  |  |  |
| One-to four-family residential | 97 | 12.5% | 32.5% |
| Commercial and multi-family residential | 290 | 37.5% | 55.2% |
| Home equity lines of credit | 0 | 0.0% | 0.6% |
| Student loans | 378 | 48.8% | 7.8% |
| Other loans | 9 | 1.2% | 3.9% |
| Total allowance for loan losses | 774 | 100.0% | 100.0% |

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**Securities Activities**

***General***. Our investment policy is established by the Board of Directors. The objectives of the policy are to: (i) ensure adequate liquidity for loan demand and deposit fluctuations, and to allow us to alter our liquidity position to meet both day-to-day and long-term changes in assets and liabilities; (ii) manage interest rate risk in accordance with our interest rate risk policy; (iii) provide collateral for pledging requirements; (iv) maximize return on our investments; and (v) maintain a balance of high quality diversified investments to minimize risk.

Our investment committee, consisting of our Chief Executive Officer, our President and our Chief Financial Officer is responsible for implementing our investment policy, including approval of investment strategies and monitoring investment performance. Our Chief Executive Officer, our President and our Chief Financial Officer are each authorized to execute purchases or sales of securities of up to $2.0 million. The Board of Directors regularly reviews our investment strategies and the market value of our investment portfolio.

We account for investment and mortgage-backed securities in accordance with Accounting Standards Codification Topic 320, "Investments - Debt and Equity Securities." Accounting Standards Codification 320 requires that investments be categorized as held-to maturity, trading, or available for sale. Our decision to classify certain of our securities as available-for-sale is based on our need to meet daily liquidity needs and to take advantage of profits that may occur from time to time.

Federally chartered savings institutions have authority to invest in various types of assets, including government-sponsored enterprise obligations, securities of various federal agencies, residential and commercial mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, corporate debt instruments, debt instruments of municipalities and Fannie Mae and Freddie Mac equity securities. At December 31, 2022, our investment portfolio consisted of securities, mortgage-backed securities issued by U.S. Government agencies or U.S. Government-sponsored enterprises, commercial mortgage-backed securities not issued by the U.S. Government agencies and state and political subdivisions as well as insured bank certificates of deposit. Additionally, as a member of the FHLB, we are required to purchase stock in the FHLB and at December 31, 2022, we owned $54,100 in FHLB stock.

The following table sets forth the amortized cost and fair value of our securities portfolio (excluding common stock we hold in the FHLB and in the Atlantic Community Bankers Bank) at the dates indicated.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | | Gross Unrealized | Gross Unrealized | |
|  | Amortized<br>Cost | Gains | Losses | Fair<br>Value |
| Securities held to maturity: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;State, county, and municipal obligations | $350226 | $- | $6720 | $343506 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 65379 | - | 2320 | 63059 |
|  | $415605 | $- | $9040 | $406565 |
| Securities available for sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. government and agency obligations | $12862316 | $- | $1193169 | $11669147 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 22866886 | 239 | 801235 | 22065890 |
|  | $35729202 | $239 | $1994404 | $33735037 |

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The following table sets forth the amortized cost and fair value of our insured bank certificates of deposit at the dates indicated.

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| | | |
|:---|:---|:---|
|  | **At December 31, 2022** | **At December 31, 2022** |
|  | **Amortized**<br>**Cost** | **Fair**<br>**Value** |
|  | **(In thousands)** | **(In thousands)** |
| Certificates of Deposit | $250 | $250 |
| &nbsp;&nbsp;&nbsp;Maturing in after 1 to 5 years | $250 | $250 |

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***Portfolio Maturities and Yields.*** The composition and maturities of the investment securities portfolio at December 31, 2022 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.

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| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | | More than One year | More than One year | More than Five Years | More than Five Years | | | | | |
|  | One Year or Less | One Year or Less | through Five Years | through Five Years | through Ten Years | through Ten Years | More than Ten Years | More than Ten Years | Total Securities | Total Securities | Total Securities |
|  |<br>Amortized<br>Cost | Weighted<br>Average<br>Yield |<br>Amortized<br>Cost | Weighted<br>Average<br>Yield |<br>Amortized<br>Cost | Weighted<br>Average<br>Yield |<br>Amortized<br>Cost | Weighted<br>Average<br>Yield |<br>Amortized<br>Cost |<br>Fair<br>Value | Weighted<br>Average<br>Yield |
|  | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) |
| Securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |
| State, county and municipal securities | $- | -% | $- | -% | $- | -% | $350 | 3.10% | $350 | $344 | 3.10% |
| Mortgage-backed securities | $- | -% | $- | -% | $- | -% | $65 | 1.80% | $65 | $63 | 1.80% |
| Total securities held to maturity | $- | -% | $- | -% | $- | -% | $415 | 2.90% | $415 | $407 | 2.90% |
| Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |
| US government and agency securities | $- | -% | $1931 | 2.62% | $5231 | 3.49% | $5700 | 3.84% | $12862 | $11669 | 3.52% |
| Mortgage-backed securities | $2598 | 6.40% | $7023 | 7.96% | $1631 | 3.02% | $11616 | 3.26% | $22868 | $22066 | 5.04% |
| Total securities available for sale | $2598 | 6.40% | $8954 | 6.80% | $6862 | 3.38% | $17316 | 3.46% | $35730 | $33735 | 4.49% |

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**Sources of Funds**

***General.*** Deposits, scheduled amortization and prepayments of loan principal, maturities and calls of securities and funds provided by operations are our primary sources of funds for use in lending, investing and for other general purposes. We can also borrow from the FHLB to fund our operations and we had no borrowings at December 31, 2022.

***Deposits.*** We offer deposit products having a range of interest rates and terms. We currently offer statement savings accounts, NOW accounts, noninterest-bearing demand accounts, money market accounts and certificates of deposit. Our strategic plan includes a greater emphasis on developing commercial business activities, both deposit and lending customer relationships.

Deposit flows are significantly influenced by general and local economic conditions, changes in prevailing interest rates, internal pricing decisions and competition. Our deposits are primarily obtained from areas surrounding our branch office. In order to attract and retain deposits we rely on paying competitive interest rates and providing quality service.

Based on our experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions. At December 31, 2022, $20.7 million, or 27.7% of our total deposit accounts were certificates of deposit, of which $15.7 million had maturities of one year or less.

The following table sets forth the distribution of our average deposit accounts for the seven months ended December 31, 2022.

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| | | | |
|:---|:---|:---|:---|
|  | **2022** | **2022** | **2022** |
|  |<br>**Average**<br>**Balance** |<br>**Percent** | **Weighted**<br>**Average**<br>**Rate** |
| Deposit Type |  |  |  |
| Non-interest-bearing checking | $7724 | 9.9% | -% |
| NOW | 13997 | 17.9% | 0.05% |
| Savings | 30965 | 39.6% | 0.20% |
| Money Market | 2547 | 3.3% | 0.10% |
| Certificates of Deposits | 22920 | 29.3% | 1.08% |
|  | $**78153** | **100.0%** | **0.39%** |

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Uninsured deposits are the portion of deposit accounts that exceed the FDIC insurance limit. Total uninsured deposits were $7.5 million at December 31, 2022.

The following table sets forth certificates of deposit classified by interest rate as of the dates indicated.

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| | |
|:---|:---|
|  | At December 31,<br>2022 |
|  | (In thousands) |
| **Interest Rate:** |  |
| Less than 2.00% | $17021 |
| 2.00% to 2.99% | 2928 |
| 3.00% and above | 707 |
| &nbsp;&nbsp;&nbsp;**Total** | $20656 |

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***Maturities of Certificates of Deposit Accounts.*** The following table sets forth the amount and maturities of certificates of deposit accounts at the dates indicated.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | At December 31, 2022 | At December 31, 2022 | At December 31, 2022 | At December 31, 2022 | At December 31, 2022 | At December 31, 2022 |
|  | Period to Maturity | Period to Maturity | Period to Maturity | Period to Maturity | Period to Maturity | Period to Maturity |
|  | Less Than or Equal to One Year | More Than One to Two Years | More Than Two to Three Years | More Than Three Years | Total | Percent of Total |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
| Interest Rate Range: |  |  |  |  |  |  |
| Less than 2.00% | $14154 | $2510 | $143 | $214 | $17021 | 82.4% |
| 2.00% to 2.99% | 1554 | 1164 | 2 | 208 | 2928 | 14.2% |
| 3.00% to 3.99% | - | 697 | - | 10 | 707 | 3.4% |
| &nbsp;&nbsp;&nbsp;Total | $15708 | $4371 | $145 | $432 | $20656 | 100% |

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As of December 31, 2022, the aggregate amount of outstanding certificates of deposit at Sunnyside Federal that exceeded the FDIC insurance limit was $1.1 million. At December 31, 2022, the scheduled maturity of time deposit uninsured balances was as follows:

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| | |
|:---|:---|
| Period to Maturity | At December 31, 2022 |
|  | (In thousands) |
| Three months or less | $280 |
| Over three through six months | 21 |
| Over six months through one year | 560 |
| Over one year | 289 |
| Total | $1150 |

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***Borrowings:*** As a member of the FHLB, Sunnyside Federal is eligible to obtain advances from the FHLB by pledging investment securities as collateral or mortgage loans, provided certain standards related to credit-worthiness have been met. FHLB advances are available pursuant to several credit programs, each of which has its own interest rate and range of maturities.

The following table presents our outstanding balances and interest rates on these advances:

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| | |
|:---|:---|
|  | For the seven months ended<br>December 31, 2022 |
|  | (In thousands) |
| Balance at end of period | $&nbsp;&nbsp;&nbsp;&nbsp;- |
| Average balance during period | $92 |
| Maximum outstanding at any month end | $849 |
| Interest rate at end of period | N/A |
| Average interest rate during period | 2.20% |

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**Expense and Tax Allocation**

Sunnyside Federal has entered into an agreement with Vecta Inc. to provide it with certain administrative support services for compensation not less than the fair market value of the services provided. In addition, Sunnyside Federal and Vecta Inc. have entered into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

**Human Capital**

As of December 31, 2022, we had 15 full-time equivalent employees. Our employees are not represented by any collective bargaining group. Management believes that we have a good working relationship with our employees.

**REGULATION AND SUPERVISION**

**General**

As a federal savings association, Sunnyside Federal is subject to examination and regulation by the OCC", and is also subject to examination by the Federal Deposit Insurance Corporation ("FDIC"). The federal system of regulation and supervision establishes a comprehensive framework of activities in which Sunnyside Federal may engage and is intended primarily for the protection of depositors and the FDIC's Deposit Insurance Fund.

Sunnyside Federal also is regulated to a lesser extent by the Board of Governors of the Federal Reserve System(the "Federal Reserve Board"), which governs the reserves to be maintained against deposits and other matters. In addition, Sunnyside Federal is a member of and owns stock in the Federal Home Loan Bank of New York, which is one of the twelve regional banks in the Federal Home Loan Bank System. Sunnyside Federal's relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and the form and content of Sunnyside Federal's loan documents.

As a savings and loan holding company, Vecta Inc. is subject to examination and supervision by, and is required to file certain reports with, the Federal Reserve Board. Vecta Inc. is also subject to the rules and regulations of the SEC under the federal securities laws.

Set forth below are certain material regulatory requirements that are applicable to Sunnyside Federal and Vecta Inc. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on Sunnyside Federal and Vecta Inc. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on Vecta Inc., Sunnyside Federal and their operations.

**Federal Banking Regulation**

***Business Activities.*** A federal savings association derives its lending and investment powers from the Home Owners' Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, Sunnyside Federal may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. Sunnyside Federal may also establish subsidiaries that may engage in certain activities not otherwise permissible for Sunnyside Federal, including real estate investment and securities and insurance brokerage.

***Capital Requirements.*** Federal regulations require FDIC-insured depository institutions, including federal savings associations, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to adjusted average total assets leverage ratio. These capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

Common equity Tier 1 capital is generally defined as common stockholders' equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income ("AOCI"), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Sunnyside Federal has exercised the opt-out and therefore does not include AOCI in its regulatory capital determinations. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution's assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increased each year until it was fully implemented at 2.5% on January 1, 2019.

Federal law required the federal banking agencies, including the OCC, to establish a "community bank leverage ratio" of between 8% and 10% for institutions with total consolidated assets of less than $10 billion. Institutions with capital complying with the ratio and otherwise meeting the specified requirements and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. The community bank leverage ratio was established at 9% Tier 1 capital to total average assets, effective January 1, 2020. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to regain compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable regulatory capital requirements.

At December 31, 2022, Sunnyside Federal's capital exceeded all applicable requirements.

***Prompt Corrective Action*.** Under the federal Prompt Corrective Action statute, the OCC is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institution's level of capital. An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4% is considered to be "undercapitalized." A savings institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be "significantly undercapitalized." A savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be "critically undercapitalized."

Generally, the OCC is required to appoint a receiver or conservator for a federal savings association that becomes "critically undercapitalized" within specific time frames. The regulations also provide that a capital restoration plan must be filed with the OCC within 45 days of the date that a federal savings association is deemed to have received notice that it is "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." Any holding company of a federal savings association that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5.0% of the savings association's assets at the time it was deemed to be undercapitalized by the OCC or the amount necessary to restore the savings association to adequately capitalized status. This guarantee remains in place until the OCC notifies the savings association that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Institutions that are undercapitalized become subject to certain mandatory measures such as restrictions on capital distributions and asset growth. The OCC may also take any one of a number of discretionary supervisory actions against undercapitalized federal savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.

At December 31, 2022, Sunnyside Federal met the criteria for being considered "well capitalized," which means that its total risk-based capital ratio exceeded 10%, its Tier 1 risk-based ratio exceeded 8.0%, its common equity Tier 1 ratio exceeded 6.5% and its leverage ratio exceeded 5.0%.

***Loans-to-One Borrower.*** Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2022, Sunnyside Federal was in compliance with the loans-to-one borrower limitations.

***Qualified Thrift Lender Test.*** As a federal savings association, Sunnyside Federal must satisfy the qualified thrift lender, or "QTL," test. Under the QTL test, Sunnyside Federal must maintain at least 65% of its "portfolio assets" in "qualified thrift investments" (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of the most recent 12-month period. "Portfolio assets" generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association's business.

Sunnyside Federal also may satisfy the QTL test by qualifying as a "domestic building and loan association" as defined in the Internal Revenue Code of 1986, as amended.

A savings association that fails the qualified thrift lender test must operate under specified restrictions set forth in the Home Owners' Loan Act. The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law. At December 31, 2022, Sunnyside Federal satisfied the QTL test.

***Capital Distributions.*** Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association's capital account. A federal savings association must file an application for approval of a capital distribution if:

● the total capital distributions for the applicable calendar year exceed the sum of the savings association's net income for that year to date plus the savings association's retained net income for the preceding two years;

● the savings association would not be at least adequately capitalized following the distribution;

● the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or

● the savings association is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every savings association that is a subsidiary of a savings and loan holding company, such as Sunnyside Federal, must still file a notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend or approves a capital distribution.

A notice or application related to a capital distribution may be disapproved if:

● the federal savings association would be undercapitalized following the distribution;

● the proposed capital distribution raises safety and soundness concerns; or

● the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

In addition, the Federal Deposit Insurance Act provides that an insured depository institution shall not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement. A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form.

***Community Reinvestment Act and Fair Lending Laws.*** All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings association, the Office of the Comptroller of the Currency is required to assess the federal savings association's record of compliance with the Community Reinvestment Act. A savings association's failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of the Comptroller of the Currency, as well as other federal regulatory agencies and the Department of Justice.

In June 2020, the OCC issued a final rule clarifying and expanding the activities that qualify for Community Reinvestment Act credit and, according to the agency, seeking to create a more consistent and objective method for evaluating Community Reinvestment Act performance. The final rule was effective October 1, 2020, but compliance with certain of the revised requirements is not mandatory until January 1, 2024 for institutions of Sunnyside Federal's asset size.

The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. Sunnyside Federal received a "satisfactory" Community Reinvestment Act rating in its most recent federal examination.

***Transactions with Related Parties.*** A federal savings association's authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with an insured depository institution such as Sunnyside Federal. Vecta Inc. is an affiliate of Sunnyside Federal because of its control of Sunnyside Federal. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates. Federal regulations require savings associations to maintain detailed records of all transactions with affiliates.

Sunnyside Federal's authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders:

● be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

● not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Sunnyside Federal's capital.

In addition, extensions of credit in excess of certain limits must be approved by Sunnyside Federal's board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

***Enforcement.*** The OCC has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all "institution-affiliated parties," including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the OCC may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The FDIC also has the authority to terminate deposit insurance or recommend to the OCC that enforcement action be taken with respect to a particular savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.

***Standards for Safety and Soundness.*** Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

***Insurance of Deposit Accounts.*** Sunnyside Federal is a member of the Deposit Insurance Fund, which is administered by the FDIC. Deposit accounts in Sunnyside Federal are insured up to a maximum of $250,000 for each separately insured depositor.

Under the FDIC's risk-based assessment system, institutions deemed less risky of failure pay lower assessments. Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution's failure within three years.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Sunnyside Federal. Future insurance assessment rates cannot be predicted.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule order or regulatory condition imposed in writing. We do not know of any practice, condition or violation that might lead to termination of deposit insurance.

**Other Regulations**

Interest and other charges collected or contracted for by Sunnyside Federal are subject to state usury laws and federal laws concerning interest rates. Sunnyside Federal's operations are also subject to federal laws applicable to credit transactions, such as the:

● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

● Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

● Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

● Truth in Savings Act; and

● rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services;

● Check Clearing for the 21st Century Act (also known as "Check 21"), which gives "substitute checks," such as digital check images and copies made from that image, the same legal standing as the original paper check;

● The USA PATRIOT Act, which requires savings associations to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

● The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution's privacy policy and provide such customers the opportunity to "opt out" of the sharing of certain personal financial information with unaffiliated third parties.

***Prohibitions Against Tying Arrangements*.** Federal savings associations are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

***Federal Home Loan Bank System.*** Sunnyside Federal is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of New York, Sunnyside Federal is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of December 31, 2022, Sunnyside Federal was in compliance with this requirement.

***Qualified Mortgages and Retention of Credit Risk.*** The Consumer Financial Protection Bureau has issued a rule designed to clarify for lenders how they can avoid legal liability under the Dodd-Frank Act, which would hold lenders accountable for ensuring a borrower's ability to repay a mortgage. Loans that meet this "qualified mortgage" definition will be presumed to have complied with the new ability-to-repay standard. Under the Consumer Financial Protection Bureau's rule, a "qualified mortgage" loan must not contain certain specified features, including:

● excessive upfront points and fees (those exceeding 3% of the total loan amount, less "bona fide discount points" for prime loans);

● interest-only payments;

● negative-amortization; and

● terms longer than 30 years.

Also, to qualify as a "qualified mortgage," a borrower's total monthly debt-to-income ratio may not exceed 43%. Lenders must also verify and document the income and financial resources relied upon to qualify the borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments. The Consumer Financial Protection Bureau's rule on qualified mortgages could limit our ability or desire to make certain types of loans or loans to certain borrowers, or could make it more expensive/and or time consuming to make these loans, which could limit our growth or profitability.

In addition, the Dodd-Frank Act requires the regulatory agencies to issue regulations that require securitizers of loans to retain not less than 5% of the credit risk for any asset that is not a "qualified residential mortgage." The regulatory agencies have issued a proposed rule to implement this requirement. The Dodd-Frank Act provides that the definition of "qualified residential mortgage" can be no broader than the definition of "qualified mortgage" issued by the Consumer Financial Protection Bureau for purposes of its regulations (as described above). Although the final rule with respect to the retention of credit risk has not yet been issued, the final rule could have a significant effect on the secondary market for loans and the types of loans we originate, and restrict our ability to make loans.

**Holding Company Regulation**

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***General*.** Vecta Inc. is a non-diversified savings and loan holding company within the meaning of the Home Owners' Loan Act. As such, Vecta Inc. is registered with the Federal Reserve Board and is subject to regulations, examinations, supervision and reporting requirements applicable to savings and loan holding companies. In addition, the Federal Reserve Board has enforcement authority over Vecta Inc. and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

***Permissible Activities.*** The business activities of Vecta Inc. are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, provided certain conditions are met, or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations.

Federal law prohibits a savings and loan holding company, including Vecta Inc., directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior regulatory approval. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities that are not closely related to banking or financial in nature, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

● the approval of interstate supervisory acquisitions by savings and loan holding companies; and

● the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

***Capital.*** Savings and loan holding companies of under $3 billion in consolidated assets remain exempt from consolidated regulatory capital requirements, unless the Federal Reserve determines otherwise in particular cases.

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***Source of Strength.*** The Dodd-Frank Act extended the "source of strength" doctrine to savings and loan holding companies. The regulatory agencies must issue regulations requiring that all Association and savings and loan holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

***Dividends.*** Sunnyside Federal is required to notify the Federal Reserve Board thirty days before declaring any dividend to Vecta Inc. The financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the regulator and the agency has authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

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***Acquisition.*** Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company, such as Vecta Inc., unless the Federal Reserve Board has been given 60 days' prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution's directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution. There is a presumption of control upon the acquisition of 10% or more of a class of voting stock under certain circumstances, such as where the holding company involved has its shares registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

**Federal Securities Laws**

Vecta Inc.'s common stock is registered with the SEC under the Exchange Act. Vecta Inc. is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

**TAXATION**

**Federal Taxation**

***General.*** Vecta Inc. and Sunnyside Federal are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to Vecta Inc. and Sunnyside Federal.

***Method of Accounting.*** For federal income tax purposes, Sunnyside Federal currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31<sup>st</sup> for filing its federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by large savings institutions, effective for taxable years beginning after 1995. Since Sunnyside Federal is not a large savings institution, the reserve method is still used.

***Minimum Tax.*** The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, less an exemption amount, referred to as "alternative minimum taxable income." The alternative minimum tax is payable to the extent tax computed this way exceeds tax computed by applying the regular tax rates to regular taxable income. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. The Tax Cuts and Jobs Act repealed the alternative minimum tax for income generated after January 1, 2018. At December 31, 2022, we had no minimum tax credit carryforward.

***Net Operating Loss Carryovers.*** Prior to 2020, a corporation could carry forward net operating losses ("NOLs") generated in tax years beginning after December 31, 2017 indefinitely and could offset up to 80% of taxable income. NOLs generated in taxable years beginning before 2018 could be carried forward 20 years. The New York NOL carryforward period is 20 years. At December 31, 2022, Sunnyside Federal had $5.1 million of federal NOL carry-forwards and $7.4 million of New York State NOL carry-forwards available for future use. As a result of the merger as discussed in Note 1 to the financial statements usage of the federal NOL and $6,000,000 of the New York State NOL is limited in accordance with Internal Revenue Code Section 382 to $379,000 annually on a cumulative basis. (Portions of the $379,000 not used in a particular tax year may be added to subsequent usage.)

The Company recorded a valuation allowance on its entire federal deferred tax asset as of December 31, 2022. The amount of the impact on our future tax expense will be affected by any changes in our operations, structure, or profitability.

***Capital Loss Carryovers.*** Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which carried and is used to offset any capital gains. Any non-deducted loss remaining after the five year carryover period is not deductible.

***Corporate Dividends.*** We may generally exclude from our income 100% of dividends received from Sunnyside Federal as a member of the same affiliated group of corporations.

***Audit of Tax Returns.*** Sunnyside Federal's federal income tax returns have been audited for the years ended December 31, 2011 and 2012. Audit results concluded that no changes were proposed to the filed returns for each of the two years noted.

**New York State Taxation**

Vecta Inc. and Sunnyside Federal report their combined income on a calendar year basis to New York State. New York State franchise tax on corporations with income under $5.0 million is imposed in an amount equal to the greater of: (i) 6.50% of "entire net income" allocable to New York State; (ii) 0.1875% of the capital base; or (iii) nominal minimum tax. Entire net income is based on federal taxable income, subject to certain modifications.

In addition, the companies are subject to a Metropolitan Transportation Business Tax surcharge equal to 30.0% of New York franchise tax, as calculated with certain adjustments.

In March 2014, tax legislation was enacted that changed the manner in which financial institutions and their affiliates are taxed in New York State. The most significant changes affecting the Company is that thrift institutions that maintain a qualified residential loan portfolio are entitled to a specially computed modification that reduces the income taxable to New York State.

The Company recorded a valuation allowance on its entire New York deferred tax asset as of December 31, 2022. The amount of the impact on our future tax expense will be affected by any changes in our operations, structure, or profitability.

Sunnyside Federal's state income tax returns have not been audited in the most recent five-year period.

**Availability of Annual Report on Form 10-K**

This Annual Report is available by written request to: Vecta Inc, One World Trade Center, Suite 8500, New York, NY 10007, Attention: Corporate Secretary.

**<u>ITEM 1A. Risk Factors</u>**

This Item 1A - Risk Factors is omitted as it is not required for smaller reporting companies.

**<u>ITEM 1B. Unresolved Staff Comments</u>**

None.

**<u>ITEM 2. Properties</u>**

We operate from our office located at 56 Main Street, Irvington, New York 10533. The aggregate net book value of our premises was $5.4 million at December 31, 2022.

**<u>ITEM 3. Legal Proceedings</u>**

At December 31, 2022, we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts which management believes will not materially adversely affect our financial condition, our results of operations and our cash flows.

**<u>ITEM 4. Mine Safety Disclosures.</u>**

Not applicable.

**PART II**

**<u>ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities</u>**

***Market Information, Holders and Dividend Information.*** Our common stock was quoted on the OTC Pink Marketplace under the symbol "SNNY." In connection with the Merger, on June 1, 2022, our common stock ceased being quoted on the OTC Pink Marketplace and Vecta Inc. became a wholly-owned subsidiary of Vecta Partners LLC. Accordingly, as of March 31, 2023, all shares of Vecta Inc.'s common stock are owned by Vecta Partners LLC.

The following table presents high and low bid prices for shares of Vecta Inc.'s common stock for the years ended December 31, 2022 and 2021, based upon information derived from [www.otcmarkets.com]/[OTC Pink Marketplace]. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **2022** | **High Sale** | **High Sale** | **Low Sale** | **Low Sale** |
| Quarter ended December 31 | ● | N/A | ● | N/A |
| Quarter ended September 30 | ● | N/A | ● | N/A |
| Quarter ended June 30 | ● | 20.20 | ● | 19.15 |
| Quarter ended March 31 | ● | 20.08 | ● | 19.90 |
| **2021** | **High Sale** | **High Sale** | **Low Sale** | **Low Sale** |
| Quarter ended December 31 | ● | $21.00 | ● | $19.91 |
| Quarter ended September 30 | ● | $21.50 | ● | $17.85 |
| Quarter ended June 30 | ● | $18.40 | ● | $14.72 |
| Quarter ended March 31 | ● | $15.00 | ● | $12.30 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(1)* *In connection with the Merger, on June 1, 2022, Vecta Inc.'s common stock ceased being quoted on the OTC Pink Marketplace. Therefore, high and low bid prices for Vecta Inc.'s common stock for the quarter ended December 31, 2022 and September 30, 2022 is not available.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(2)* *[The high and low bid prices for Vecta Inc.'s common stock for the quarter ended June 30, 2022 were calculated based on information available on the OTC Pink Marketplace prior to the Closing Date of the Merger.]* 

Vecta Inc. does not currently pay cash dividends on its common stock. Dividend payments by Vecta Inc. are dependent, in part, on dividends it receives from Sunnyside Federal, because Vecta Inc. has no source of income other than dividends from Sunnyside Federal and interest payments with respect to our loan to the Employee Stock Ownership Plan.

The Federal Reserve Board has issued supervisory policies providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Federal Reserve Board guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company's net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company's overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. In addition, Sunnyside Federal's ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to stockholders. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Office of the Comptroller of the Currency, may be paid in addition to, or in lieu of, regular cash dividends.

***Securities Authorized for Issuance Under Equity Compensation Plans.***

Set forth below is information as of December 31, 2022 with respect to compensation plans under which Company equity securities are authorized for issuance. As disclosed previously, the Company's Employee Stock Ownership Plan was terminated during 2022 in connection with the consummation of the Merger. Equity compensation plans approved by stockholders consist of the Vecta Inc. 2014 Equity Incentive Plan (the "2014 Equity Plan'') which was approved by stockholders on September 16, 2014.

---

| | | | |
|:---|:---|:---|:---|
|  | **Number of Securities to be issued Upon Exercise of Outstanding Options** | **Weighted Average Exercise Price of Outstanding Options** | **Number of Securities Remaining Available for Future Issuance** |
| Equity Compensation Plans Approved by Stockholders | 0 | n/a | 1389825<sup>(1)</sup> |
| Equity Compensation Plans Not Approved by Stockholders | &nbsp;&nbsp;&nbsp;&nbsp;0 | n/a | 0 |
| **Total** | **0** | **n/a** | **1389825** |

---

*(1)* *Reflects the 15 to 1 stock dividend declared June 1, 2022. The Company has not issued any stock options pursuant to the 2014 Equity Plan.* 

 

***Issuer Purchases of Equity Securities.*** The Company had no stock repurchases of its outstanding common stock during the quarter ended December 31, 2022, and did not have an authorized stock repurchase program in place as of or during the year ended December 31, 2022.

**<u>ITEM 6. [RESERVED]</u>**

**<u>ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations</u>**

This section should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear in Item 8 of this Annual Report.

**Overview**

Vecta Inc. Acquisition by Vecta Partners

Vecta Inc. was incorporated in the State of Maryland in March 2013 for the purpose of becoming the savings and loan holding company for Sunnyside Federal Savings and Loan Association of Irvington, a federally-chartered savings and loan association and the wholly-owned subsidiary of Vecta Inc. ("Sunnyside Federal" or the "Bank"), upon consummation of Sunnyside Federal's mutual to stock conversion. The conversion was consummated in July 2013 at which time Sunnyside Bancorp became the registered savings and loan holding company of the Bank. Prior to the Closing Date (as referenced below) of the Merger (as referenced below), other than holding all of the issued and outstanding stock of Sunnyside Federal and making a loan to the Sunnyside Federal's employee stock ownership plan, Vecta Inc. has not engaged in any material business.

As further disclosed in Note 2 (Business Combination) to the consolidated financial statements in Item 8 to this Annual Report, on June 1, 2022 (the "Closing Date"), Vecta Partners LLC (formerly known as Rhodium BA Holdings LLC), a Delaware limited liability company ("Vecta Partners"), completed its acquisition of Vecta Inc., pursuant to the Agreement and Plan of Merger, dated as of June 16, 2021, as amended on August 26, 2021 (the "Merger Agreement"), by and among Vecta Partners, Rhodium BA Merger Sub, Inc., a Maryland corporation ("Merger Sub"), Mark Silber, Vecta Inc. and Sunnyside Federal. Pursuant to the Merger Agreement and subject to the terms and conditions thereof, on the Closing Date, Merger Sub merged with and into Vecta Inc. (the "Merger"), with Vecta Inc continuing as the surviving corporation and a wholly-owned subsidiary of Vecta Partners.

Under the terms of the Merger Agreement, Vecta Partners acquired all of the outstanding common stock of Vecta Inc. at a price of $20.25 per share in cash. The aggregate value of the merger consideration was approximately $15.3 million. Vecta Partners incurred approximately $6.1 million in merger related acquisition costs.

The Merger was accounted for under the acquisition method of accounting and accordingly the results of Vecta Inc.'s operations have been included in Vecta Inc.'s December 31, 2022 consolidated financial statements from the date of acquisition, or June 1, 2022.

On June 1, 2022, the Board of Directors of Vecta Inc. authorized and approved a 15-for-1 stock dividend to the existing shareholders of Vecta Inc. The 15-for-1 stock dividend was consummated on July 18, 2022.

On June 29, 2022, Vecta Partners made an additional capital contribution of $4.5 million to Vecta Inc. in exchange for 222,222 shares of Vecta Inc.'s common stock.

Vecta Inc. has been informed by Vecta Partners, that Vecta Partners intends to divest some of his ownership in Vecta Inc. through private sales, however, Vecta Partners intends to maintain majority ownership of Vecta Inc.

On July 18, 2022, Vecta Inc. also increased its authorized shares of common stock to 100,000,000 par value $0.01, and increased its authorized shares of preferred stock to 2,000,000 par value $0.01. As of December 31, 2022, Vecta Inc. had 15,930,976 shares of common stock outstanding and no shares of preferred stock outstanding.

On July 18, 2022, Vecta Inc. amended its Articles of Incorporation to change its name from "Sunnyside Bancorp, Inc." to Vecta Inc. The name change was effected pursuant to the filing of Articles of Amendment to Vecta Inc.'s Articles of Incorporation with the Maryland State Department of Assessments and Taxation.

Vecta Inc. operates as the savings and loan holding company for its only present subsidiary Sunnyside Federal, which offers various banking products and services and has no other present business operations. The Sunnyside Federal conducts business from its full-service banking office located in Irvington, New York. Sunnyside Federal considers its deposit market area to be the areas of Westchester County, New York towns of Irvington, Tarrytown, Sleepy Hollow, Hastings, Dobbs Ferry and Ardsley-on-Hudson, and considers its lending area to be primarily Westchester, Putnam and Rockland counties, New York.

Vecta Inc.'s proposed future goals are to increase the capital available to Sunnyside Federal, expand the current business lines offered by Sunnyside Federal, and to analyze and address new business lines, products and services that management feels would be beneficial to Vecta Inc. and Sunnyside Federal.

As of the Closing Date of the Merger, Sunnyside Federal had approximately ten employees, all of whom work from Sunnyside Federal's sole branch in Irvington, New York. Sunnyside Federal recently hired a new lending team and expects to become a preferred small business lender with the SBA in the next twelve to eighteen months. Sunnyside Federal now has eighteen full time equivalent employees.

**Board of Directors; Management**

The Board of Directors and leadership team is comprised of experienced seasoned professionals with successful track records. A brief summary of the experience of each member of the Board of Directors is provided immediately below:

Vecta Inc.'s Board of Directors

**Fredrick Schulman, Chairman of the Board, President and CEO**

Fred is a founding shareholder and the former Chairman of NewBank, a state chartered commercial bank founded in 2006 with a focus on supporting and serving local businesses, with an initial concentration on the Korean – American community. The bank currently operates five (5) full services retail branch locations, two in New York and three in New Jersey. For the past 8 years, NewBank has been the leading small business lender through the SBA's 7a loan guarantee program in the New York region.

Under the guidance of Mr. Schulman, for the past fifteen years, NewBank has grown consistently, and has also received numerous awards including the SBA Pinnacle Award for six consecutive years, which is the highest award issued by the U.S. Small Business Administration.

Fredrick Schulman, has over 35 years of experience as an investment banker, real estate principal, and attorney, with extensive expertise in corporate, commercial, and real estate finance. Mr. Schulman is currently the Managing Partner (and one of the founding shareholders) of Rhodium Capital Advisors, LLC, an owner/operator of commercial real estate (with concentration in multi-family garden apartment complexes across the country), and the CEO of NB Affordable LLC, a real estate entity dedicated to the acquisition and redevelopment of affordable housing. Rhodium and its affiliates own an aggregate of approximately 25,000 units with an approximate value of $2.5 billion.

Mr. Schulman was previously the President, and currently serves as a Director of East Coast Capital Holdings, Ltd ("ECCH"), a Specialized Small Business Investment Company and Community Development Entity based in Manhattan which is licensed by the U.S. Small Business Administration. He is also the President of Targeted Lease Capital LLC, with offices in Buffalo and Huntington, NY, specializing in equipment finance.

Mr. Schulman's successful track record and broad range of experience provides Vecta with the required management skills, regulatory knowledge and sound financial analysis to guide the Bank towards a successful future. Mr. Schulman holds a Bachelor of Arts Degree from Clark University and a Juris Doctor Degree from Boston College School of Law.

**Mark Silber, Vice Chairman of the Board**

Mark Silber is a successful entrepreneur who has developed a sizeable commercial real estate portfolio by creating an infrastructure consisting of acquisition, management, development and construction businesses. His core business has been the acquisition and management of income producing garden style apartments throughout the United States in secondary and tertiary markets. He believes that these types of assets have experienced, and will experience, consistent growth in real estate cash flows and capital appreciation with limited financial pressure during challenging economic times.

Mark's real estate career began in 2010, working with the owners of a large real estate owner/operator controlling a portfolio of over 5,000 units in New York City. He developed his acquisition and management expertise as the person in charge of all operations, including rent collections, maintenance and repairs, lease negotiations, tenant buy-outs and building refinancing's.

In 2012, Mark rolled up his real estate holdings into a family office under the CCH Realty Inc. umbrella. CCH has focused on buying opportunistic garden style apartments throughout the United States, with a focus on value-add opportunities. In conjunction with the opening of CCH Realty, Mark founded Rhodium Capital Advisors as a real estate syndicator to assist with capital raising for real estate transactions. CCH Realty, through its subsidiaries, is a full-service real estate firm covering due diligence, acquisition management, maintenance, development and construction. EVU Residential, the management arm of CCH Realty, manages thousands of units throughout the United States. Mr. Silber has developed a broad range of value added, unique relationships in the real estate sector which have enhanced his access to real estate product and real estate financing. In aggregate his companies have acquired approximately 25,000 units in the multi-family sector, with an aggregate value of approximately $2.5 billion.

**John Leo, Secretary, Treasurer, Independent Director**

Mr. Leo is an experienced business operator, investment banker and fund manager. He has 30 years of experience in the financial sector, which includes investment banking, due diligence, compliance, trading, management and operations. He has established and personally financed two FINRA member, SEC registered Investment Banking Firms, and is currently majority owner of Primary Capital LLC and VCS Venture Securities. He has organized and supervised operations in multiple locations including numerous offices in the US, China and Singapore. His firms have provided financing for 150+ US based companies and 50+ foreign based companies covering all business sectors including hotels, resorts, residential and commercial properties, technology, health, nutraceuticals, pharmaceuticals and consumer brands. His primary focus in the investment banking sector has been providing capital to small and midsized businesses, for operations, expansion and acquisitions. Mr. Leo maintains the following FINRA registrations: SIE, Series 7, 24, 55, 63, 79, 99.

**Robert Geyer, Independent Director**

Mr. Geyer was the Senior Loan Officer with The Westchester Bank at the inception of the organization in 2008 and served in this capacity until his retirement in 2019. Mr. Geyer served as the Senior Vice President / Senior Loan Officer for the Community Bank of Orange County, Middletown, NY, from 2004-2008. Mr. Geyer also held the position of Senior Vice President / Senior Loan Officer with the Community Bank of Sullivan County, Monticello, NY, from 1999-2004. He has over 47 years of commercial banking experience which includes 30+ years in the field of commercial lending.

**Joseph M. Mormak, Independent Director**

Mr. Mormak has served in the capacity of a Risk Analyst at Treliant Risk Advisors and also with KPMG Commercial Credit Risk in New York, where he performs M&A due diligence of varied loan portfolios for regional bank clients. Mr. Mormak analyzes commercial and institutional credit, commercial real estate and multi-family housing loans to determine reasonableness of credit risk ratings for both large global institutions and community banks. Mr. Mormak also reviews consumer residential mortgage documentation and foreclosure execution review under FDIC and OCC consent decrees. From 2014 through 2015 Mr. Mormak served as an Interim Chief Credit Officer at Convergex, an agency broker dealer. From 2009 through 2011 Mr. Mormak served as Vice President of Risk Management for Commerzbank AG, and upon the acquisition of Dresdner Bank by Commerzbank, Mr. Mormak assumed the global portfolio management responsibilities for large, multi-national manufacturers.

Sunnyside Federal's Board of Directors

**Gerardina Mirtuono, Director, President and Chief Operating Officer**

Gerardina Mirtuono has been Chief Operating Officer of Sunnyside Federal Savings and Loan since March 2010, and has held the role of President since June 2022. From March 2008 until March 2010, Ms. Mirtuono was senior vice president and chief compliance officer for The Park Avenue Bank, New York City. Prior to this position, from 2001 until 2008 Ms. Mirtuono was senior vice president and chief compliance officer for Union State Bank, Orangeburg, New York. Ms. Mirtuono has over 35 years of financial institution experience, and this experience provides the Board with broad financial industry knowledge and experience.

**William Boeckelman, Independent Director**

William Boeckelman is a licensed real estate broker with Coldwell Banker Residential Brokerage, a position he has held since 1995. Mr. Boeckelman has owned businesses and/or lived in Irvington, New York since 1978, having owned The Cantina restaurant, located in Irvington, from 1978 until 1995. Mr. Boeckelman has been an active member of the community for over 35 years. His expertise in both the local residential real estate market and the local business environment provides a valuable perspective for Sunnyside Federal.

**Walter G. Montgomery, Independent Director**

Walter G. Montgomery retired in 2014 as Chief Executive Officer of RLM Finsbury, a global consultancy engaged in designing and implementing corporate communications strategies. A co-founder and CEO of RLM (Robinson, Lerer & Montgomery), he merged it with Finsbury in 2011. During his 27-year tenure he served a variety of industries that included money-center and other banks. Earlier he was Senior Vice-President of Global Communications for American Express Company. He is Chairman of the Board of Abbott House, a social-services agency based in Irvington, NY; an Advisory Board member at Lyndhurst Mansion in neighboring Tarrytown; and President and Chairman of The Hudson Independent News Foundation, publisher of a local online newspaper. He served on several other not-for-profit boards as well as Irvington's Board of Trustees, Board of Education, and Planning Board. A veteran of the U.S. Army, Mr. Montgomery holds Ph.D. and M.A. degrees in Chinese history from Brown University, and a B.A. in political science from Syracuse University.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ In
 addition to being members of the Board of Directors of Vecta Inc., Mark Silber, John Leo, Robert Geyer and Joseph Mormak are also
 Board Members of the Sunnyside Federal.

■ Edward
 Lipkus is the CFO of both Vecta and the Sunnyside Federal.

■ Fredrick
 Schulman is Chairman of the Board and CEO of both Vecta Inc., and the Sunnyside Federal.

Sunnyside Federal's Management

**Edward J. Lipkus, III, Vice President and Chief Financial Officer**

Mr. Lipkus has served as Vice President and Chief Financial Officer of Sunnyside Bancorp and Sunnyside Federal Savings and Loan since May 2014. From 2010 to 2012, Mr. Lipkus served as Chief Financial Officer of First National Community Bancorp, Dunmore, Pennsylvania. From 2006 until 2009, Mr. Lipkus served as Chief Financial Officer for First Commonwealth Financial Corporation, Indiana, Pennsylvania. From 2002 to 2006, Mr. Lipkus served as Controller for Valley National Bancorp, Wayne, NJ. Mr. Lipkus is a certified public accountant and has over 35 years of financial institution experience.

**Kevin Kim, Senior Vice President & Chief Lending Officer**

Mr. Kim is experienced in the management of lending, including but not limited to strategic planning, credit approval, portfolio management and loan administration. He was previously a Senior Vice President & Chief Revenue Officer of KEB Hana Bank, NA and managed a lending team for two years. He was a Senior Vice President & SBA Team Leader of East West Bank and established a new SBA lending team in the Eastern Region for four years. From 2006 to 2014 he served as Senior Vice President & Chief Lending Officer of New Bank, where he led the bank to the top ranking in SBA 7(a) loan origination, and a number of Pinnacle awards from the NY District Office. Mr. Kim graduated from ABA Stonier Graduate School of Banking and serves on the Board of Directors of Healixa, Inc., and The Korean-American Chamber of Commerce in Greater New York.

**Anticipated Growth Plans and Strategies**

Provided below is a brief overview of Vecta Inc.'s anticipated growth plans and strategies.

In connection with Vecta Inc.'s anticipated growth plans, which are discussed in more detail immediately below, Vecta Inc. will consider strategic acquisition opportunities and, more specifically, will evaluate underperforming bank and non-bank organizations in key markets with the intent to transform them into profitable and valuable components of Vecta Inc.'s corporate group.

Some of Vecta Inc.'s anticipated growth plans and strategies may require regulatory approval prior to Vecta Inc. or the Bank engaging in such activities. As such, there is no guarantee that Vecta Inc.'s intended growth plans and strategies will be successful in obtaining regulatory approval or commercially successful.

Goals and operational strategy for Vecta Inc. and the Bank:

&nbsp;&nbsp;&nbsp;&nbsp;■ Consider
 acquisitions of financial organizations using clearly defined, specific acquisition parameters.

■ Consider
 acquisitions of value-added Neo Bank Platforms as well as the internal development of similar technology.

■ Develop
 significant non-interest revenues through origination and sale of government insured or guaranteed assets, including, residential
 mortgage and small business lending.

■ Build
 a strong and integrated corporate culture that is guided by a clear mission and fully articulated with a reinforced value system.

■ Embrace
 the highest standards of corporate governance and risk management to minimize loss and reduce execution risk.

■ Build
 an integrated operations framework that maximizes efficiencies and enhances earnings.

■ Focus
 on highly scalable business lines in which the new management has expertise, such as Multi-Family housing.

■ Become
 a leader among community banks by providing outsourced services which they could not otherwise afford to implement on their own due
 to lack of capital, scale, or know-how.

■ Provide
 diversified products and services that are uniquely designed to meet the needs of our communities and client base.

Vecta Inc. and the Bank intend to provide various services to other community banks, credit unions and specialty lenders for both mortgage and small business lending. Some of these services may include the following:

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| |
|:---|
| Back-office Loan Platform Services |
| White-label loan origination services, including loan processing, documents, packaging, closing and post-closing services. |
| Loans will typically be closed in the client's name, not requiring balance sheet capacity / liquidity or representing credit risk of or to the Bank. |
| Vecta may receive revenue in the form of origination and processing fees and may share in the profits should its clients desire Vecta to assist with secondary market loan sales. |
| Loan Syndication, Loan Participation and Asset-based Loan Program Administrator |
| The Bank intends to originate, syndicate or participate in loans with other financial institutions that are too large to hold in its portfolio. |
| Vecta may also function as a loan program administrator for other loan portfolio investors. |
| Revenue will be captured in the form of gains from sales (or profits from sales of loans), servicing or excess servicing. |
| Neo Bank Platform |
| The Bank intends on using an API based core technology operating system to provide third party marketing platforms with the ability to originate and syndicate asset and liability component production into the banking system. |
| The Bank intends to utilize multi-family bridge lending as an essential platform to drive profitability and achieve targeted goals. |
| The Bank intends to leverage its lending experience by focusing on strong sponsor relationships that are well known to executive management and have the depth of experience from multiple economic cycles. |
| Multi-Family Bridge Loan lending will support housing, localized services and investment within the communities the Bank serves. Lending will include individual facilities for Multi-Family and related projects (which will also fulfill the Bank's CRA requirements). |
| The Bank intends to limit speculative risk in the Multi-Family bridge product by securing an agency takeout lender prior to origination. |
| Multi-Family Lending Policies will be determined by the Bank's board and will include guidance to limit market, interest rate, and concentration risks. |
| The Bank intends to establish and maintain Multi-Family portfolio standards for monitoring and reporting. |
| Diversification of credit risk is an important and desirable attribute of the Bank's real estate portfolio. The Bank intends to seek portfolio diversification based on lending product, geographic region and collateral type. Certain risks may be mitigated by the short-term nature and guaranteed take-out refinancing of these loans by a HUD or a FNMA DUS lender. |
| Typical loan terms are expected to be less than 18 months with a floating interest rate tied to the Prime Rate. |
| Management intends to service all loans originated for its portfolio. The Bank anticipates utilizing best-in-class software and servicing platforms to administer and manage the portfolio. With demonstrated success, the Bank expects to offer loan servicing as a service to other small to medium sized banks looking to gain operational efficiencies. |

---

**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 ("U.S. GAAP"). 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 following represent our critical 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 losses on loans 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 allocations. Specific percentage allocations can be made 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 allocation 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 factors that are applied to the loan groups to determine the amount of the general reserve. 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 Current Expected Credit Losses ("CECL") methodology standard for determining the amount of our allowance for credit losses, which could 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.

***Securities Valuation and Impairment*.** We classify our investments in debt and equity securities as either held-to-maturity or available-for-sale. Securities classified as held-to maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. We obtain our fair values from a third party service. This service's fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting our financial position, results of operations and cash flows. If the estimated value of investments is less than the cost or amortized cost, we evaluate whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and we determine that the impairment is other-than-temporary, we expense the impairment of the investment in the period in which the event or change occurred. We also consider how long a security has been in a loss position in determining if it is other than temporarily impaired. Management also assesses the nature of the unrealized losses taking into consideration factors such as changes in risk-free interest rates, general credit spread widening, market supply and demand, creditworthiness of the issuer, and quality of the underlying collateral. At December 31, 2022, 72.2% of our securities were issued by U.S. government agencies or U.S. government-sponsored enterprises.

**Supplemental Information**

**Supplemental Financial Disclosure and Information**

As described in Note 2. (Business Combination) to the consolidated financial statements, included in Item 8of this Annual Report, and discussed above in this Item 7. (Management's Discussion and Analysis of Financial Condition and Results of Operations), the acquisition by Vecta Partners of all of the outstanding common stock of Vecta Inc., pursuant to the Merger, was accounted for under the acquisition method of accounting. Following the Merger, Vecta Inc. remains the holding company for the Bank.

Pursuant to applicable accounting rules and guidance, as a result of the Merger, the operations of the Bank prior to the June 1, 2022 Closing Date of the Merger are not reflected in the financial statements included in Item 8 (Financial Statements) of this Annual Report. However, management has elected to provide the following supplemental financial disclosure and information to provide the reader of this Annual Report a clearer understanding of Vecta Inc.'s and the Bank's consolidated financial performance as if the operations of Vecta Inc. and the Bank, on a consolidated basis, prior to the closing of the Merger on June 1, 2022 were included in the financial statements.

**VECTA INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**

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| | | |
|:---|:---|:---|
|  | December 31,<br>2022 | December 31,<br>2021 |
| <u>Assets</u> |  |  |
| Cash and cash equivalents | $13286059 | $3470090 |
| Certificates of deposit | 250000 | 250000 |
| Securities held to maturity, net; approximate fair value of $407,000 (2022) and $431,000 (2021) | 415605 | 417010 |
| Securities available for sale | 33735037 | 53411654 |
| Loans receivable, net | 28562632 | 31633926 |
| Premises and equipment, net | 5355021 | 955757 |
| Federal Home Loan Bank of New York and other stock, at cost | 139100 | 196600 |
| Accrued interest receivable | 398389 | 414295 |
| Cash surrender value of life insurance | 2571968 | 2504594 |
| Goodwill | 5622899 |  |
| Core deposit intangible | 1323792 |  |
| Deferred income taxes |  | 922727 |
| Other assets | 236353 | 222643 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $91896855 | $94399296 |
| <u>Liabilities and Stockholders' Equity</u> |  |  |
| Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | $74555554 | $82854464 |
| &nbsp;&nbsp;&nbsp;Borrowings |  | 1007716 |
| &nbsp;&nbsp;&nbsp;Advances from borrowers for taxes and insurance | 578246 | 519908 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 445644 | 412947 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 75579444 | 84795035 |
| Commitments and contingencies |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Serial preferred stock; par value $.01, 2,000,000 shares authorized, no shares issued |  |  |
| &nbsp;&nbsp;&nbsp;Common stock; par value $.01, 100,000,000 shares authorized and 15,930,976 shares issued | 159310 | 7935 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 18565663 | 7121120 |
| &nbsp;&nbsp;&nbsp;Unallocated common stock held by the Employee Stock Ownership Plan |  | (355075) |
| &nbsp;&nbsp;&nbsp;Retained earnings (accumulated deficit) | (202722) | 4337274 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (2204840) | (1506993) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 16317411 | 9604261 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $91896855 | $94399296 |

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**VECTA INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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| | | |
|:---|:---|:---|
|  | Year Ended | Year Ended |
|  | December 31, | December 31, |
|  | 2022 | 2021 |
| Interest and dividend income: |  |  |
| &nbsp;&nbsp;&nbsp;Loans | $1439474 | $1662575 |
| &nbsp;&nbsp;&nbsp;Investment securities | 470227 | 263106 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 976047 | 643866 |
| &nbsp;&nbsp;&nbsp;Federal funds sold and other earning assets | 176819 | 20325 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest and dividend income | 3062567 | 2589872 |
| Interest expense: |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 215423 | 324176 |
| &nbsp;&nbsp;&nbsp;Borrowings | 9514 | 29950 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 224937 | 354126 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 2837630 | 2235746 |
| Provision for loan losses | 82225 | 145798 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision for loan losses | 2755405 | 2089948 |
| Non-interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Fees and service charges | 73762 | 77038 |
| &nbsp;&nbsp;&nbsp;Income on bank owned life insurance | 67374 | 66018 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest income | 141136 | 143056 |
| Non-interest expense: |  |  |
| &nbsp;&nbsp;&nbsp;Compensation and benefits | 2866713 | 1121340 |
| &nbsp;&nbsp;&nbsp;Occupancy and equipment, net | 294168 | 271989 |
| &nbsp;&nbsp;&nbsp;Data processing service fees | 366947 | 326453 |
| &nbsp;&nbsp;&nbsp;Merger related expenses | 299697 | 1215067 |
| &nbsp;&nbsp;&nbsp;Professional fees | 485808 | 347300 |
| &nbsp;&nbsp;&nbsp;Federal deposit insurance premiums | 25965 | 22613 |
| &nbsp;&nbsp;&nbsp;Amortization of core deposit intangible | 82005 |  |
| &nbsp;&nbsp;&nbsp;Advertising and promotion | 53346 | 54182 |
| &nbsp;&nbsp;&nbsp;Other | 346995 | 201700 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest expense | 4821644 | 3560644 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) before income tax (benefit) | (1925103) | (1327640) |
| Income tax expense (benefit) | (295233) | (33944) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (loss) | $(1629870) | $(1293696) |

---

**Comparison of Financial Condition at December 31, 2022 and December 31, 2021**

Total assets decreased $2.5 million, or 2.7%, to $91.9 million at December 31, 2022 from $94.4 million at December 31, 2021. The decrease was primarily the result of a decrease in investment securities, loans, and deferred income taxes partly offset by increases in cash and cash equivalents, premises and equipment, goodwill, and core deposit intangible.

Securities available for sale decreased $19.7 million, or 36.8%, to $33.7 million at December 31, 2022 from $53.4 million at December 31, 2021. The decrease in securities available for sale was primarily due to maturities and pay-downs of government and mortgage-backed securities.

Net loans receivable decreased $3.1 million, or 9.7 %, to $28.6 million at December 31, 2022 from $31.6 million at December 31, 2021. The decrease in loans receivable during 2022 was primarily due to a decrease of $2.4 million, or 100.0% in loans originated under the Paycheck Protection Program, a decrease of $1.5 million, or 13.1 %, in residential one-to-four family loans and a $523,000, or 18.3% decrease in student loans partly offset by a $2.0 million, or 13.9% increase in commercial real estate and multi-family loans.

Cash and cash equivalents increased $9.8 million, or 282.9% to $13.3 million at December 31, 2022 compared to $3.5 million at December 31, 2021.

Maturities and principal payments of securities available for sale resulted in a decrease of $19.7 million. There were no purchases of securities in 2022 as the Company strategically avoided purchasing securities in a rising interest rate environment.

Premises and equipment increased $4.4 million, or 460.3% as a result of the Merger.

At December 31, 2022, our investment in bank-owned life insurance was $2.6 million, an increase of $67,000 or 2.7% from $2.5 million at December 31, 2021. We invest in bank-owned life insurance to provide us with a funding offset for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses, and we have not made any additional contributions to our bank-owned life insurance since 2002.

Goodwill and core deposit intangible increased $5.6 million and $1.3 million, respectively as a result of the merger.

Net deferred tax assets decreased $923,000, or 100.0%, to $0.00 at December 31, 2022 from $923,000 at December 31, 2021. The decrease resulted from the recording of a valuation allowance on the total deferred tax asset at the time of the merger.

Total deposits decreased $8.3 million, or 10.0%, to $74.6 million at December 31, 2022 from $82.9 million at December 31, 2021. The decrease was primarily due to lower certificates of deposit and NOW balances partly offset by higher savings balances. Certificates of deposit and NOW balances decreased $8.4 million, or 29.0% and $1.6 million, or 10.4%, respectively, while Savings deposits increased $2.5 million or 9.1%.

We had no Federal Home Loan Bank advances outstanding at December 31, 2022 compared to $1.0 million at December 31, 2021. At December 31, 2022, we had the ability to borrow approximately $27.8 million from the Federal Home Loan Bank of New York, subject to our pledging sufficient assets. Additionally, at December 31, 2022, we had the ability to borrow up to $2.0 million on a Fed Funds line of credit with Atlantic Community Bankers Bank.

Total equity increased $6.7 million, or 69.9%, to $16.3 million at December 31, 2022 compared to $9.6 million at December 31, 2021 primarily due to the merger as well as an additional $4.5 million capital contribution shortly after the merger was consummated.

**Comparison of Operating Results for the Years Ended December 31, 2022 and 2021**

***General.***

For the year ended December 31, 2022, the Company recorded a net loss of $1.6 million compared to a net loss of $1.3 million in 2021. The increase in net loss was primarily due to an increase of $1.3 million of non-interest expense mainly as a result of change in control payments related to the Company's Merger, partly offset by a decrease in merger related expenses and an increase in net interest income.

Our current business strategy includes increasing the Bank's asset size, diversifying our loan portfolio to increase our non-residential lending, including commercial and multi-family real estate lending and commercial lending and increasing our non-interest income, as ways to improve our profitability in future periods.

Our ability to achieve profitability depends upon a number of factors, including general economic conditions, competition with other financial institutions, changes to the interest rate environment that may reduce our profit margins or impair our business strategy, adverse changes in the securities markets, changes in laws or government regulations, changes in consumer spending, borrowing, or saving, and changes in accounting policies.

***Net Interest Income.*** Net interest income increased $602,000, or 26.9%, to $2.8 million for the year ended December 31, 2022 from $2.2 million for the year ended December 31, 2021. The increase in net interest income was primarily due to a $473,000, or 18.3% increase in interest income and a $129,000, or 36.5% reduction in interest expense.

Interest income on loans decreased $223,000, or 13.4%, primarily due to decreases in the loan balances partly offset by higher yields. Interest income on investment securities increased $207,000 or 78.7%, primarily due to higher balances and an increase in rates. Interest income on mortgage-backed securities increased $332,000 or 51.6%, primarily due to an increase in yields partly offset by lower balances. Interest income on federal funds sold and other interest-earning assets increased $156,000, or 770.0% due to higher rates and balances. The average yield on our loans increased 75 basis points, while average balances decreased $9.7 million. The average yield on our mortgage-backed securities increased 173 basis points while average balances decreased $4.4 million. The average yield on investment securities increased 76 basis points, while the average balance increased $3.2 million during 2022. Our net interest rate spread increased 100 basis points to 3.46% for the year ended December 31, 2022 from 2.46% for the year ended December 31, 2021, and our net interest margin increased 97 basis points to 3.49% for 2022 from 2.52% for 2021.

***Interest and Dividend Income.*** Interest and dividend income increased $473,000 to $3.1 million for the year ended December 31, 2022 from $2.6 million for the year ended December 31, 2021. Interest on mortgage-backed securities, investment securities and interest on federal funds sold and other earning assets increased $332,000, or 51.6%, $207,000, or 78.7%, and $156,000, or 770.0%, respectively, but was partly offset by a decrease in loan interest income of $223,000 or 13.4% compared to 2021.

Interest income on loans decreased $223,000, or 13.4%, to $1.4 million for the year ended December 31, 2022 from $1.7 million for the year ended December 31, 2021. The decrease resulted primarily from a decrease of $9.7 million in average loan balances to $27.8 million in 2022 from $37.5 million in 2021, partly offset by a 75 basis point increase in the yield to 5.18% in 2022 from 4.43% in 2021 primarily resulting from an increase in the prime rate.

Interest income on mortgage-backed securities increased $332,000 to $976,000 primarily due to a 173 basis point increase in yield to 3.94% in 2022 from 2.21% in 2021, partly offset by a decrease of $4.4 million in average balances. Interest on investment securities increased $207,000 to $470,000 primarily due to an increase of 76 basis points in yield from 1.48% in 2021 to 2.24% in 2022 and an increase of $3.2 million in average balances. Interest and dividend income of federal funds sold and other earning assets increased $156,000 to $177,000 mainly due to a 181 basis point increase in yield from 0.47% in 2021 to 2.28% in 2022 and an increase in the average balance of $3.5 million.

 ****

***Interest Expense.*** Interest expense, consisting of the cost of interest-bearing deposits and borrowings, decreased $129,000 to $225,000 for the year ended December 31, 2022 from $354,000 for the year ended December 31, 2021. The cost of interest-bearing deposits and borrowings decreased 15 basis points to 0.31% for 2022 compared to 0.46% for 2021, mainly reflecting a decrease in rates on certificates of deposit.

***Provision for Loan Losses.*** We establish provisions for loan losses that are charged to operations in order to maintain the allowance for loan losses at a level believed, to the best of management's knowledge, to cover all known and inherent losses in the portfolio both probable and reasonable to estimate at each reporting date. We recorded a provision for loan losses of $82,000 for the year ended December 31, 2022 compared to $146,000 for the year ended December 31, 2021. The decrease was mainly due to lower provisions for the student loan portfolio. The allowance for loan losses was $79,000 at December 31, 2022 compared to $364,000 at December 31, 2021. As a result of the Company's Merger, the allowance for loan losses was reduced to zero at June 1, 2022 and a credit mark of $895,000 was established. The balance in this credit mark was $774,000 at December 31, 2022 as a result of charge-offs and amortization.

We had $303,000 in non-performing loans at December 31, 2022 and $580,000 at December 31, 2021. During the years ended December 31, 2022 and 2021 we had loan charge-offs of $68,000 and $193,000, respectively. There were $126,000 and $10,000 of recoveries in 2022 and 2021, respectively. Effective January 1, 2023, we adopted the CECL standard for determining the amount of our allowance for credit losses, which could 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.

***Noninterest Income.*** Noninterest income decreased $2,000, or 1.3% to $141,000 for the year ended December 31, 2022 from $143,000 for the year ended December 31, 2021. The decrease was primarily due to lower fees and service charges collected.

***Noninterest Expense.*** Noninterest expense increased $1.3 million, or 35.4%, to $4.8 million for the year ended December 31, 2022 from $3.6 million for the year ended December 31, 2021. This increase was primarily due to change of control payments and professional fees as a result of the Company's Merger as well as amortization of core deposit intangible, partly offset by a decrease in merger legal fees incurred in 2022 compared to 2021.

Compensation and benefits increased $1.7 million, or 155.7% primarily due to change of control payments made in connection with the Company's Merger. Core deposit intangible amortization was $82,000 in 2022 compared to $0 in 2021 as a result of the Merger. Other expenses increased $145,000, or 72.0% in 2022 compared to 2021 primarily due to recording Director and Officer tail insurance as a result of the merger as well as higher cost of insurance and training expenses. Partly offsetting these expenses was a decrease in merger-related expenses of $915,000 primarily due to lower legal and investment banking expenses.

***Income Tax Expense.*** We recorded an income tax benefit of $295,000 for the year ended December 31, 2022 based on a loss before taxes of $1.9 million. In 2021, we recorded an income tax benefit of $34,000 based on a loss before taxes of $1.3 million. The increase in tax benefit in 2022 was primarily due to non-deductible merger related expenses in 2021 partially offset by a valuation allowance against the deferred tax asset.

***Analysis of Net Interest Income.*** The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances and include non-accrual loans. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. No taxable equivalent adjustments have been made.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** |
|  | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  |<br>**Average**<br>**Balance** | **Interest**<br>**Income/**<br>**Expense** |<br>**Yield/**<br>**Cost** |<br>**Average**<br>**Balance** | **Interest**<br>**Income/**<br>**Expense** |<br>**Yield**<br>**Cost** |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
| **Interest-earning assets:** |  |  |  |  |  |  |
| Loans: | $27820 | $1440 | 5.18% | $37546 | $1663 | 4.43% |
| Investment securities | 20945 | 470 | 2.24% | 17736 | 263 | 1.48% |
| Mortgage-backed securities | 24754 | 976 | 3.94% | 29196 | 644 | 2.21% |
| Fed funds sold and other interest-earning assets | 7755 | 177 | 2.28% | 4291 | 20 | 0.47% |
| Total interest-earning assets | 81274 | 3063 | 3.77% | 88769 | 2590 | 2.92% |
| Non-interest-earning assets | 12594 |  |  | 7933 |  |  |
| Total assets | $93868 |  |  | $96702 |  |  |
| **Interest Bearing Liabilities** |  |  |  |  |  |  |
| Transaction Accounts | $14067 | $7 | 0.05% | $13496 | $7 | 0.05% |
| Regular Savings | 30214 | 60 | 0.20% | 27208 | 49 | 0.18% |
| Money Markets | 2609 | 2 | 0.08% | 2929 | 3 | 0.10% |
| Certificates of Deposits | 24393 | 147 | 0.60% | 30862 | 265 | 0.86% |
| Advances from FHLB and FRB of NY | 432 | 9 | 2.20% | 2363 | 30 | 1.27% |
| Total Interest Bearing Liabilities | 71715 | 225 | 0.31% | 76858 | 354 | 0.46% |
| Non-Interest Bearing Liabilities | 9099 |  |  | 9321 |  |  |
| Total Liabilities | 80814 |  |  | 86179 |  |  |
| **Equity** | 13054 |  |  | 10523 |  |  |
| **Total Liabilities and Equity** | $93868 |  |  | $96702 |  |  |
| Net Interest Income |  | $2838 |  |  | $2236 |  |
| Interest Rate Spread <sup>(1)</sup> |  |  | 3.46% |  |  | 2.46% |
| Net Interest-Earning Assets <sup>(2)</sup> | $9559 |  |  | $11911 |  |  |
| Net Interest Margin <sup>(3)</sup> |  | 3.49% |  |  | 2.52% |  |
| Average Interest-Earning Assets to Average Interest-Bearing Liabilities | 113.33% |  |  | 115.50% |  |  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Net
 interest rate spread represents the difference between the yield on average interest-earning
 assets and the cost of average interest-bearing liabilities.

(2) Net
 interest-earning assets represents total interest-earning assets less total interest-bearing
 liabilities.

(3) Net
 interest margin represents net interest income divided by average 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 fiscal 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 net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

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| | | | |
|:---|:---|:---|:---|
|  | **For the** | **For the** | **For the** |
|  | **Years Ended December 31** | **Years Ended December 31** | **Years Ended December 31** |
|  | **2022 vs. 2021** | **2022 vs. 2021** | **2022 vs. 2021** |
|  | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** |
|  | <br>Volume | <br>Rate | Total<br>Increase<br>&nbsp;&nbsp;&nbsp;&nbsp;(Decrease) |
| **Interest-earning assets:** |  |  |  |
| Loans | $(476) | $253 | $(223) |
| Investment Securities | 199 | 8 | 207 |
| Mortgage-backed securities | (110) | 442 | 332 |
| Fed funds sold and other interest-earning assets | 27 | 130 | 157 |
| &nbsp;&nbsp;&nbsp;Total Interest Income | (360) | 833 | 473 |
| **Interest-bearing liabilities:** |  |  |  |
| NOW accounts |  |  |  |
| Regular savings | 6 | 5 | 11 |
| Money Market | (1) |  | (1) |
| Certificates of deposit | (49) | (69) | (118) |
| Borrowings | (35) | 14 | (21) |
| &nbsp;&nbsp;&nbsp;Total interest expense | (79) | (50) | (129) |
| **Increase (decrease) in net interest income** | $(281) | $883 | $602 |

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**Management of Market Risk**

***General*.** Our most significant form of market risk is interest rate risk. 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 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.

Historically, we have operated as a traditional thrift institution. A significant portion of our assets consist of longer-term, fixed-rate, one- to four-family residential real estate loans and securities, which we have funded primarily with deposits. Historically we have retained in our portfolio all of the one- to four-family residential real estate loans that we have originated. We have revised our business strategy with an increased emphasis on the origination of commercial and multi-family real estate loans, student loans and commercial loans. Such loans generally have shorter maturities than one- to four-family residential real estate loans. Additionally, subject to favorable market conditions, we will consider the sale or brokerage of certain newly originated longer-term (terms of 15 years or greater), one- to four-family residential real estate loans rather than retain all of such loans in portfolio as we have done in the past. Additionally, we have implemented a SBA lending program and we will consider selling the government-guaranteed portions of such loans to generate additional fee income and manage interest rate risk. We are an SBA-approved lender.

***Net Interest Income Analysis.*** We analyze our sensitivity to changes in interest rates through our net interest income simulation model which is provided to us by an independent third party. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a one-year period based on current interest rates. We then calculate what the net interest income would be for the same period under different interest rate assumptions. We also estimate the impact over a five year time horizon. The following table shows the estimated impact on net interest income for the one-year period beginning December 31, 2022 resulting from potential changes in interest rates. These estimates require certain assumptions to be made, including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain. As a result, no simulation model can precisely predict the impact of changes in interest rates on our net interest income. Although the net interest income table below provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

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| | | |
|:---|:---|:---|
| <br>**Rate Shift (1)** | **Net Interest Income**<br>**Year 1 Forecast** | **Year 1 Change**<br>**from Level** |
| (In thousands) | (In thousands) | (In thousands) |
| +400 | $3435 | 9.60% |
| +300 | $3413 | 8.90% |
| +200 | $3357 | 7.12% |
| +100 | $3264 | 4.15% |
| Level | $3134 | 0.00% |
| -100 | $2973 | -5.14% |

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&nbsp;&nbsp;&nbsp;&nbsp;***(1)***  ***The calculated changes assume an immediate shock of the static yield curve.*** 

 ****

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value 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. In this regard, the 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. The tables also do not measure the changes in credit and liquidity risk that may occur as a result of changes in general interest rates. Accordingly, although the 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 our economic value of equity and will differ from actual results.

We do not engage in hedging activities, such as investing 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.

**Liquidity 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, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities and funds provided by our operations. In addition, we have the ability to borrow from the Federal Home Loan Bank of New York and the Federal Reserve Bank of New York. At December 31, 2022, we had the capacity to borrow $27.8 million from the Federal Home Loan Bank of New York, subject to our pledging sufficient assets. Additionally, at December 31, 2022, we had the ability to borrow up to $2 million on a Fed Funds line of credit with Atlantic Community Bankers Bank. At December 31, 2022, we had no outstanding advances from the FHLB.

Loan repayments and maturing securities are a relatively predictable source of funds. However, deposit flows, calls of securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of these sources of funds.

Our primary investing activities are the origination or purchase of one- to four-family real estate loans and commercial and multi-family real estate loans and the purchase of securities. For the year ended December 31, 2022, loan originations totaled $4.1 million compared to originations of $5.8 million, for the year ended December 31, 2021. Purchases of investments, mortgage-backed securities and bank certificates of deposit totaled $7.0 million for the year ended December 31, 2022 and $65.1 million for the year ended December 31, 2021.

Total deposits decreased $8.3 million during the year ended December 31, 2022, while total deposits increased $4.6 million during the year ended December 31, 2021. Deposit flows are affected by the level of interest rates, the interest rates and products offered by competitors and other factors. At December 31, 2022, certificates of deposit scheduled to mature within one year totaled $15.7 million. Our ability to retain these deposits will be determined in part by the interest rates we are willing to pay on such deposits.

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.

At December 31, 2022 and 2021, our capital ratios were all above the minimum levels required for it to be considered a "well capitalized" financial institution under "prompt corrective action" regulations. In order to be classified as "well-capitalized" under federal banking regulations, we were required to have Tier I and total risked-based capital ratios of 8.0% and 10.0%, respectively, as of December 31, 2022. Our Tier 1 and total risked-based capital was $11.3 million and $11.4 million, respectively, or 24.44% and 24.61% of total risk weighted assets at December 31, 2022. At December 31, 2021, our Tier 1 and total risked-based capital was $10.0 million and $10.4 million, respectively, or 20.63% and 21.38% of risk weighted assets.

**Off-Balance Sheet Arrangements and Aggregate Contractual Obligations**

***Commitments.*** As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make.

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

**Recent Accounting Pronouncements**

Please see Note 1 to our consolidated financial statements in Item 8 of this Annual Report.

**Impact of Inflation and Changing Price**

Our financial statements and related notes have been prepared in accordance with U.S. GAAP. U.S. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

**<u>ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk</u>**

This Item 7A is omitted as it is not required for smaller reporting companies.

**<u>ITEM 8. Financial Statements and Supplementary Data</u>**

The consolidated audited financial statements for Vecta Inc. are a part of this Annual Report and may be found beginning on page F-1.

**<u>ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</u>**

None

**<u>ITEM 9A Controls and Procedures</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Evaluation of disclosure controls and procedures. An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act as of December 31, 2022. Based on that evaluation, the Company's management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective.

Changes in internal control over financial reporting. During the quarter ended December 31, 2022, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Management's annual report on internal control over financial reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance U.S. GAAP. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in "Internal Control-Integrated Framework (2013)." Based on such assessment, management believes that the Company's internal control over financial reporting as of December 31, 2022 is effective.

This Annual Report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to provisions of the Dodd-Frank Act that permit the Company to provide only management's report in this Annual Report.

**<u>ITEM 9B. Other Information</u>**

None.

**PART III**

**<u>ITEM 10. Directors, Executive Officers and Corporate Governance</u>**

Information called for by this Item concerning the directors and officers will be included in the Company's Definitive Proxy Statement for the 2023 annual meeting of shareholders (the "Proxy Statement") to be filed with the SEC within 120 days after the end of the Company's fiscal year ended December 31, 2022. Such information is incorporated herein by reference.

The Company has adopted a Code of Ethics ("Code") that applies to the Company's principal executive officer, principal financial officer and all other employees and directors. The Code includes guidelines relating to compliance with laws, the ethical handling of actual or potential conflicts of interest, the use of corporate opportunities, protection and use of the Company's confidential information, accepting gifts and business courtesies, accurate financial and regulatory reporting, and procedures for promoting compliance with, and reporting violations of, the Code. Persons interested in obtaining a copy of the Code of Ethics may do so by writing to the Company at: Vecta Inc., One World Trade Center, New York, NY 10007, Attention: Corporate Secretary.

**<u>Item 11. Executive Compensation.</u>**

The information required by this Item is incorporated herein by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the Company's fiscal year.

**<u>Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.</u>**

The information required by this Item regarding security ownership of certain beneficial owners and management is incorporated by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the Company's fiscal year.

**<u>Item 13. Certain Relationships and Related Transactions, and Director Independence.</u>**

The information required by this Item is incorporated herein by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the Company's fiscal year.

**<u>Item 14. Principal Accounting Fees and Services.</u>**

The information required by this Item is incorporated herein by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the Company's fiscal year.

**PART IV**

**<u>ITEM 15. Exhibit and Financial Statement Schedules</u>**

(a)(1) <u>Financial Statements</u>

Documents filed as a part of this report. The following financial statements are incorporated by reference from Item 8 hereof:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Report
 of Independent Registered Public Accounting Firm (Fontanella Associates LLC, Totowa, New
 Jersey, PCAOB ID 6359)

(B) Consolidated
 Statement of Financial Condition at December 31, 2022;

(C) Consolidated
 Statement of Operations for the seven months ended December 31, 2022;

(D) Consolidated
 Statement of Comprehensive Income (Loss) for the seven months ended December 31, 2022;

(E) Consolidated
 Statement of Stockholders' Equity for the seven months ended December 31, 2022;

(F) Consolidated
 Statement of Cash Flows for the seven months ended December 31, 2022; and

(G) Notes
 to Consolidated Financial Statements.

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted as the required information is inapplicable or has been included in the consolidated financial statements or related notes thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The
 following exhibits are file with or incorporated by reference in this Annual Report on Form
 10-K, and this list includes the Exhibit Index.

---

| | |
|:---|:---|
| Exhibit | Description |
| 3.1 | [Articles of Incorporation of Vecta Inc. (1)](https://www.sec.gov/Archives/edgar/data/1571398/000110465913021304/a13-7598_1ex3d1.htm) |
| 3.2 | [Articles of Amendment to Articles of Incorporation of Vecta Inc. (2)](https://www.sec.gov/Archives/edgar/data/1571398/000149315222020060/ex3-1.htm) |
| 3.3 | [Bylaws of Vecta Inc. (1)](https://www.sec.gov/Archives/edgar/data/1571398/000110465913021304/a13-7598_1ex3d2.htm) |
| 4.1 | [Form of Common Stock Certificate of Vecta Inc. (1)](https://www.sec.gov/Archives/edgar/data/1571398/000110465913021304/a13-7598_1ex4.htm) |
| 4.2 | [Description of Vecta Inc.'s Securities (3)](https://www.sec.gov/Archives/edgar/data/1571398/000149315220004899/ex4-2.htm) |
| 10.1 | [Vecta Inc. 2014 Equity Incentive Plan (5)\*](https://www.sec.gov/Archives/edgar/data/1571398/000157104914003859/t1401528_def14a.htm) |
| 10.2 | [Form of Employment Agreement with Timothy D. Sullivan (4)\*](https://www.sec.gov/Archives/edgar/data/1571398/000157104915005231/t1501472_ex10-1.htm) |
| 10.3 | [Amendment to Employment Agreement with Timothy D. Sullivan (6)\*](https://www.sec.gov/Archives/edgar/data/1571398/000149315218003825/ex10-1.htm) |
| 10.4 | [Employment Agreement, effective as of June 1, 2022, by and among Vecta Inc. (f/k/a Sunnyside Bancorp, Inc.), Sunnyside Federal Savings and Loan Association of Irvington and Fredrick Schulman.\*](ex10-4.htm) |
| 10.5 | [Employment Agreement, effective as of June 1, 2022, by and among Vecta Inc. (f/k/a Sunnyside Bancorp, Inc.), Sunnyside Federal Savings and Loan Association of Irvington and Edward Lipkus.\*](ex10-5.htm) |
| 10.6 | [Employment Agreement, effective as of June 1, 2022, by and among Vecta Inc. (f/k/a Sunnyside Bancorp, Inc.), Sunnyside Federal Savings and Loan Association of Irvington and Gerardina Mirtuono.\*](ex10-6.htm) |
| 10.7 | [Employment Agreement, effective as of June 1, 2022, by and among Vecta Inc. (f/k/a Sunnyside Bancorp, Inc.), Sunnyside Federal Savings and Loan Association of Irvington and Dong Yun (Kevin) Kim.\*](ex10-7.htm) |
| 21 | [Subsidiaries](ex21.htm) |
| 23 | [Consent of Auditor](ex23.htm) |
| 31.1 | [Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](ex31-1.htm) |
| 31.2 | [Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](ex31-2.htm) |
| 32 | [Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](ex32.htm) |

---

---

| | |
|:---|:---|
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101. |

---

\* Management contract or compensatory plan or arrangement.

(1) Incorporated by reference to the Company's Registration Statement on Form S-1 (File no. 333-187317), initially filed with the SEC on March 15, 2013.

(2) Incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on July 21, 2022.

(3) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 31, 2021.

(4) Incorporated by reference to the Company's Registration Statement on Form S-1 (file no. 333-187317), initially filed March 15, 2014 and the Current Report on Form 8-K filed with the SEC on June 22, 2015.

(5) Incorporated by reference to the Company's Definitive Proxy Statement filed with the SEC on August 11, 2014.

(6) Incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on March 23, 2018.

**<u>Item 16. Form 10-K Summary</u>**

None.

**INDEX TO FINANCIAL STATEMENTS OF**

**VECTA INC.**

---

| | |
|:---|:---|
|  | Page |
| [Report of Independent Registered Public Accounting Firm](#S1_001) | F-2 |
| [Consolidated Statement of Financial Condition at December 31, 2022](#S1_002) | F-3 |
| [Consolidated Statement of Operations for the seven months ended December 31, 2022](#S1_003) | F-4 |
| [Consolidated Statement of Comprehensive (Loss) for the seven months ended December 31, 2022](#S1_004) | F-5 |
| [Consolidated Statement of Stockholders' Equity for the seven months ended December 31, 2022](#S1_005) | F-6 |
| [Consolidated Statement of Cash Flows for the Seven months ended December 31, 2022](#S1_006) | F-7 |
| [Notes to Consolidated Financial Statements](#S1_007) | F-9 |

---

![](form10-k_001.jpg)

**<u>REPORT OF Independent Registered Public Accounting Firm</u>**

To the Board of Directors

Vecta Inc. and Subsidiary

New York, New York

**Opinion on the Consolidated Financial Statements**

I have audited the accompanying consolidated statements of financial condition of Vecta Inc. and Subsidiary (the "Company") as of December 31, 2022, and the related consolidated statements of operations, comprehensive (loss), stockholders' equity, and cash flows for the seven months then ended, and the related notes (collectively, the "consolidated financial statements"). In my opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the seven months then ended, in conformity with U.S. generally accepted accounting principles.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these consolidated financial statements based on my audit. Fontanella Associates LLC is a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and is required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

I conducted my audit in accordance with the standards of the PCAOB. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. As part of my audit, I am required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, I express no such opinion.

My audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. My audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. I believe that my audit provides a reasonable basis for my opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way my opinion on the consolidated financial statements, taken as a whole, and I am not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it related.

*Allowance for Loan Losses*

 

As discussed in Notes 1 and 6 to the consolidated financial statements, the allowance for loan losses is established through a provision for loan losses and represents an amount, which, in management's judgment, will be adequate to absorb losses in the loan portfolio. The Company's allowance for loan losses was $79,000 at December 31, 2022 and consists of a general allowance only as of that date. Management develops the general component based on historical loan loss experience adjusted for qualitative factors not reflected in the historical loss experience. Historical loss ratios are measured using the average charge-off ratio for the previous three-year period, depending on loan type. The qualitative factors used by the Company include factors such as national and local economic conditions, levels of and trends in delinquency rates and nonaccrual loans, trends in volumes and terms of loans, changes in lending policies and procedures, lending personnel, and collateral, as well as concentrations in loan types, industry and geography. The adjustments for qualitative factors require a significant amount of judgement by management and involve a high degree of estimation uncertainty.

I identified the qualitative factor component of the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgement as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.

My audit procedures related to the qualitative factor component of the allowance for loan losses included the following, among others:

● Obtaining an understanding of the relevant controls related to the allowance for loan losses, including controls related to management's establishment, review, an approval of the qualitative factors, and the completeness and accuracy of the data used in determining qualitative factors.

● Evaluation of the appropriateness of management's methodology for estimating the allowance for loan losses.

● Testing the completeness and accuracy of data used by management in determining qualitative factor adjustments by agreeing them to internal and external source data.

● Testing management's conclusions regarding the appropriateness of the qualitative factor adjustments and agreement of any changes therein to the allowance for loan losses calculation.

Alfred Fontanella <br> Fontanella Associates LLC <br> Totowa, NJ

Fontanella Associates LLC has served as the Company's auditor since 2016. The engagement partner has served on the audit team since 2009 originally under the firm name of Fontanella & Babitts, Certified Public Accountants.

March 30, 2023

**VECTA INC. AND SUBSIDIARY**

**<u>CONSOLIDATED STATEMENT OF FINANCIAL CONDITION</u>**

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| <u>Assets</u> |  |
| Cash and cash equivalents | $13286059 |
| Certificates of deposit | 250000 |
| Securities held to maturity, net; approximate fair value of $407,000 (December 31, 2022) | 415605 |
| Securities available for sale | 33735037 |
| Loans receivable, net | 28562632 |
| Premises and equipment, net | 5355021 |
| Federal Home Loan Bank of New York and other stock, at cost | 139100 |
| Accrued interest receivable | 398389 |
| Cash surrender value of life insurance | 2571968 |
| Goodwill | 5622899 |
| Core deposit intangible | 1323792 |
| Other assets | 236353 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $91896855 |
| <u>Liabilities and Stockholders' Equity</u> |  |
| Liabilities: |  |
| &nbsp;&nbsp;&nbsp;Deposits | $74555554 |
| &nbsp;&nbsp;&nbsp;Advances from borrowers for taxes and insurance | 578246 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 445644 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 75579444 |
| Commitments and contingencies |  |
| Stockholders' equity: |  |
| &nbsp;&nbsp;&nbsp;Serial preferred stock; par value $.01, 2,000,000 shares authorized, no shares issued |  |
| &nbsp;&nbsp;&nbsp;Common stock; par value $.01, 100,000,000 shares authorized and 15,930,976 shares issued | 159310 |
| Additional paid-in capital | 18565663 |
| Accumulated deficit | (202722) |
| Accumulated other comprehensive loss | (2204840) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 16317411 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $91896855 |

---

See accompanying notes to consolidated financial statements.

**VECTA INC. AND SUBSIDIARY**

**<u>CONSOLIDATED STATEMENT OF OPERATIONS</u>**

---

| | |
|:---|:---|
|  | Seven Months Ended<br>December 31,<br>2022 |
| Interest and dividend income: |  |
| &nbsp;&nbsp;&nbsp;Loans | $875745 |
| &nbsp;&nbsp;&nbsp;Investment securities | 348618 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 667591 |
| &nbsp;&nbsp;&nbsp;Federal funds sold and other earning assets | 168650 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest and dividend income | 2060604 |
| Interest expense: |  |
| &nbsp;&nbsp;&nbsp;Deposits | 128932 |
| &nbsp;&nbsp;&nbsp;Borrowings | 1149 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 130081 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 1930523 |
| Provision for loan losses | 69475 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision for loan losses | 1861048 |
| Non-interest income: |  |
| &nbsp;&nbsp;&nbsp;Fees and service charges | 44976 |
| &nbsp;&nbsp;&nbsp;Income on bank owned life insurance | 39425 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest income | 84401 |
| Non-interest expense: |  |
| &nbsp;&nbsp;&nbsp;Compensation and benefits | 1056641 |
| &nbsp;&nbsp;&nbsp;Occupancy and equipment, net | 186671 |
| &nbsp;&nbsp;&nbsp;Data processing service fees | 227247 |
| &nbsp;&nbsp;&nbsp;Merger related expenses | 19702 |
| &nbsp;&nbsp;&nbsp;Professional fees | 335568 |
| &nbsp;&nbsp;&nbsp;Federal deposit insurance premiums | 15603 |
| &nbsp;&nbsp;&nbsp;Amortization of core deposit intangible | 82005 |
| &nbsp;&nbsp;&nbsp;Advertising and promotion | 31926 |
| &nbsp;&nbsp;&nbsp;Other | 170408 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest expense | 2125771 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) before income tax (benefit) | (180322) |
| Income tax expense (benefit) | 22400 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (loss) | $(202722) |
| Basic and diluted income (loss) per share | $(0.01) |
| Weighted average shares outstanding, basic and diluted | 15465764 |

---

See accompanying notes to consolidated financial statements.

**VECTA INC. AND SUBSIDIARY**

**<u>CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS)</u>**

---

| | |
|:---|:---|
|  | Seven Months Ended<br>December 31,<br>2022 |
| Net (loss) | $(202722) |
| &nbsp;&nbsp;&nbsp;Other comprehensive (loss), before tax (benefit): |  |
| &nbsp;&nbsp;&nbsp;Defined benefit pension plan: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (loss) | (210675) |
| &nbsp;&nbsp;&nbsp;Unrealized (loss) on securities available for sale: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized holding (loss) arising during the period | (1994165) |
| Other comprehensive (loss), before tax (benefit) | (2204840) |
| Income tax (benefit) related to items of other comprehensive (loss) | - |
| Other comprehensive (loss), net of tax (benefit) | (2204840) |
| Comprehensive (loss) | $(2407562) |

---

See accompanying notes to consolidated financial statements.

**VECTA INC. AND SUBSIDIARY**

**<u>CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY</u>**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |<br>Common<br>Stock |<br>Additional<br>Paid-in<br>Capital |<br>Accumulated<br>Deficit | Accumulated<br>Other<br>Comprehensive<br>Loss |<br>Total<br>Equity |
| Balance at June 1, 2022 | $- | $- | $- | $- | $- |
| Net (loss) for the seven months ended December 31, 2022 |  |  | (202722) |  | (202722) |
| Net proceeds from the sale of stock | 159310 | 18565663 |  |  | 18724973 |
| Other comprehensive (loss), net of tax (benefit) | - | - | - | (2204840) | (2204840) |
| Balance at December 31, 2022 | $159310 | $18565663 | $(202722) | $(2204840) | $16317411 |

---

See accompanying notes to consolidated financial statements.

**VECTA INC. AND SUBSIDIARY**

**<u>Condensed cONSOLIDATED Statement of Cash Flows</u>**

---

| | |
|:---|:---|
|  | Seven Months Ended<br>December 31,<br>2022 |
| Cash flows from operating activities: |  |
| &nbsp;&nbsp;&nbsp;Net (loss) | $(202722) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net (loss) to net cash used in operating activities: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense | 86242 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of premiums and accretion of discounts, net | (411235) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred loan fees and costs, net | (33652) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of core deposit intangible | 82005 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for loan losses | 69475 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in accrued interest receivable | (12261) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in cash surrender value of life insurance | (39425) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other assets | (40437) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in other liabilities | (26204) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (528214) |
| Cash flows from investing activities: |  |
| &nbsp;&nbsp;&nbsp;Repayments and maturities of securities held to maturity | 2561 |
| &nbsp;&nbsp;&nbsp;Repayments and maturities of securities available for sale | 13439266 |
| &nbsp;&nbsp;&nbsp;Loan originations, net of principal repayments | (1819409) |
| &nbsp;&nbsp;&nbsp;Purchase of premises and equipment | (37529) |
| &nbsp;&nbsp;&nbsp;Redemption of FHLB stock | 38300 |
| &nbsp;&nbsp;&nbsp;Cash paid for acquisition, net of cash acquired | (9714795) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities | 1908394 |
| Cash flows from financing activities: |  |
| &nbsp;&nbsp;&nbsp;Net decrease in deposits | (6141854) |
| &nbsp;&nbsp;&nbsp;Net increase in advances from borrowers for taxes and insurance | 171787 |
| &nbsp;&nbsp;&nbsp;Repayment of long-term borrowings | (849027) |
| &nbsp;&nbsp;&nbsp;Net proceeds from sale of stock | 18724973 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 11905879 |
| &nbsp;&nbsp;&nbsp;Net increase in cash and cash equivalents | 13286059 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents at beginning of period | - |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents at end of period | $13286059 |
| Supplemental disclosures of cash flow information: |  |
| Cash paid for: |  |
| &nbsp;&nbsp;&nbsp;Interest | $130839 |
| &nbsp;&nbsp;&nbsp;Income taxes | $- |

---

See accompanying notes to consolidated financial statements.

**Vecta Inc. AND SUBSIDIARY**

**<u>Condensed cONSOLIDATED Statement of Cash Flows</u> (CONT'D)**

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Supplemental schedule of non-cash investing activities: |  |
| &nbsp;&nbsp;&nbsp;Acquisition: |  |
| &nbsp;&nbsp;&nbsp;Non-cash assets acquired: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificates of Deposit | $250000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities Held to Maturity | 418301 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities Available for Sale | 48838559 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans receivable, net | 26693944 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premises and equipment | 5403734 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal Home Loan Bank of New York and other stock, at cost | 177400 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest receivable | 386128 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash surrender value of life insurance | 2532543 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 5622899 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Core deposit intangible | 1405797 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | 195916 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-cash assets acquired | 91925221 |
| Liabilities assumed: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits | 80693767 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowings | 849027 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advances from borrowers for taxes and insurance | 406459 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | 261173 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities assumed | 82210426 |
| Net non-cash assets acquired | $9714795 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents acquired in acquisition, net | $4510178 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for acquisition, net of transaction costs | $14224973 |

---

See accompanying notes to consolidated financial statements.

**<u>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u>**

Corporate History, Nature of Business and Merger Acquisition

Vecta Inc. (formerly known as Sunnyside Bancorp, Inc.) ("Vecta," "Vecta, Inc.,"or the "Company")was incorporated in the State of Maryland in March 2013 for the purpose of becoming the savings and loan holding company for Sunnyside Federal Savings and Loan Association of Irvington, ("Sunnyside Federal" or the "Bank") a federally-chartered savings and loan association, founded in 1930, and the wholly-owned subsidiary of Vecta Inc. upon consummation of Sunnyside Federal's mutual to stock conversion. The Bank conversion was consummated in July 2013 at which time Sunnyside Bancorp became the registered savings and loan holding company of the Bank. Prior to the Closing Date (as referenced below) of the Merger (as referenced below), other than holding all of the issued and outstanding stock of Sunnyside Federal and making a loan to the Sunnyside Federal's employee stock ownership plan, Vecta Inc. has not engaged in any material business.

As further disclosed in Note 2 (Business Combination), on June 1, 2022 (the "Closing Date"), Vecta Partners LLC (formerly known as Rhodium BA Holdings LLC), a Delaware limited liability company ("Vecta Partners"), completed its acquisition of Vecta Inc, pursuant to the Agreement and Plan of Merger, dated as of June 16, 2021, as amended on August 26, 2021 (the "Merger Agreement"), by and among Vecta Partners, Rhodium BA Merger Sub, Inc., a Maryland corporation ("Merger Sub"), Mark Silber, Vecta Inc. and Sunnyside Federal. Pursuant to the Merger Agreement and subject to the terms and conditions thereof, on the Closing Date, Merger Sub merged with and into Vecta Inc. (the "Merger"), with Vecta Inc. continuing as the surviving corporation and a wholly-owned subsidiary of Vecta Partners.

The Merger was accounted for under the acquisition method of accounting and accordingly the results of Vecta Inc.'s operations have been included in Vecta Inc.'s December 31, 2022 consolidated financial statements from the date of acquisition, or June 1, 2022.

On June 1, 2022, the Board of Directors of Vecta Inc. authorized and approved a 15-for-1 stock dividend to the existing shareholders of Vecta Inc. The 15-for-1 stock dividend was consummated on July 18, 2022.

On June 29, 2022, Vecta Partners made an additional capital contribution of $4.5 million to Vecta Inc. in exchange for 222,222 shares of Vecta Inc.'s common stock.

On July 18, 2022, Vecta Inc. also increased its authorized shares of common stock to 100,000,000 par value $0.01, and increased its authorized shares of preferred stock to 2,000,000 par value $0.01. As of December 31, 2022, Vecta Inc. had 15,930,976 common shares outstanding and no shares of preferred stock outstanding.

On July 18, 2022, Vecta Inc. also amended its Articles of Incorporation to change its name from "Sunnyside Bancorp, Inc." to Vecta Inc. The name change was effected pursuant to the filing of Articles of Amendment to Vecta Inc.'s Articles of Incorporation with the Maryland State Department of Assessments and Taxation.

Sunnyside Federal is a community-oriented savings institution whose primary business is accepting deposits from customers within its market area (Westchester County, New York) and investing those funds in mortgage loans secured by one-to-four family residences, multi-family and commercial real estate properties. To a lesser extent, funds are invested in commercial loans, small business administration ("SBA") loans, consumer loans and mortgage-backed securities and other securities. Customer deposits are insured up to applicable limits by the "FDIC". As a federally-chartered savings association, Sunnyside Federal's primary regulator is the Office of the Controller of the Currency (the "OCC").

<u>Principles of Consolidation</u>

The consolidated financial statements are comprised of the consolidated accounts of Vecta Inc., and Sunnyside Federal. All significant intercompany accounts and transactions have been eliminated in consolidation.

<u>Basis of Financial Statement Presentation</u>

The financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of financial condition and revenues and expenses for the period then ended. Actual results could differ significantly from those estimates.

**<u>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u> (Cont'd)**

A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for loan losses. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions in the Company's market area.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all cash and amounts due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less to be cash equivalents.

Investment and Mortgage-Backed Securities

Securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Securities classified as available-for-sale securities are reported at fair value, with unrealized holding gains or losses reported in a separate component of retained earnings. As of December 31, 2022, the Company had no securities classified as held for trading.

The Company conducts a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. The evaluation of other-than-temporary impairment considers the duration and severity of the impairment, the Company's intent and ability to hold the securities and assessments of the reason for the decline in value and the likelihood of a near-term recovery. If such a decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to income as a component of non-interest expense.

Premiums and discounts on securities are amortized by use of the level-yield method, over the life of the individual securities. Gain or loss on sales of securities is based upon the specific identification method.

Loans Receivable

Loans receivable are stated at unpaid principal balances less the allowance for loan losses and net deferred loan fees.

Recognition of interest on the accrual method is generally discontinued when interest or principal payments are ninety days or more in arrears, or when other factors indicate that the collection of such amounts is doubtful. At that time, a loan is placed on a nonaccrual status, and all previously accrued and uncollected interest is reversed against interest income in the current period. Interest on such loans, if appropriate, is recognized as income when payments are received. A loan is returned to an accrual status when factors indicating doubtful collectability no longer exist.

Allowance for Loan Losses

An allowance for loan losses is maintained at a level, to the best of management's knowledge, to cover all known and inherent losses in the portfolio that are both probable and reasonable to estimate. Management of the Company, in determining the provision for loan losses considers the risks inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with the general economic and real estate market conditions. The Company utilizes a two tier approach: (1) identification of problem loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan portfolio. The Company maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential problem loans. Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers. Specific loan losses are established for identified loans based on a review of such information and appraisals of the underlying collateral. General loan losses are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions, and management's judgment. Although management believes that adequate specific and general loan loss allowances are established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may be necessary.

**<u>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u> (Cont'd)**

A loan evaluated for impairment is deemed to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. An insignificant payment delay, which is defined as up to ninety days by the Company, will not cause a loan to be classified as impaired. A loan is not impaired during a period of delay in payment if the Company expects to collect all amounts due, including interest accrued at the contractual interest rate for the period of delay. The amount of loan impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. All loans identified as impaired are evaluated independently. The Company does not aggregate such loans for evaluation purposes. Payments received on impaired loans are applied first to accrued interest receivable and then to principal.

Federal Home Loan Bank of New York Stock

As a member of the Federal Home Loan Bank of New York ("FHLB"), the Company is required to acquire and hold shares of FHLB Class B stock. The holding requirement varies based on the Company's activities, primarily its outstanding borrowings, with the FHLB. The investment in FHLB stock is carried at cost. The Company conducts a periodic review and evaluation of its FHLB stock to determine if any impairment exists.

Premises and Equipment

Premises and equipment are comprised of land, building, and furniture, fixtures, and equipment, at cost, less accumulated depreciation. Depreciation charges are computed on the straight-line method over the following estimated useful lives:

SCHEDULE OF PREMISES AND EQUIPMENT ESTIMATED USEFUL LIVES

Building and improvements 5 to 40 years <br> Furniture, fixtures and equipment 2 to 10 years

Bank-Owned Life Insurance

Bank-owned life insurance ("BOLI") is accounted for in accordance with FASB guidance. The cash surrender value of BOLI is recorded on the statement of financial condition as an asset and the change in the cash surrender value is recorded as non-interest income. The amount by which any death benefits received exceeds a policy's cash surrender value is recorded in non-interest income at the time of receipt. A liability is also recorded on the statement of financial condition for postretirement death benefits provided by the split-dollar endorsement policy. A corresponding expense is recorded in non-interest expense for the accrual of benefits over the period during which employees provide services to earn the benefits.

Income Taxes

Federal and state income taxes have been provided on the basis of reported income. The amounts reflected on the tax return differ from these provisions due principally to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted as deferred taxes applicable to future periods. Deferred income tax expense or benefit is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset which is not likely to be realized.

The Company accounts for uncertainty in income taxes recognized in the financial statements in accordance with accounting guidance which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company's evaluation, no significant income tax uncertainties have been identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the seven months ended December 31, 2022. The Company's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the statement of operations. The Company did not recognize any interest and penalties for the seven months ended December 31, 2022. The Company is subject to U.S. federal income tax, as well as income tax of the State of New York. The Company is no longer subject to examination by taxing authorities for years before 2018.

**<u>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u> (Cont'd)**

Employee Benefits

Defined Benefit Plans:

The accounting guidance related to retirement benefits requires an employer to: (a) recognize in its statement of financial position an asset for a plan's overfunded status or a liability for a plan's underfunded status; (b) measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year; and (c) recognize, in comprehensive income, changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The accounting guidance requires that plan assets and benefit obligations be measured as of the date of the employer's fiscal year-end statement of financial condition.

401(K) Plan:

The Company has a 401(k) plan covering substantially all employees. The Company matches 50% of the first 6% contributed by participants and recognizes expense as its contributions are made.

Equity Incentive Plan:

The Company maintains an equity incentive plan ("the Stock Incentive Plan"). Stock options and restricted stock may be granted to directors, officers and other employees of the Company. The maximum number of shares which may be issued upon exercise of the options under the plan cannot exceed 1,190,250 shares. The maximum number of shares of stock that may be issued as restricted stock awards cannot exceed 357,075.

The Stock Incentive Plan will remain in effect as long as any awards under it are outstanding; however, no awards may be granted under the Stock Incentive Plan on or after the 10-year anniversary of the effective date of the Stock Incentive Plan or July 17, 2024. Under FASB ASC Topic 718, the Company will recognize compensation expense on its income statement over the requisite service period or performance period based on the grant date fair value of stock options and other equity-based compensation (such as restricted stock).

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss). Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, and the actuarial gains and losses of the pension plan, are reported as a separate component of the equity section of the balance sheet, such items, along with net income (loss), are components of comprehensive income (loss).

Concentration of Credit Risk and Interest-Rate Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, investment and mortgage-backed securities and loans. Cash and cash equivalents include amounts placed with highly rated financial institutions. Investment securities include securities backed by the U.S. Government and other highly rated instruments. The Company's lending activity is primarily concentrated in loans collateralized by real estate in the State of New York. As a result, credit risk is broadly dependent on the real estate market and general economic conditions in the State.

The Company is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to make loans secured by real estate in the State of New York. The potential for interest-rate risk exists as a result of the shorter duration of the Company's interest-sensitive liabilities compared to the generally longer duration of interest-sensitive assets. In a rising rate environment, liabilities will reprice faster than assets, thereby reducing net interest income. For this reason, management regularly monitors the maturity structure of the Company's assets and liabilities in order to measure its level of interest-rate risk and to plan for future volatility.

Advertising Costs

It is the Company's policy to expense advertising costs in the period in which they are incurred.

Goodwill

Intangible assets resulting from acquisitions under the acquisition method of accounting consist of goodwill and other intangible assets (see "Core Deposit Intangible" below). Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired and is not amortized. The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities. Goodwill is subject to annual tests for impairment or more often, if events or circumstances indicate it may be impaired.

**<u>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u> (Cont'd)**

Core Deposit Intangible

The Core Deposit Intangible is the portion of an acquisition purchase price which represents value assigned to the existing deposit base and is amortized on a straight line basis over a ten year period.

Business Combinations

Business combinations are accounted for under the acquisition method of accounting. Acquired assets, including separately identifiable intangible assets, and assumed liabilities are recorded at their acquisition-date estimated fair values. The excess of the cost of acquisition over these fair values is recognized as goodwill. During the measurement period, which cannot exceed one year from the acquisition date, changes to estimated fair values are recognized as an adjustment to goodwill. Certain transaction costs are expensed as incurred.

Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock. Diluted earnings per share is computed by adjusting the weighted average number of shares of common stock outstanding to include the effect of outstanding stock options and compensation grants, if dilutive, using the treasury stock method.

Recent Accounting Pronouncements

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings ("TDRs") by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs which includes an assessment of whether the creditor has granted a concession, an entity must evaluate whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, for public business entities, ASU 2022-02 requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6. ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022. The Company may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method, which would result in a cumulative-effect adjustment to retained earnings, or to adopt the amendments prospectively. The Company intends to elect to adopt the updated guidance on TDR recognition and measurement prospectively; therefore, the guidance will be applied to modifications occurring after the date of adoption. The amendments on TDR disclosures and vintage disclosures must be adopted prospectively. The Company does not believe that ASU 2022-02 will have a material impact on the Company's consolidated financial statements.

In June, 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses" (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. In April, 2019, FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses". ASU 2019-04 made amendments to the following categories in ASU 2016-13 which include Accrued interest, transfers between classifications or categories for loans and debt securities, recoveries, reinsurance recoverables, projections of interest rate environments for variable-rate financial instruments, costs to sell when foreclosure is probable, consideration of expected prepayments when determining the effective interest rate, vintage disclosures and extension and renewal options. In May, 2019, FASB issued ASU 2019-05, "Financial Instruments – Credit Losses (Topic 326); Targeted Transition Relief", ASU 2019-05 allows the Company to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of Topic 326 if the instruments are eligible for the fair value option under authoritative guidance for fair value. The fair value option election does not apply to held-to-maturity debt securities. We are required to make this election on an instrument-by-instrument basis. This ASU will be effective for public business entities that are a smaller reporting company in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

**<u>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u> (Cont'd)**

<u>Recent Accounting Pronouncements</u> (Cont'd)

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In June 2020, the FASB issued ASU 2020-05, "Effective Dates for Certain Entities". The amendments in this update defer the effective date for one year for small reporting companies that have not yet issued financial statements reflecting the adoption of "Leases". Therefore, "Leases" is effective, for the Company, for fiscal years beginning after December 15, 2021. The adoption of this guidance in 2022 did not have a material effect on the Company's consolidated financial statements.

Subsequent Events

The Company evaluated its December 31, 2022 consolidated financial statements for subsequent events through the date the consolidated financial statements were issued and has determined that there are no subsequent events that require disclosure under FASB guidance.

**<u>2. BUSINESS COMBINATION</u>**

On June 1, 2022, Vecta Partners completed its acquisition of Vecta Inc. pursuant to the Merger Agreement, by and among Vecta Partners, Merger Sub, Mark Silber, Vecta Inc. and Sunnyside Federal. Pursuant to the Merger Agreement and subject to the terms and conditions thereof, on the Closing Date, Merger Sub merged with and into Vecta Inc., with Vecta Inc continuing as the surviving corporation and a wholly-owned subsidiary of Vecta Partners.

Under the terms of the Merger Agreement, as of the Closing Date and as a result of the Merger, Vecta Partners acquired all of the outstanding common stock of Vecta Inc. at a price of $20.25 per share in cash. The aggregate value of the Merger consideration was approximately $15.3 million.

The Merger was accounted for under the acquisition method of accounting and accordingly the results of the Company's consolidated operations have been included in the Company's December 31, 2022 consolidated financial statements from the Closing Date of the Merger, or June 1, 2022.

**<u>2. Business combination</u> (Cont'd)**

The following table sets forth assets acquired, and liabilities assumed in connection with the Merger, at their estimated fair values as of the Closing Date of the Merger:

SCHEDULE OF ASSETS AND LIABILITIES ACQUIRED

---

| | |
|:---|:---|
|  | (In thousands) |
| Assets acquired: |  |
| Cash and cash equivalents | $4510 |
| Certificates of deposit | 250 |
| Securities held to maturity | 418 |
| Securities available for sale | 48839 |
| Loans receivable, net | 26694 |
| Premises and equipment | 5404 |
| Federal Home Loan Bank of New York and other stock, at cost | 177 |
| Accrued interest receivable | 386 |
| Cash surrender value of life insurance | 2533 |
| Goodwill | 5623 |
| Core deposit intangible | 1406 |
| Other assets | 195 |
| Total assets Acquired | 96435 |
| Liabilities assumed: |  |
| Deposits: |  |
| &nbsp;&nbsp;&nbsp;Non-interest bearing | 7795 |
| &nbsp;&nbsp;&nbsp;Savings, NOW and money market | 47863 |
| &nbsp;&nbsp;&nbsp;Time deposits | 25036 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 80694 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowings | 849 |
| &nbsp;&nbsp;&nbsp;Advances from borrowers for taxes and insurance | 406 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities assumed | 82211 |
| Net assets acquired | 14224 |
| Transaction cost, net | 1042 |
| Price paid | $15266 |

---

The determination of the fair value of the assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information (existing at the date of closing) relative to closing date fair values becomes available.

Fair Value Measurement of Assets Acquired and Liabilities Assumed:

Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in this acquisition.

Cash and cash equivalents **-** The estimated fair values of cash and cash equivalents approximate their stated face amounts, as these financial instruments are either due on demand or have short-term maturities.

Investment securities **-** The investment securities acquired were classified as either "available for sale" or "held to maturity" based on the Company's intent at the acquisition date. The estimated fair values of the investment securities were calculated utilizing Level 2 inputs similar to the valuation techniques used for Vecta's investment portfolios detailed in Note 16.

**<u>2. Business combination</u> (Cont'd)**

Loans - The fair value of the performing loan portfolio includes both a yield component and a credit component. The yield component utilizes a discounted cash flow analysis, including prepayment speed assumptions, to compare the difference between the present values of projected cash flows of the loan portfolio at portfolio rates versus cash flows at current market rates. The yield component reflected a pre-tax discount of $405,796, which will be accreted as a net increase in interest income over the lives of the related loans. For purposes of the credit adjustment, the loan portfolio was segregated into performing and non-performing loans. The credit component of total loans reflected an aggregate pre-tax discount of $895,330, comprised of adjustments to the loans based on Sunnyside Federal's historical charge-off history, charge-off statistics by type of loan published by the FDIC, Sunnyside Federal's internal allowance for loan and lease losses ("ALLL") analysis and the level of allowances for loan losses maintained by public New York-based financial institutions with assets less than $600 million, all of which provide indications of an estimated fair value adjustment a purchaser would apply to reflect the expected aggregate credit losses.

Core Deposit Intangible - Core deposit intangibles (CDI) are measures of the value of non-maturity checking, savings, NOW and money market customer deposits that are acquired in a business combination. The fair value for CDI was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the interest costs associated with the customer deposits. The CDI is amortized over an estimated useful life of 10 years to approximate the existing deposit relationships acquired.

Premises and equipment- The fair value of the office building and land was based on an appraisal using the income approach.

Deposits - The fair values of deposit liabilities with no stated maturity (i.e., non-interest bearing accounts and savings, NOW and money market accounts) are equal to the carrying amounts payable on demand. The fair values of certificates of deposit represent contractual cash flows, discounted to present value using interest rates currently offered on deposits with similar characteristics and remaining maturities.

**<u>3. LIQUIDATION ACCOUNT</u>**

On July 15, 2013, the Bank completed a mutual-to-stock conversion and in accordance with applicable federal conversion regulations, at the time of the completion of the mutual-to-stock conversion, Sunnyside Bancorp Inc., now Vecta Inc. established a liquidation account in the Bank in an amount equal to the Bank's total retained earnings as of the latest balance sheet date in the final prospectus used in the Conversion. Each eligible account holder or supplemental account holder is entitled to a proportionate share of this liquidation account in the event of a complete liquidation of the Bank, and only in such event. This share is reduced if the eligible account holder's or supplemental account holder's deposit balance falls below the amounts on the date of record as of any December 31 and will cease to exist if the account is closed. The liquidation account will never be increased despite any increase after conversion in the related deposit balance. The Company may not declare, pay a dividend on, or repurchase any of its capital stock, if the effect thereof would cause its capital to be reduced below the liquidation account amount or regulatory capital requirements.

**<u>4. CERTIFICATES OF DEPOSIT</u>**

**** 

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Maturing in: |  |
| &nbsp;&nbsp;&nbsp;After one to five years | $250000 |

---

**<u>5. SECURITIES</u>**

SCHEDULE OF HELD TO MATURITY AND AVAILABLE FOR SALE SECURITIES

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | | Gross Unrealized | Gross Unrealized | |
|  | Amortized<br>Cost | Gains | Losses | Fair<br>Value |
| Securities held to maturity: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;State, county, and municipal obligations | $350226 | $- | $6720 | $343506 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 65379 | - | 2320 | 63059 |
|  | $415605 | $- | $9040 | $406565 |
| Securities available for sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. government and agency obligations | $12862316 | $- | $1193169 | $11669147 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 22866886 | 239 | 801235 | 22065890 |
|  | $35729202 | $239 | $1994404 | $33735037 |

---

Mortgage-backed securities consist of securities guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac with amortized costs of $256,000, $5.2 million and $8.0 million, at December 31, 2022. Mortgage-backed securities also include other commercial mortgage-backed securities totaling $9.5 million at December 31, 2022.

There were no sales of securities held to maturity or available for sale for the seven months ended December 31, 2022.

The following is a summary of the amortized cost and fair value of securities at December 31, 2022 by remaining period to contractual maturity. Actual maturities may differ from these amounts because certain debt security issuers have the right to call or redeem their obligations prior to contractual maturity. In addition, mortgage backed securities that amortize monthly are listed in the period the security is legally set to pay off in full.

SCHEDULE OF AMORTIZED COST AND FAIR VALUE OF SECURITIES BY REMAINING PERIOD TO CONTRACTUAL MATURITY

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Held to Maturity | Held to Maturity | Available for Sale | Available for Sale |
|  | Amortized<br>Cost | Fair<br>Value | Amortized<br>Cost | Fair<br>Value |
| Within one year | $- | $- | $2598318 | $2589582 |
| After one to five years |  |  | 8953594 | 8820721 |
| After five to ten years |  |  | 6861502 | 6303252 |
| After ten years | 415605 | 406565 | 17315788 | 16021482 |
|  | $415605 | $406565 | $35729202 | $33735037 |

---

**<u>5. SECURITIES</u> (Cont'd)**

The following table summarizes the fair values and unrealized losses of securities with an unrealized loss at December 31, 2022, segregated between securities that have been in an unrealized loss position for less than one year, or one year or longer, at the respective dates.

SCHEDULE OF FAIR VALUES AND UNREALIZED LOSS

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Under One Year | Under One Year | One Year or More | One Year or More |
|  |<br>Fair<br>Value | Gross<br>Unrealized<br>Loss |<br>Fair<br>Value | Gross<br>Unrealized<br>Loss |
| Securities held to maturity: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;State, county, and municipal obligations | $343506 | $6720 | $- | $- |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 63059 | 2320 | - | - |
|  | 406565 | 9040 | - | - |
| Securities available for sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. government and agency obligations | 11669147 | 1193169 |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 21946311 | 801235 | - | - |
|  | 33615458 | 1994404 | - | - |
|  | $34022023 | $2003444 | $&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |

---

The unrealized losses are primarily due to changes in market interest rates subsequent to purchase. A total of 45 securities were in an unrealized loss position at December 31, 2022. The Company generally purchases securities issued by Government Sponsored Enterprises (GSE). Accordingly, it is expected that the GSE securities would not be settled at a price less than the Company's amortized cost basis. The Company does not consider these investments to be other-than-temporarily impaired at December 31, 2022 since the decline in market value is attributable to changes in interest rates and not credit quality and the Company has the intent and ability to hold these investments until there is a full recovery of the unrealized loss, which may be at maturity.

Securities available for sale with a carrying value of approximately $3.5 million as of December 31, 2022 have been pledged to secure advances from the FHLB.

**<u>6. LOANS RECEIVABLE, NET</u>**

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Mortgage loans: |  |
| &nbsp;&nbsp;&nbsp;Residential 1-4 family | $9676089 |
| &nbsp;&nbsp;&nbsp;Commercial and multi-family | 16438436 |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit | 170468 |
|  | 26284993 |
| Other loans: |  |
| &nbsp;&nbsp;&nbsp;Passbook | 5789 |
| &nbsp;&nbsp;&nbsp;Student | 2337460 |
| &nbsp;&nbsp;&nbsp;Commercial | 1164210 |
|  | 3507459 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | 29792452 |
| Less: |  |
| &nbsp;&nbsp;&nbsp;Purchase accounting credit adjustment | 774063 |
| &nbsp;&nbsp;&nbsp;Purchase accounting discount | 373626 |
| &nbsp;&nbsp;&nbsp;Deferred loan fees (costs and premiums), net | 2841 |
| &nbsp;&nbsp;&nbsp;Allowance for loan losses | 79290 |
|  | 1229820 |
|  | $28562632 |

---

In the ordinary course of business, the Company makes loans to its directors, executive officers, and their associates (related parties) on the same terms as those prevailing at the time of origination for comparable loans with other borrowers. The unpaid principal balances of related party loans were approximately $98,000 at December 31, 2022.

As a result of the acquisition of Sunnyside Federal, the loan portfolio was segregated into performing and non-performing loans to determine the credit adjustment. The credit component of total loans reflected an aggregate original pre-tax discount of $895,330, comprised of adjustments to the loans based on Sunnyside Federal's historical charge-off history, charge-off statistics by type of loan published by the FDIC, Sunnyside Federal's internal allowance for loan and lease losses ("ALLL") analysis and the level of allowances for loan losses maintained by public New York-based financial institutions with assets less than $600 million, all of which provide indications of an estimated fair value adjustment a purchaser would apply to reflect the expected aggregate credit losses.

**<u>6. LOANS RECEIVABLE, NET</u> (Cont'd)**

Activity in this credit adjustment is summarized as follows:

SCHEDULE OF ACTIVITY IN CREDIT ADJUSTMENT

---

| | |
|:---|:---|
|  | Seven months ended<br>December 31,<br>2022 |
| Balance at beginning of period | $- |
| Credit Adjustment as a result of merger | 895330 |
| Amortization | (52932) |
| Charge - offs | (68335) |
| Balance at end of period | $774063 |

---

In addition to the above credit adjustment, the Company will maintain an allowance for loan losses for new loans originated and for qualitative and other changes in the loan portfolio that existed as of the acquisition date.

Activity in the allowance for loan losses is summarized as follows:

SCHEDULE OF ACTIViTY IN ALLOWANCE FOR LOAN LOSSES

---

| | |
|:---|:---|
|  | Seven months ended<br>December 31,<br>2022 |
| Balance at beginning of period | $- |
| Provision for loan losses | 69475 |
| Recoveries | 9815 |
| Balance at end of period | $79290 |

---

The allowance for loan losses consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. There are no specific allowances as of December 31, 2022. The general component covers pools of loans by loan class not considered impaired, as well as smaller balance homogeneous loans, such as one-to-four family real estate, home equity lines of credit and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:

1. Lending
 policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

2. National,
 regional, and local economic and business conditions including the value of underlying collateral for collateral dependent loans.

3. Nature
 and volume of the portfolio and terms of loans.

4. Experience,
 ability, and depth of lending management and staff and the quality of the Company's loan review system.

**<u>6. LOANS RECEIVABLE, NET</u> (Cont'd)**

5. Volume
 and severity of past due, classified and nonaccrual loans.

6. Existence
 and effect of any concentrations of credit and changes in the level of such concentrations.

7. Effect
 of external factors, such as competition and legal and regulatory requirements.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management's best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower's overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of pass, special mention, substandard, doubtful and loss.

Loan classifications are defined as follows:

● Pass — These loans are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

● Special Mention — These loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects.

● Substandard — These loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

● Doubtful — These loans have all the weaknesses inherent in a loan classified substandard with the added characteristic that the weaknesses make the full recovery of our principal balance highly questionable and improbable on the basis of currently known facts, conditions, and values. The likelihood of a loss on an asset or portion of an asset classified as doubtful is high. Its classification as Loss is not appropriate, however, because pending events are expected to materially affect the amount of loss.

● Loss — These loans are considered uncollectible and of such little value that a charge-off is warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery will occur.

**<u>6. LOANS RECEIVABLE, NET</u> (Cont'd)**

One of the primary methods the Company uses as an indicator of the credit quality of their portfolio is the regulatory classification system. The following table reflects the credit quality indicators by portfolio segment and class, at the date indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Mortgage Loans | Mortgage Loans | Mortgage Loans | | | |
|  | <br>Residential<br>1-4 Family | Commercial Real Estate<br>and<br>Multi-Family | <br>Home<br>Equity | <br>Student | <br>Commercial<br>and<br>Other | <br>Total |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
| Pass | $9676 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14497 | $170 | $2132 | $1170 | $27645 |
| Special Mention |  | 767 |  | 137 |  | 904 |
| Substandard | - | 1174 | - | 69 | - | 1243 |
| &nbsp;&nbsp;&nbsp;Total | $9676 | $16438 | $170 | $2338 | $1170 | $29792 |

---

The following table provides information about loan delinquencies at the date indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  |<br>30-59<br>Days<br>Past Due |<br>60-89<br>Days<br>Past Due |<br>90 Days<br>or More<br>Past Due |<br><br>Total<br>Past Due |<br><br>Current<br>Loans |<br><br>Total<br>Loans | 90 Days<br>or More<br>Past Due<br>and<br>Accruing |
|  | | | | (In thousands) | (In thousands) | | |
| Residential 1-4 family | $- | $- | $- | $- | $9676 | $9676 | $- |
| Commercial real estate and multi-family |  |  | 234 | 234 | 16204 | 16438 |  |
| Home equity lines of credit |  |  |  |  | 170 | 170 |  |
| Student loans | 134 | 38 |  | 172 | 2166 | 2338 |  |
| Commericial and other loans | - | - | - | - | 1170 | 1170 | - |
|  | $134 | $38 | $234 | $406 | $29386 | $29792 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |

---

**<u>6. LOANS RECEIVABLE, NET</u> (Cont'd)**

The following is a summary of loans, by loan type, on which the accrual of income has been discontinued and loans that are contractually past due 90 days or more but have not been classified as non-accrual at the dates indicated:

SCHEDULE OF LOANS ACCRUAL OF INCOME HAS BEEN DISCONTINUED AND LOANS PAST DUE BUT NOT CLASSIFIED AS NON-ACCRUAL

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
|  | (In thousands) |
| Non-accrual loans: |  |
| &nbsp;&nbsp;&nbsp;Residential 1-4 family | $- |
| &nbsp;&nbsp;&nbsp;Commercial real estate and multi-family | 234 |
| &nbsp;&nbsp;&nbsp;Home equity lines of credit |  |
| &nbsp;&nbsp;&nbsp;Student | 69 |
| &nbsp;&nbsp;&nbsp;Commercial and other loans | - |
| &nbsp;&nbsp;&nbsp;Total non-accrual loans | 303 |
| Accruing loans delinquent 90 days or more | - |
| &nbsp;&nbsp;&nbsp;Total non-performing loans | $303 |

---

The total amount of interest income on non-accrual loans that would have been recognized if interest on all such loans had been recorded based upon original contract terms amounted to approximately $15,000 for the seven months ended December 31, 2022 respectively. The total amount of interest income recognized on non-accrual loans amounted to approximately $31,300 during seven months ended December 31, 2022.

A loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual terms of the loan agreement. The Company considers one-to four-family mortgage loans and consumer installment loans to be homogeneous and, therefore, does not generally evaluate them for impairment, unless they are considered troubled debt restructurings. All other loans are evaluated on an individual basis.

The Company did not have any troubled debt restructurings at or during the seven months ended December 31, 2022.

The following table presents the activity in the allowance for loan losses by loan type for the period indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Seven months ended | Seven months ended | Seven months ended | Seven months ended | Seven months ended | Seven months ended | Seven months ended |
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Mortgage Loans | Mortgage Loans | Mortgage Loans | | | | |
|  |<br>Residential<br>1-4 Family | Commercial<br>and<br>Multi-Family |<br>Home<br>Equity |<br><br>Student |<br><br>Other |<br><br>Unallocated |<br><br>Total |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
| Beginning balance | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - |
| Provision for loan losses |  | 56 |  | 13 |  |  | 69 |
| Charge offs |  |  |  |  |  |  |  |
| Recoveries | - | - | - | 10 | - | - | 10 |
| Ending Balance | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $56 | $- | $23 | $- | $- | $79 |

---

**<u>7. PREMISES AND EQUIPMENT, NET</u>**

SCHEDULE OF PREMISES AND EQUIPMENT, NET

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Land and land improvements | $1290000 |
| Building and building improvements | 4004842 |
| Furniture, fixtures and equipment | 146421 |
|  | 5441263 |
| Less accumulated depreciation | (86242) |
|  | $5355021 |

---

Depreciation expense for the seven months ended December 31, 2022 was $86,242.

**<u>8. ACCRUED INTEREST RECEIVABLE</u>**

SCHEDULE OF ACCRUED INTEREST RECEIVABLE

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Loans | $263457 |
| Mortgage-backed securities | 86585 |
| Investment securities | 47381 |
| Certificates of deposit | 966 |
|  | $398389 |

---

**<u>9. DEPOSITS</u>**

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2022 | 2022 |
|  | Weighted<br>Average<br>Rate |<br>Amount |
| Non-interest bearing checking | 0.00% | $7556028 |
| NOW accounts | 0.05% | 13593642 |
| Regular savings and clubs | 0.10% | 18502093 |
| Super saver | 0.36% | 11758062 |
| Money market | 0.10% | 2489311 |
|  |  | 53899136 |
| Certificates of deposit | 1.08% | 20656418 |
|  | 0.39% | $74555554 |

---

**<u>9. DEPOSITS</u> (Cont'd)**

Certificates of deposit are summarized by remaining period to contractual maturity as follows:

SCHEDULE OF CERTIFICATES OF DEPOSIT BY CONTRACTUAL MATURITY

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
|  | (In thousands) |
| One year or less | $15708 |
| Over one to three years | 4516 |
| Over three years | 432 |
|  | $20656 |

---

Certificates of deposit with balances of $100,000 or more totaled $11.5 million at December 31, 2022. The Company's deposits are insurable to applicable limits established by the FDIC. The maximum deposit insurance amount is $250,000.

Interest expense on deposits is summarized as follows:

---

| | |
|:---|:---|
|  | Seven Months Ended<br>December 31,<br>2022 |
| NOW | $4066 |
| Savings and clubs | 36721 |
| Money market | 1486 |
| Certificates of deposit | 86659 |
|  | $128932 |

---

**<u>10. BORROWINGS</u>**

At December 31, 2022, the Company had a borrowing capacity at the FHLB of $27.8 million and access to a line of credit at Atlantic Community Bankers Bank of $2,000,000 of which no balances were outstanding at December 31, 2022.

See Note 5 to the consolidated financial statements regarding securities pledged as collateral for such advances.

**<u>11. INCOME TAXES</u>**

The components of income taxes are summarized as follows:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSES (BENEFITS)

---

| | |
|:---|:---|
|  | Seven Months<br>Ended<br>December 31,<br>2022 |
| Current tax expense: |  |
| &nbsp;&nbsp;&nbsp;Federal | $- |
| &nbsp;&nbsp;&nbsp;State | 22400 |
|  | 22400 |
| Deferred tax expense (benefit): |  |
| &nbsp;&nbsp;&nbsp;Federal |  |
| &nbsp;&nbsp;&nbsp;State | - |
|  | - |
|  | $22400 |

---

The following is a reconciliation of expected income taxes (benefit), computed at the applicable federal statutory rate of 21% for the seven months ended December 31, 2022 to actual income tax (benefit):

SCHEDULE OF RECONCILIATION OF EFFECTIVE INCOME TAX RATE FROM STATUTORY FEDERAL RATE

---

| | |
|:---|:---|
|  | Seven Months<br>Ended<br>December 31,<br>2022 |
| Federal income tax expense (benefit) | $(37868) |
| State income tax expense (benefit) | 17696 |
| Income from life insurance | (8279) |
| Tax-exempt interest | (1053) |
| Change in federal valuation allowance | 53059 |
| Other | (1155) |
| Actual income tax (benefit) | $22400 |

---

**<u>11. INCOME TAXES</u> (Cont'd)**

The components of deferred tax assets and liabilities are as follows:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Deferred tax assets: |  |
| &nbsp;&nbsp;&nbsp;Depreciation | $138203 |
| &nbsp;&nbsp;&nbsp;Benefit plan liabilities | 44786 |
| &nbsp;&nbsp;&nbsp;Allowance for loan losses | 22057 |
| &nbsp;&nbsp;&nbsp;Charitable contribution carryover | 865 |
| &nbsp;&nbsp;&nbsp;Net operating loss carryover | 1581652 |
| &nbsp;&nbsp;&nbsp;Unfunded pension liability | 44242 |
| &nbsp;&nbsp;&nbsp;Unrealized loss on securities available for sale | 418775 |
| &nbsp;&nbsp;&nbsp;Other | 8645 |
|  | 2259225 |
| &nbsp;&nbsp;&nbsp;Valuation allowance | (1865428) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets | 393797 |
| Deferred tax liabilities: |  |
| &nbsp;&nbsp;&nbsp;Discounts on investments | 295 |
| &nbsp;&nbsp;&nbsp;Prepaid benefit plans | 42939 |
| &nbsp;&nbsp;&nbsp;Purchase accounting adjustments | 335772 |
| &nbsp;&nbsp;&nbsp;Net deferred loan cost/fees | 14791 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | 393797 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax assets | $- |

---

At December 31, 2022, the Company had a federal net operating loss carryover of $5,100,000 and a New York state net operating loss carryover of $7,400,000 available to offset future taxable income. As a result of the merger as discussed in Note 1, usage of the federal NOL and $6,000,000 of the New York State NOL is limited in accordance with Internal Revenue Code Section 382 to $379,000 annually on a cumulative basis. (Portions of the $379,000 not used in a particular tax year may be added to subsequent usage.)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As a result, a valuation allowance of $1,865,000 has been established on the entire net deferred tax asset.

Sunnyside Federal qualifies as a savings and loan association under the provisions of the Internal Revenue Code and, therefore, was permitted, prior to January 1, 1996, to deduct from federal taxable income an allowance for bad debts based on eight percent of taxable income before such deduction less certain adjustments, subject to certain limitations. Beginning January 1, 1996, the Sunnyside Federal, for federal income tax purposes, must calculate its bad debt deduction using either the experience or the specific charge off method. Retained earnings at December 31, 2022 included approximately $1,700,000 of such bad deductions for which income taxes have not been provided.

**<u>12. BENEFIT PLANS</u>**

Pension Plan

All eligible Company employees are included in a non-contributory defined benefit pension plan. Prior to the acquisition date of June 1, 2022, the plan was "Frozen." At the freeze date, April 15, 2008, no employee has been permitted to commence or recommence participation in the plan and no further benefits will accrue to any plan participants. In addition, compensation received on or after the plan freeze date will not be considered for any purpose under the plan.

The following table sets forth the change in benefit obligation, change in plan assets, and a reconciliation of the funded status:

SCHEDULE OF CHANGE IN BENEFIT OBLIGATION, CHANGE IN PLAN ASSETS, AND RECONCILIATION OF FUNDED STATUS

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Change in projected benefit obligation: |  |
| &nbsp;&nbsp;&nbsp;Projected benefit obligation on June 1, 2022 | $2084819 |
| &nbsp;&nbsp;&nbsp;Interest cost | 56920 |
| &nbsp;&nbsp;&nbsp;Actuarial loss | 54354 |
| &nbsp;&nbsp;&nbsp;Benefits paid | (112371) |
| Projected benefit obligation at end of year | 2083722 |
| Change in fair value of plan assets: |  |
| &nbsp;&nbsp;&nbsp;Fair value of plan assets on June 1, 2022 | 2113996 |
| &nbsp;&nbsp;&nbsp;Actual return on plan assets | (70633) |
| &nbsp;&nbsp;&nbsp;Employer contributions | 94059 |
| &nbsp;&nbsp;&nbsp;Benefits paid | (112371) |
| &nbsp;&nbsp;&nbsp;Fair value of plan assets at end of year | 2025051 |
| &nbsp;&nbsp;&nbsp;Funded status of plan included in other liabilities | $(58671) |

---

As of December 31, 2022, the components of accumulated other comprehensive loss on a pretax basis is an unrecognized actuarial loss of $210,675. The unrecognized net actual loss of $1,519,621 that existed as of May 31, 2022 was recognized as of the acquisition date of June 1, 2022.

The estimated net actuarial loss for the pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during 2023 is $64.

The weighted average assumptions used to determine the Plan's benefit obligation are as follows:

SCHEDULE OF WEIGHTED AVERAGE ASSUMPTION USED TO DETERMINE PLANS BENEFIT OBLIGATION

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Discount rate | 4.94% |
| Salary increase rate | N/A |

---

**<u>12. BENEFIT PLANS</u> (Cont'd)**

The components of net periodic plan cost are as follows:

SCHEDULE OF COMPONENTS OF NET PERIODIC PLAN COST

---

| | |
|:---|:---|
|  | Seven Months Ended<br>December 31,<br>2022 |
| Components of net periodic plan cost (credit): |  |
| &nbsp;&nbsp;&nbsp;Interest cost | $56920 |
| &nbsp;&nbsp;&nbsp;Expected return on assets | (85688) |
| Net periodic plan cost (credit) included in compensation and benefits expense | (28768) |
| Changes in benefit obligation recognized in other comprehensive income (loss): |  |
| &nbsp;&nbsp;&nbsp;Net loss | 210675 |
| Benefit obligation recognized in other comprehensive income (loss) | 210675 |
| Total recognized in net periodic plan cost and other comprehensive income (loss) | $181907 |

---

The weighted average assumptions used to determine net periodic plan cost are as follows:

SCHEDULE OF WEIGHTED AVERAGE ASSUMPTION USED TO DETERMINE NET PERIODIC PLAN

---

| | |
|:---|:---|
|  | Seven months Ended<br>December 31,<br>2022 |
| Discount rate | 4.94% |
| Expected rate of return on plan assets | 7.00% |
| Rate of compensation increase | N/A |
| Amortization period | N/A |

---

*Investment Policies and Strategies*

Wilmington Trust Retirement & Institutional Services Company acts as Trustee for the Plan. The Plan assets are managed by Pinnacle Associates, Ltd.

The long-term investment objectives are to maintain plan assets at a level that will sufficiently cover long-term obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term obligations will grow. A broadly diversified combination of equity and fixed income portfolios and various risk management techniques are used to help achieve these objectives.

Allowable investments include common stocks, preferred stocks, fixed income securities, depository receipts, money market funds, real estate investment trusts, and publicly traded limited partnerships with the following limitations:

**<u>12. BENEFIT PLANS</u> (Cont'd)**

● The
 account will be a balanced account, with a target of 60% equity securities and 40% fixed income securities ratio which may vary based
 on the portfolio manager's discretion.

● The
 account will generally not invest more than 20% of its net assets in cash and cash equivalents.

● The
 account will invest, under normal circumstances, between 20% to 60% of its net assets in fixed income securities.

● The
 account will invest, under normal circumstances, between 30% to 80% of its net assets in equity securities. The equities will be
 mostly of a large capitalization nature.

● The
 account will generally hold between 50 to 90 equity securities.

● The
 maximum equity position size will be limited to 5% of net assets at the time of purchase.

● For
 equities, each significant economic sector will be considered for the investment.

● The
 account may invest up to 15% of its net assets in companies incorporated outside of the United States, at the time of purchase.

● The
 account will not sell securities short. Any short transactions in futures, swaps, structured products, and call options will apply
 to this limit.

The investment goal is to achieve investment results that will contribute to the proper funding of the pension plan by exceeding the rate of inflation over the long term.

*Determination of Long-Term Rate-of-Return*

The long-term rate-of-return-on-assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan's target allocation of asset classes. Equities and fixed income securities were assumed to earn real rates of return in the ranges of 5-9% and 2-6%, respectively. The long-term inflation rate was estimated to be 3%. When these overall return expectations are applied to the plan's target allocation, the result is an expected rate of return of 7% to 10%.

 

*Estimated Future Benefit Payments*

 

The following benefit payments, which reflect expected future services, as appropriate, are expected to be paid:

SCHEDULE OF BENEFIT PAYMENTS EXPECTED TO BE PAID

---

| | |
|:---|:---|
| Fiscal year ending | Fiscal year ending |
| December 31, | December 31, |
| 2023 | $196241 |
| 2024 | 189975 |
| 2025 | 183602 |
| 2026 | 176749 |
| 2027 | 169417 |
| Years 2028-2032 | 759523 |
|  | $1675507 |

---

The Company does not expect to make any contribution to the plan in 2023.

**<u>12. BENEFIT PLANS</u> (Cont'd)**

The fair values of the pension plan assets at December 31, 2022, by asset category (see note 16 for the definition of levels) are as follows:

SCHEDULE OF FAIR VALUES OF PENSION PLAN ASSETS

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | | Quoted Prices | | |
|  | | in Active | | |
|  | | Markets for | Significant | Significant |
|  | | Identical | Observable | Unobservable |
|  | | Assets | Inputs | Inputs |
| Asset Category | Total | (Level 1) | (Level 2) | (Level 3) |
| Cash and money market funds | $127547 | $127547 | $- | $- |
| U.S. Treasury securities (a) | 547243 |  | 547243 |  |
| Corporate bonds (b) | 322002 |  | 322002 |  |
| Equity securities (c) | 1028259 | 1028259 | - | - |
| &nbsp;&nbsp;&nbsp;Total | $2025051 | $1155806 | $869245 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - |

---

(a) Includes seven securities maturing within three years .

(b) Includes five corporate bonds due within five years rated BBB- or better by the S&P.

(c) Includes 36 companies spread over various market sectors.

Employee Savings Plan

The Company also maintains a defined contribution plan for eligible employees under Section 401(k) of the Internal Revenue Service ("IRS") Code. All employees who meet the plan eligibility requirements may elect to participate in the plan by making contributions up to the maximum permissible IRS limit. The Company makes matching contributions limited to 50% of the participant's contributions up to 6% of compensation. Savings plan expense was approximately $16,500 for the seven months ended December 31, 2022.

Equity Incentive Plan

On July 17, 2014, the Board of Directors adopted the Vecta Inc. 2014 Equity Incentive Plan (the "Stock Incentive Plan") which was approved by shareholders at the Company's 2014 Annual Meeting of Shareholders held on September 16, 2014. Stock options and restricted stock may be granted to directors, officers and other employees of the Company. The maximum number of shares which may be issued upon exercise of the options under the plan cannot exceed 1,190,250 shares. The maximum number of shares of stock that may be issued as restricted stock awards cannot exceed 357,075. (Shares reflect the effect of the 15 to 1 stock dividend declared on June 1, 2022.)

There were no restricted stock awards outstanding or stock options outstanding as of December 31, 2022.

Other Retirement Benefits

Prior to the acquisition date, the Company entered into salary continuation agreements with certain of its, now retired, officers effective June 2002. The agreements provide for specified benefit payments for life, 15-year period certain commencing at normal retirement, as well as payments upon early retirement, disability and death. The amounts payable under the agreements vest at an annual rate of 5% over 20 years and are computed as a specified percentage of a defined total compensation base, less (i) benefits under the Company's pension plan, 401(k) plan and deferred compensation agreements, and (ii) a portion of social security benefits. The Association also entered into agreements providing for split-dollar life insurance death benefits based on each officer's total compensation, as defined. The salary continuation and split-dollar agreements are unfunded, non-qualified benefits plans. However, the Company has purchased life insurance policies held by a Rabbi Trust in consideration of its obligations under the salary continuation agreements and certain prior deferred compensation agreements. During 2009, certain of these obligations were renegotiated by the Company with the purchase of annuity contracts. At December 31, 2022, recorded obligations of $161,000, are included in other liabilities with respect to these agreements. The related life insurance policies are reported as assets at their cash surrender values of $2,571,968 at December 31, 2022. Total expense under these plans was approximately $(5,500) for the seven months ended December 31, 2022.

**<u>13. ACCUMULATED OTHER COMPREHENSIVE LOSS</u>**

The components of accumulated other comprehensive loss included in stockholders' equity are as follows:

SCHEDULE OF COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS

---

| | |
|:---|:---|
|  | December 31,<br>2022 |
| Unrealized net loss on pension plan | $(210675) |
| Unrealized loss on securities available for sale | (1994165) |
| Accumulated other comprehensive loss before taxes | (2204840) |
| Tax effect | - |
| Accumulated other comprehensive loss | $(2204840) |

---

A full valuation allowance has been established on the deferred tax assets related to the loss components of accumulated other comprehensive loss. See Note 11 for further discussion.

**<u>14. COMMITMENTS AND CONTINGENCIES</u>**

Off-Balance Sheet Financial Instruments

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments are limited to agreements to extend credit that involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the balance sheets. The contract or notional amounts of these instruments reflect the extent of the Association's involvement in particular classes of financial instruments. The Company's maximum exposure to credit loss in the event of nonperformance by the other parties to these instruments represents the contract amounts, assuming that they are fully funded at a later date and any collateral proves to be worthless.

The Company had outstanding undisbursed home equity and other lines of credit totaling $30,000 and commercial real estate commitments to lend $2,975,000. In addition, there were outstanding standby letters of credit totaling $75,000. These are contractual agreements to lend to customers within specified time periods at interest rates and on other terms based on existing market conditions.

Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee by the customer. The commitment amounts do not necessarily represent future cash requirements since certain agreements may expire without being funded. The credit risk associated with these instruments is essentially the same as for outstanding loans reported in the balance sheets. Commitments are subject to the same credit approval process, including a case-by-case evaluation of the customer's creditworthiness and related collateral requirements.

Legal Proceedings

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. At December 31, 2022, the Company is not involved in any legal proceedings, the outcome of which would be material to the financial statements.

**<u>15. REGULATORY CAPITAL</u>**

The Association is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulators, that if undertaken could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines that involve quantitative measures of the Association's assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices.

Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations. As of December 31, 2022 the Association exceeded all capital adequacy requirements to which it was subject (see tables below). There were no conditions or events since December 31, 2022 that management believes have changed the Association's capital ratings.

The following table presents the Association's actual capital positions and ratios under risk-based capital guidelines of Basel III and Basel I at December 31, 2022:

SCHEDULE OF ACTUAL CAPITAL POSITIONS AND RATIOS

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | | | | To be Well | To be Well | To be Well | To be Well |
|  | | | | | Capitalized Under | Capitalized Under | Capitalized With | Capitalized With |
|  | | | Minimum Capital | Minimum Capital | Prompt Corrective | Prompt Corrective | Capital Conservation | Capital Conservation |
|  | Actual | Actual | Requirements | Requirements | Action Provisions | Action Provisions | Buffer | Buffer |
|  | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio |
|  | | | (Dollars in Thousands) | (Dollars in Thousands) | | | | |
| <u>December 31, 2022</u> |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tangible Capital | $11278 | 13.04% | $1298 | 1.50% | N/A | N/A | N/A | N/A |
| &nbsp;&nbsp;&nbsp;Total Risked-based Capital | 11357 | 24.61% | 4846 | 10.50% | 4615 | 10.00% | 4846 | 10.50% |
| &nbsp;&nbsp;&nbsp;Common Equity Tier 1 Capital | 11278 | 24.44% | 3230 | 7.00% | 3000 | 6.50% | 3230 | 7.00% |
| &nbsp;&nbsp;&nbsp;Tier 1 Risk-based Capital | 11278 | 24.44% | 3923 | 8.50% | 3692 | 8.00% | 3923 | 8.50% |
| &nbsp;&nbsp;&nbsp;Tier 1 Leverage Capital | 11278 | 13.04% | 3460 | 4.00% | 4325 | 5.00% | N/A | N/A |

---

**<u>16. FAIR VALUE MEASUREMENTS AND DISCLOSURES</u>**

**<u>A. Fair Value Measurements</u>**

The Accounting Standards Codification ("ASC") Topic 820, "Fair Value Measurements and Disclosures," defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 applies only to fair value measurements already required or permitted by other accounting standards and does not impose requirements for additional fair value measures. ASC Topic 820 was issued to increase consistency and comparability in reporting fair values.

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The Company did not have any liabilities that were measured at fair value at December 31, 2022. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as foreclosed real estate owned and certain impaired loans. These non-recurring fair value adjustments generally involve the write-down of individual assets due to impairment losses.

In accordance with ASC Topic 820, the Company groups its assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

● Level
 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

**<u>16. FAIR VALUE MEASUREMENTS AND DISCLOSURES</u> (Cont'd)**

**<u>A. Fair Value Measurements</u> (Cont'd)**

● Level
 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar
 instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable
 in the market.

● Level
 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These
 unobservable assumptions reflect the Company's own estimates of assumptions that market participants would use in pricing the
 asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.
 The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or
 liability.

The Company bases its fair values on the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. ASC Topic 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets that are measured on a recurring basis are limited to the available-for-sale securities portfolio. The available-for-sale portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders' equity. Substantially all of the available-for-sale portfolio consists of investment securities issued by government-sponsored enterprises. The fair values for substantially all of these securities are obtained from an independent securities broker. Based on the nature of the securities, the securities broker provides the Company with prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available for the majority of securities in the portfolio.

The following table provides the level of valuation assumptions used to determine the carrying value of assets measured at fair value on a recurring basis at December 31, 2022:

SCHEDULE OF ASSETS MEASURED AT FAIR VALUE ON RECURRING BASIS

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | | Fair Value Measurements | Fair Value Measurements | Fair Value Measurements |
|  | | Quoted Prices in Active | Significant Other | Significant |
|  | Carrying | Markets for Identical | Observable Inputs | Unobservable Inputs |
| Description | Value | (Level 1) | (Level 2) | (Level 3) |
| December 31, 2022: |  |  |  |  |
| Securities available for sale | $33735037 | $&nbsp;&nbsp;&nbsp;&nbsp; - | $33735037 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |

---

There were no assets measured at fair value on a non-recurring basis at December 31, 2022.

**<u>B. Fair Value Disclosures</u>**

The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein.

Cash and Cash Equivalents

For cash and due from banks and federal funds sold, the carrying amount approximates the fair value (Level 1).

Securities

The fair value of securities is estimated based on bid quotations received from securities dealers, if available (Level 1). If a quoted market price was not available, fair value was estimated using quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instruments being valued (Level 2).

**<u>16. FAIR VALUE MEASUREMENTS AND DISCLOSURES</u> (Cont'd)**

**<u>B. Fair Value Disclosures</u> (Cont'd)**

FHLB and other stock, at cost

The fair value for FHLB and other stock, at cost is its carrying value, since this is the amount for which it could be redeemed. There is no active market for this stock, and the Company is required to maintain a minimum balance based upon the unpaid principal of home mortgage loans (Level 2).

Loans Receivable

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage, commercial, and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories (Level 3).

Deposits

The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, and NOW and money market accounts, is equal to the amount payable on demand (Level 1). The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits with similar remaining maturities (Level 2).

Short-Term Borrowings

The carrying amounts of federal funds purchased, and other short-term borrowings maturing within 90 days approximate their fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements (Level 1).

Long-Term Borrowings

The fair value of long-term borrowings is estimated using discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements (Level 2).

Off-Balance-Sheet Instruments

In the ordinary course of business the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit. Such financial instruments are recorded in the financial statements when they are funded. Their fair value would approximate fees currently charged to enter into similar agreements. For further information on these financial instruments, see Note 14.

**<u>16. FAIR VALUE MEASUREMENTS AND DISCLOSURES</u> (Cont'd)**

**<u>B. Fair Value Disclosures</u> (Cont'd)**

The carrying values and estimated fair values of financial instruments are as follows:

SCHEDULE OF ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENT

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2022 | 2022 |
|  | Carrying<br>Value | Estimated<br>Fair Value |
|  | (In Thousands) | (In Thousands) |
| Financial assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $13286 | $13286 |
| &nbsp;&nbsp;&nbsp;Certificates of Deposit | 250 | 250 |
| &nbsp;&nbsp;&nbsp;Securities held to maturity | 416 | 407 |
| &nbsp;&nbsp;&nbsp;Securities available for sale | 33735 | 33735 |
| &nbsp;&nbsp;&nbsp;Loans receivable | 28563 | 28102 |
| &nbsp;&nbsp;&nbsp;FHLB and other stock, at cost | 139 | 139 |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 398 | 398 |
| Financial liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 74556 | 74646 |

---

The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that could be realized if all or substantially all of the financial instruments were offered for sale.

In addition, the fair value estimates were based on existing on-and-off balance sheet financial instruments without attempting to value the anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and losses have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. The lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

**Signatures**

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **Vecta Inc.** | **Vecta Inc.** |
| Date: March 31, 2023 | By: |   */s/ Fredrick Schulman* |
|  |  | Fredrick Schulman |
|  |  | Chairman, Chief Executive Officer and President |
|  |  | (Duly Authorized Representative) |

---

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| Signatures | Title | Date<br>|
| */s/ Fredrick Schulman* | Chairman, Chief Executive Officer, President |  |
| Fredrick Schulman | and Director (Principal Executive Officer) | March 31, 2023 |
| */s/ Mark Silber* |  |  |
| Mark Silber | Vice Chairman | March 31, 2023 |
|   */s/ Edward J. Lipkus* | Vice President and Chief Financial Officer |  |
| Edward J. Lipkus | (Principal Financial and Accounting Officer) | March 31, 2023 |
|   */s/ John Leo* |  |  |
| John Leo | Corporate Secretary, Treasurer and Director | March 31, 2023 |
|   */s/ Joseph Mormak* |  |  |
| Joseph Mormak | Director | March 31, 2023 |
| */s/ Robert Geyer* |  |  |
| Robert Geyer | Director | March 31, 2023 |

---

## Exhibit 10.4

**Exhibit 10.4**

![](ex10-4_001.jpg)

![](ex10-4_002.jpg)

![](ex10-4_003.jpg)

![](ex10-4_004.jpg)

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![](ex10-4_016.jpg)

## Exhibit 10.5

**Exhibit 10.5**

![](ex10-5_001.jpg)

![](ex10-5_002.jpg)

![](ex10-5_003.jpg)

![](ex10-5_004.jpg)

![](ex10-5_005.jpg)

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![](ex10-5_015.jpg)

## Exhibit 10.6

**Exhibit 10.6**

![](ex10-6_001.jpg)

![](ex10-6_002.jpg)

![](ex10-6_003.jpg)

![](ex10-6_004.jpg)

![](ex10-6_005.jpg)

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![](ex10-6_013.jpg)

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![](ex10-6_016.jpg)

## Exhibit 10.7

**Exhibit 10.7**

![](ex10-7_001.jpg)

![](ex10-7_002.jpg)

![](ex10-7_003.jpg)

![](ex10-7_004.jpg)

![](ex10-7_005.jpg)

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## Ex-21

**Exhibit 21**

**SUBSIDIARIES OF THE REGISTRANT**

---

| | | |
|:---|:---|:---|
| **Subsidiary** | **Ownership** | **State of Incorporation** |
| Sunnyside Federal Savings and Loan Association of Irvington | 100% | Federal |

---

## Ex-23

**Exhibit 23**

![](ex23_001.jpg)

## Exhibit 31.1

**Exhibit 31.1**

**Certification of Chief Executive Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Fredrick Schulman, certify that:

1. I
 have reviewed this annual report on Form 10-K of Vecta Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
 this report;

4. The
 registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
 Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
 to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others
 within those entities, particularly during the period in which this report is being prepared;

b) designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles;

c) evaluated
 the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
 the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

d) disclosed
 in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
 or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The
 registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
 reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing
 the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) all
 significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
 and

b) any
 fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
 internal control over financial reporting.

---

| | | |
|:---|:---|:---|
|  |  |   */s/ Fredrick Schulman* |
| Date | March 31, 2023 | Fredrick Schulman |
|  |  | Chairman, Chief Executive Officer and President |

---

## Exhibit 31.2

**Exhibit 31.2**

**Certification of Chief Financial Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Edward J. Lipkus, certify that:

1. I
 have reviewed this annual report on Form 10-K of Vecta Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
 this report;

4. The
 registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
 Act Rules 13a-15(f) and 15(d)-15(f))) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
 to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others
 within those entities, particularly during the period in which this report is being prepared;

b) designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles;

c) evaluated
 the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
 the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

d) disclosed
 in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
 or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The
 registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
 reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing
 the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) all
 significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
 and

b) any
 fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
 internal control over financial reporting.

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| | | |
|:---|:---|:---|
|  |  | */s/ Edward J. Lipkus* |
| Date | March 31, 2023 | Edward J. Lipkus |
|  |  | Vice President and Chief Financial Officer |

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## Ex-32

**Exhibit 32**

**Certification pursuant to**

**18 U.S.C. Section 1350, as adopted pursuant to**

**Section 906 of the Sarbanes-Oxley Act of 2002**

Fredrick Schulman, Chairman, Chief Executive Officer and President and Edward J. Lipkus, Vice President and Chief Financial Officer of Vecta Inc. (the "Company") each certify in their capacity as officers of the Company that they have reviewed the Annual Report of the Company on Form 10-K for the year ended December 31, 2022 and that to the best of their knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the
 Report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and

(2) the
 information contained in the report fairly presents, in all material respects, the financial condition and results of operations
 of the Company.

---

| | | |
|:---|:---|:---|
|  |  | */s/ Fredrick Schulman* |
| Date | March 31, 2023 | Fredrick Schulman |
|  |  | Chairman, Chief Executive Officer and President |
|  |  |   */s/ Edward J. Lipkus* |
| Date | March 31, 2023 | Edward J. Lipkus |
|  |  | Vice President and Chief Financial Officer |

---