Muncy Bank Financial : December 2021 Quarterly Report

Dear Shareholders,

I am pleased to announce our fourth quarter 2021 results. While we continue

to feel the impact of the COVID-19 pandemic, including inflationary pressures

and employment and supply chain constraints, we exit 2021 proud of our accomplishments. The Bank was able to strategically grow the loan portfolio

and worked to deploy excess liquidity from deposit inflows into the investment

portfolio to enhance net interest income in future periods. Net interest income also continued to be positively impacted by fees recognized on forgiven PPP loans, and a further reduction in cost of funds. Our favorable net interest margin and low

level of nonperforming assets continue to drive profitability and shareholder value.

Financial Highlights

Financial highlights for Muncy Bank Financial, Inc. as of and for the year ended December 31, 2021, compared to the same period in 2020, include:

• Special 5% stock dividend in 2021
• Cash dividend increased to $1.46/share compared to $1.41/share in 2020
• Total Assets increased 12% to $594,334,000
• Shareholders' Equity increased 9% to $59,107,000
• Total Deposits increased 16% to $527,512,000
• Net Loans increased 10% to $441,912,000
• Return on Average Assets was 1.33% compared to 1.13% in 2020
• Return on Average Equity was 13.44% compared to 11.05% in 2020

Net income for the year ended December 31, 2021 was $7,635,000 or $4.75 per share, compared to $5,748,000 or $3.57 per share for the same period in 2020. In the second and third quarters of 2021, the Bank recorded total gains of $1.1 million in connection with proceeds received on bank-owned life insurance policies, as well as a pre-tax loss of $364,000 on prepayment of long-term borrowings. Net income for the year ended December 31, 2021 was also positively impacted by recognition of PPP fees and gains on sales of secondary market mortgages of $823,000 and $1,258,000, respectively, compared to $401,000 and $509,000, respectively, for the same period in 2020.

Increased Cash Dividend and Special 5% Stock Dividend

Muncy Bank Financial, Inc. paid cash dividends of $1.46 per share for the year ended December 31, 2021, compared to $1.41 per share for the year ended December 31, 2020, an increase of 4%. Shareholders also received a special 5% stock dividend on March 15, 2021, effectively increasing the total dividend by 9% for 2021. The fourth quarter 2021 dividend represented the 345th consecutive dividend payout dating back to 1935. Muncy Bank Financial Inc. has increased its dividend payout since 1990.

Loan and Deposit Growth

The Bank's loan portfolio remained strong, with an overall delinquency ratio of 0.46% of gross loans at December 31, 2021, compared to 1.21% at December 31, 2020. The allowance for loan losses was $4,738,000 or 1.06% of gross loans at December 31, 2021, compared to $4,268,000 or 1.05% of gross loans at December 31, 2020. Total deposits increased to $527,512,000 at December 31, 2021, compared to $454,106,000 at December 31, 2020.

New South Williamsport Community Office

The construction of our new facility in South Williamsport is now well underway. We are extremely excited about continuing to expand the Muncy Bank Brand into the Williamsport/South Williamsport market area. We look forward to a fourth quarter 2022 opening.

On behalf of our Directors, Officers and Employees, we thank you for your continued loyalty and support.

Respectfully,

President and Chief Executive Officer

BOARD OF DIRECTORS

Todd M. Arthur	Robert M. Rabb
Robert J. Glunk	Stephen M. Tasselli
Robert P. Hager	Bonnie M. Tompkins
J. Howard Langdon	David E. Wallis
Gary M. Peck

HONORARY DIRECTORS

James L. Muffly, Sr. Arlene R. Opp

Richard H. Lloyd - Director Emeritus

MUNCY BANK FINANCIAL, INC. OFFICERS

Robert J. Glunk, Chairman of the Board, President & CEO Joseph K. O'Neill, Jr., CPA, Senior Vice President, Treasurer Beth A. Benson, Secretary

OFFICE LOCATIONS

MUNCY	HUGHESVILLE
2 N Main St	725 Route 405 Hwy
PO Box 179	Hughesville, PA 17737
Muncy, PA 17756	[phone]
[phone]

CLARKSTOWN	MONTOURSVILLE
2175 Route 442 Hwy	900 N Loyalsock Ave
PO Box 179	Montoursville, PA 17754
Muncy, PA 17756	[phone]
[phone]

MUNCY DRIVE THRU		DEWART
319 S Main St	4880 State Route 44
PO Box 179		PO Box 1
Muncy, PA 17756	Watsontown, PA 17777
[phone]	[phone]

AVIS		LINDEN
2 W Central Ave	7520 S Route 220 Hwy
PO Box 146		Linden, PA 17744
Avis, PA 17721	[phone]

1. 753-5155
   MONTGOMERY

2190 State Route 54

PO Box 33

Montgomery, PA 17752

[phone]

MuncyBank.com

Toll Free [phone]

24 Hour Telephone Access Banking

[phone] or Toll Free [phone]

QUARTERLY REPORT

AS OF

DECEMBER 31, 2021

MUNCY BANK FINANCIAL, INC.

CONSOLIDATED BALANCE SHEET

(In Thousands, Except Share Data) (Unaudited)				December 31,
			2021				2020
ASSETS:
Cash and due from banks	$	3,921	$	5,741
Interest-bearing deposits in other financial institutions		2,162	4,573
Total cash and cash equivalents				6,083				10,314
Interest-bearing time deposits				740				740
Available-for-sale debt securities, at fair value				111,943				86,998
Marketable equity securities, at fair value				409				390
Restricted investment in bank stocks, at cost				1,600				1,314
Loans held for sale				238				591
Loans receivable				446,650				405,920
Allowance for loan losses				(4,738)	(4,268)
Loans, net				441,912				401,652
Premises and equipment, net				11,866				9,997
Accrued interest receivable				1,571				1,723
Bank-owned life insurance				14,052				15,752
Foreclosed assets held for sale				-				160
Deferred tax asset, net				1,018				880
Other assets				2,902				1,063
TOTAL ASSETS			$	594,334			$	531,574
LIABILITIES:
Interest-bearing deposits	$	416,570	$	367,923
Noninterest-bearing deposits				110,942				86,183
Total deposits				527,512				454,106
Short-term borrowings				1,875				7,554
Long-term borrowings				-				10,024
Accrued interest payable				256				425
Other liabilities				5,584				5,015
TOTAL LIABILITIES				535,227				477,124
SHAREHOLDERS' EQUITY:
Common stock, par value $0.4167 per share; 3,626,684 shares authorized;
1,793,475 and 1,708,036 shares issued; 1,608,358 and 1,531,734 shares
outstanding at December 31, 2021 and 2020, respectively				747				712
Additional paid-in capital				9,297				6,341
Retained earnings				51,987				49,692
Accumulated other comprehensive income				1,058				1,687
Treasury stock, at cost; 185,117 and 176,302 shares at December 31,
2021 and 2020, respectively				(3,982)				(3,982)
TOTAL SHAREHOLDERS' EQUITY				59,107				54,450
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	594,334	$	531,574

CONSOLIDATED STATEMENT OF INCOME

(In Thousands, Except Share Data) (Unaudited)				Year Ended December 31,
			2021						2020
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans	$	19,217		$	19,487
Interest on balances with depository institutions			54						39
Investment securities:
Taxable			330						344
Tax-exempt			1,716						1,428
Dividends		91				53
TOTAL INTEREST AND DIVIDEND INCOME		21,408				21,351
INTEREST EXPENSE:
Interest on deposits			2,330						3,374
Interest on short-term borrowings		8				16
Interest on long-term borrowings		76				182
TOTAL INTEREST EXPENSE		2,414				3,572
NET INTEREST INCOME			18,994						17,779
PROVISION FOR LOAN LOSSES		550				650
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
	18,444				17,129
NON-INTEREST INCOME:
Service charges on deposit accounts		1,648				1,500
Realized (losses) gains on available-for-sale debt securities, net		(28)				83
Gains on marketable equity securities			18						15
Earnings on bank-owned life insurance			313						331
Gain on bank-owned life insurance benefits			1,136						-
Investment services income			204						145
Trust income			265						233
Gains on sale of loans			1,258						509
Other service charges and fees			320						261
Other non-interest income		375				54
TOTAL NON-INTEREST INCOME		5,509				3,131
NON-INTEREST EXPENSE:
Salaries and employee benefits		8,321				7,423
Occupancy			732						627
Furniture and equipment			330						349
Data processing			1,409						1,434
Pennsylvania shares tax			301						325
Federal deposit insurance			147						99
Automated teller machine expense			542						496
Professional fees			594						633
Loss on prepayment of debt			364						-
Other non-interest expense		2,314				2,077
TOTAL NON-INTEREST EXPENSE		15,054				13,463
INCOME BEFORE INCOME TAX PROVISION			8,899						6,797
INCOME TAX PROVISION		1,264				1,049
NET INCOME	$	7,635			$	5,748
EARNINGS PER SHARE-BASIC AND DILUTED		$	4.75				$	3.57
DIVIDENDS PER SHARE		$	1.46				$	1.41