MALN BANC The purpose of this analysis is to provide the reader with information relevant to understanding and assessing the Company's results of operations for the periods presented herein and financial condition as ofJune 30, 2022 andSeptember 30, 2021 . In order to fully understand this analysis, the reader is encouraged to review the consolidated financial statements and accompanying notes thereto appearing elsewhere in this report.
Forward-Looking Statements
This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company and its subsidiaries, including statements preceded by, followed by or that include words or phrases such as "believes," "expects," "anticipates," "plans," "trend," "objective," "continue," "remain," "pattern" or similar expressions or future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions. The statements contained herein that are not historical facts are forward-looking statements based on management's experience and beliefs concerning current conditions and future developments and their potential effects on the Company, including, without limitation, plans, strategies and goals, and statements about the Company's expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, and shareholder value creation. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the effects of, and changes in, trade, monetary and fiscal policies and laws, including changes in interest rate policies of theBoard of Governors of theFederal Reserve System ; inflation, interest rate, market and monetary fluctuations; the impact of competition and the acceptance of the Company's products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations; technological changes; any undersupply or oversupply of inventory and deterioration in values of real estate in the markets in which the Company operates, including residential and commercial; changes in the value of real estate held for sale; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, theSEC , thePublic Company Accounting Oversight Board , the FASB or other accounting standards setters; possible other-than-temporary impairment of securities held by the Company; the effects of the Company's lack of a widely-diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; changes in the competitive environment among financial and bank holding companies and other financial service providers and banks; unanticipated or prolonged litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, that delay the occurrence or non-occurence of events or results in elevated expenses or unexpected outcomes; changes in the interest rate environment may reduce interest margins or the fair value of financial instruments, or increase the cost of our subordinated debt securities; unexpected loss of key personnel and future to attract and retain talent; prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions may vary substantially from period to period; general economic conditions and real estate valuations may be less favorable than expected; political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; legislative or regulatory changes or actions may adversely affect the businesses in which the Company is engaged; changes and trends in the securities markets may adversely impact the Company; difficulties in integrating any businesses that we may acquire, which may increase our expenses and delay the achievement of any benefits that we may expect from such acquisitions; the impact of reputational risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; the outcome of any regulatory or legal investigations and proceedings; the impact of any change in theFDIC insurance assessment rate or the rules and regulations related to the calculation of theFDIC insurance assessment amount; and the Company's ability to manage the risk involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2021 Annual Report filed with theSEC and available at theSEC's Internet site (http://www.sec.gov). Further, given its ongoing and dynamic nature, it is difficult to predict the full and continuing impact of the ongoingCOVID-19 outbreak, including the outbreak of its variants, on the Company's business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus and its variants can be controlled and the effects on general economic conditions. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are subject to the following risks, any of which could continue to have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to continue to substantially stay reopen; there are high levels of unemployment for an extended periods of time; inflation continues to expand; there are continued disruptions in global and domestic supply chains, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, -45- -------------------------------------------------------------------------------- especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; due to fluctuation in interest rates, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income; cyber security risks are increased as the result of an increase in the number of employees working remotely. The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, unless required by law. Critical Accounting Policies The accounting and reporting policies followed by the Company conform, in all material respects, to GAAP. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated statements of condition and for the periods indicated in the statements of operations. Actual results could differ significantly from those estimates. The Company's accounting policies are fundamental to understanding Management's Discussion and Analysis ("MD&A") of financial condition and results of operations. The Company has identified the determination of the ALLL, loans held for sale, OREO, fair value measurements, the evaluation of deferred tax assets, the other-than-temporary impairment evaluation of securities, and the valuation of our derivative positions to be critical because management must make subjective and/or complex judgments about matters that are inherently uncertain and could be most subject to revision as new information becomes available. Additional information on these policies can be found in the Company's 2021 Annual Report and Note 2 of the Notes to the Unaudited Consolidated Financial Statements. There have been no significant changes to the Company's Critical Accounting Policies as described in its 2021 Annual Report.
Liquidity Sources
Management has reviewed all primary and secondary sources of liquidity in
preparation for any unforeseen funding needs due to the COVID-19 pandemic and
prioritized such sources based on available capacity, term flexibility, and
cost. As of
Capital Strength
The Bank's capital ratios continued to exceed the highest required regulatory benchmark levels. As ofJune 30, 2022 , common equity Tier 1 capital ratio was 16.87 percent, Tier 1 leverage ratio was 15.33 percent, Tier 1 risk-based capital ratio was 18.79 percent and the total risk-based capital ratio was 19.87 percent.
Deferral and Modification Requests
The CARES Act provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act and related regulatory guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. As ofJune 30, 2022 , the Company had four COVID-19 modified loans totaling$42.1 million , representing 5.17 percent of loans outstanding as of such date. The COVID-19 loan modifications do not classify as TDRs as they fall under Section 4013 of the CARES Act, as amended, and further details regarding these modifications are provided in the table below. For -46- --------------------------------------------------------------------------------
loans subject to the program, each borrower is required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts will be moved to the end of the loan term.
June 30 ,2022
Percentage of
Loan Modified Gross
Number of Loans Exposure Gross Loans Loans Modified
(Dollars in thousands)
Residential mortgage - $ - $ 176,499 0.00 %
Construction and
Development:
Residential and commercial - - 20,459 0.00 %
Land loans - - 2,054 0.00 %
Total Construction and -
Development - 22,513 0.00 %
Commercial:
Commercial real estate 4 42,093 407,783 5.17 %
Farmland - - 15,348 0.00 %
Multi-family - - 54,879 0.00 %
Commercial and industrial - - 104,504 0.00 %
Other - - 13,954 0.00 %
Total Commercial 4 42,093 596,468 5.17 %
Consumer:
Home equity lines of credit - - 12,432 0.00 %
Second mortgages - - 4,605 0.00 %
Other - - 2,183 0.00 %
Total Consumer - - 19,220 0.00 %
Total loans 4 $ 42,093 $ 814,700 5.17 %
September 30, 2021
Percentage of
Loan Modified Gross
Number of Loans Exposure Gross Loans Loans Modified
(Dollars in thousands)
Residential mortgage 2 $ 667 $ 198,710 0.07 %
Construction and
Development:
Residential and commercial - - 61,492 0.00 %
Land loans - - 2,204 0.00 %
Total Construction and -
Development - 63,696 0.00 %
Commercial:
Commercial real estate 6 60,567 426,915 6.63 %
Farmland - - 10,297 0.00 %
Multi-family - - 66,332 0.00 %
Commercial and industrial - - 115,246 0.00 %
Other - - 10,954 0.00 %
Total Commercial 6 60,567 629,744 6.63 %
Consumer:
Home equity lines of credit - - 13,491 0.00 %
Second mortgages - - 5,884 0.00 %
Other - - 2,299 0.00 %
Total Consumer - - 21,674 0.00 %
Total loans 8 $ 61,234 $ 913,824 6.70 %
-47-
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Certain industries included within commercial real estate loans are widely
expected to be particularly impacted by social distancing, quarantines, and the
economic impact of the COVID-19 pandemic, including the following:
June 30, 2022 September 30, 2021
Number Loan Percentage of Number Loan Percentage of
of Modified Gross Loans of Modified Gross Loans
Loans Exposure on Modified Loans Exposure on Modified
(Dollars in thousands) (Dollars in thousands)
Industries:
Hotel 4 $ 42,093 5.17 % 6 $ 60,567 6.63 %
Retail - - 0.00 % - - 0.00 %
Office/Medical Office - - 0.00 % - - 0.00 %
Fitness Centers - - 0.00 % - - 0.00 %
Restaurants and food service - - 0.00 % - - 0.00 %
Other - - 0.00 % - - 0.00 %
Total Outstanding Exposure 4 $ 42,093 5.17 % 6 $ 60,567 6.63 %
Results of Operations
Net income available to common shareholders for the three months ended June 30,
2022 amounted to $1.8 million , or $0.24 per fully diluted common share, an
increase of $233,000 , or 14.6%, as compared with net income of $1.6 million , or
$0.21 per common share, for the three months ended June 30, 2021 . This increase
in net income and diluted earnings per share was primarily due to a decrease in
total interest expense for the quarter ended June 30, 2022 , in which total
interest expense decreased $1.0 million or 44.8%, to $1.3 million when compared
to the quarter ended June 30, 2021 . The decrease was primarily due to interest
rate related factors, as the average rate on interest-bearing liabilities in the
current quarter fell 33 basis points to 0.59% compared to 0.92% for the quarter
ended June 30, 2021 . The annualized return on average assets was 0.69% for the
three months ended June 30, 2022 , compared to annualized return on average
assets of 0.53% for three months ended June 30, 2021 . The annualized return on
average shareholders' equity was 5.06% for the three month period ended June 30,
2022 , compared to 4.35% in annualized return on average shareholders' equity for
the three months ended June 30, 2021 .
Net income available to common shareholders for the nine months ended June 30,
2022 , amounted to $4.4 million , or $0.58 per fully diluted common share, a
decrease of $1.7 million or 28.3%, as compared with net income of $6.1 million
or $0.81 per fully diluted common share, for the nine months ended June 30,
2021 . This decrease in net income and diluted earnings per share was primarily
due to an increase in other operating expenses. The increase in other operating
expenses resulted from a $1.7 million valuation allowance recorded on loans held
for sale reported during the second fiscal quarter ended March 31, 2022 .
Net Interest Income and Margin
Net interest income is the difference between the interest earned on the portfolio of earning assets (principally loans and investments) and the interest paid for deposits and borrowings, which support these assets.
-48-
--------------------------------------------------------------------------------Net Interest Income
The following table presents the components of net interest income for the
periods indicated:
For the Three Months Ended June 30, For the Nine Months Ended June 30,
Increase Percent Increase Percent
2022 2021 (Decrease) Change 2022 2021 (Decrease) Change
(Dollars in thousands)
Interest income:
Loans, including fees $ 7,653 $ 8,895 $ (1,242 ) (13.96 )% $ 23,509 $ 28,040 $ (4,531 ) (16.16 )%
Investment securities 729 408 321 78.68 1,805 1,123 682 60.73
Interest-bearing cash accounts 95 6 89 1,483.33 124 21 103 490.48
Dividends, restricted stock 80 110 (30 ) (27.27 ) 246 370 (124 ) (33.51 )
Total interest income 8,557 9,419 (862 ) (9.15 ) 25,684 29,554 (3,870 ) (13.09 )
Interest expense:
Deposits 812 1,446 (634 ) (43.85 ) 2,685 5,508 (2,823 ) (51.25 )
Short-term borrowings - - - - - 48 (48 ) (100.00 )
Long-term borrowings 158 461 (303 ) (65.73 ) 578 1,614 (1,036 ) (64.19 )
Subordinated debt 294 383 (89 ) (23.24 ) 1,016 1,149 (133 ) (11.58 )
Total interest expense 1,264 2,290 (1,026 ) (44.80 ) 4,279 8,319 (4,040 ) (48.56 )
Net interest income $ 7,293 $ 7,129 $ 164 2.30 % $ 21,405 $ 21,235 $ 170 0.80 %
Net interest income was $7.3 million for the quarter ended June 30, 2022 , an
increase of $164,000 , or 2.3 percent, from $7.1 million for the quarter ended
June 30, 2021 . The increase was driven by a decrease in total interest expense
of $1.0 million , partially offset by decreased total interest and dividend
income of $862,000 , primarily related to the payoff of higher yielding loans.
The average yield on interest-earning assets declined 9 basis points for the
quarter ended June 30, 2022 , to 3.48%, when compared to the same period in 2021
primarily due to the decrease in average loan balances. The average rate on
interest-bearing liabilities fell 33 basis points to 0.59% compared to the
quarter ended June 30, 2021 , due to decreases in market rates of interest. Net
interest margin increased to 2.97% for the quarter ended June 30, 2022 , from
2.70% for the same period in 2021. The margin improvement in the current period,
in large part reflected the reduction in interest expense as the cost of
borrowings decreased by 58 basis points and interest-bearing deposits decreased
by 25 basis points compared to the quarter ended June 30, 2021 .
Net interest income was $21.4 million for the nine months ended June 30, 2022 ,
an increase of $170,000 , or 0.8% from $21.2 million for the nine months ended
June 30, 2021 . Consistent with the quarter, the increase was primarily driven by
the 42 basis point decrease in cost of interest-bearing deposits compared to the
nine months ended June 30, 2021 . The cost of borrowings decreased by 18 basis
points compared to the nine months ended June 30, 2021 . The cost of
interest-bearing liabilities decreased by 47 basis points compared to the nine
months ended June 30, 2021 .
Interest Income
For the quarters ended June 30, 2022 , and June 30, 2021 , total interest income
was $8.6 million and $9.4 million , respectively. Total interest income decreased
for the quarter ended June 30, 2022 , compared to the quarter ended June 30,
2021 , primarily due to the decrease in average loan balances of $146.5 million .
The average yield on interest-earning assets declined 9 basis points for the
quarter ended June 30, 2022 , to 3.48%, when compared to the same period in 2021
primarily due to the payoff of higher yielding loan balances.
For the nine months ended June 30, 2022 , total interest income was $25.7
million , a decrease of $3.9 million or 13.1 percent, from $29.6 for the nine
months ended June 30, 2021 . The average balance of our total loans decreased
$133.1 million , or 13.3 percent, for the nine months ended June 30, 2022 , as
compared to the same period in fiscal year 2021, while the average yield on
loans decreased by 12 basis points for the nine months ended June 30, 2022 ,
compared with the same period in fiscal year 2021. The decrease in average total
loan volume was primarily due to increased paydowns and payoff activity. During
the nine months ended June 30, 2022 , compared to the same period in fiscal year
2021, the volume-related factors during the period contributed to a decrease in
interest income on loans of $3.1 million , while the rate-related factors
decreased interest income on loans by $808,000 .
-49-
--------------------------------------------------------------------------------Interest Expense
For the quarter endedJune 30, 2022 , interest expense decreased by$1.0 million , or 44.8 %, to$1.3 million , compared to$2.3 million for the quarter ended 2021. The decrease in interest expense is primarily attributable to interest rate related factors, as the average rate on interest-bearing liabilities in the current quarter fell 33 basis points to 0.59% compared to 0.92% for the quarter endedJune 30, 2021 . Interest expense decreased by$4.0 million , or 48.6%, to$4.3 million for the nine months endedJune 30, 2022 , compared to$8.3 million for the nine months endedJune 30, 2021 . The decrease in interest expense on deposits is primarily attributable to rate related factors. The annualized average rate on total interest-bearing liabilities decreased to 0.63% for the nine months endedJune 30, 2022 , from 1.10% for the nine months endedJune 30, 2021 . This decrease primarily reflects a decrease in the average rate of interest-bearing deposits of 0.42% and a decrease in the average rate of borrowings of 0.18%. The decrease in the average rate of interest-bearing deposits consisted of a 0.50% decrease in the average rate of certificates of deposit, a 0.55% decrease in the average rate of money market accounts and a 0.17% decrease in average rate of other interest-bearing deposit accounts.
Variance in Net Interest Income
The following table quantifies the impact on net interest income resulting from
changes in average balances and average rates during the periods presented. Any
change in interest income or expense attributable to both changes in volume and
changes in rate has been allocated to change in rate of each category.
Analysis of Variance in Net Interest Income Due to Changes in Volume and Rates
Three Months Ended June 30, Nine Months Ended June 30,
2022 and 2021 2022 and 2021
Increase (Decrease) Due to Change in: Increase (Decrease) Due to Change in:
Average Average Net Average Average Net
Volume Rate Change Volume Rate Change
(In thousands)
Interest Earning Assets:
Loans, including fees $ (1,348 ) $ 106 $ (1,242 ) $ (3,742 ) $ (789 ) $ (4,531 )
Investment securities 280 41 321 763 (81 ) 682
Interest-bearing cash accounts 11 78 89 20 83 103
Dividends, restricted stock (28 ) (2 ) (30 ) (103 ) (21 ) (124 )
Total interest-earning assets $ (1,085 ) $ 223 $ (862 ) $ (3,062 ) $ (808 ) $ (3,870 )
Interest Bearing Liabilities:
Money Market deposits $ (82 ) $ (298 ) $ (380 ) $ 42 $ (1,392 ) $ (1,350 )
Savings deposits 1 (3 ) (2 ) 6 (16 ) (10 )
Certificates of deposits (45 ) (91 ) (136 ) (688 ) (425 ) (1,113 )
Other interest-bearing deposits (53 ) (63 ) (116 ) 47 (397 ) (350 )
Total interest-bearing deposits (179 ) (455 ) $ (634 ) (593 ) (2,230 ) $ (2,823 )
Borrowings and Subordinated debt (267 ) (125 ) (392 ) (1,097 ) (120 ) (1,217 )
Total interest-bearing liabilities $ (446 )
-50-
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Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The
following table shows for the periods indicated the total dollar amount of
interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both
in dollars and rates, and the NIM (net interest income as a percentage of
average interest-earning assets). All average balances are based on monthly
balances. Management does not believe that the monthly averages differ
significantly from what the daily averages would be. Quarterly rates, yields,
spreads, and margins throughout this MD&A are calculated on an annualized basis
where appropriate.
Three Months Ended June 30,
2022 2021
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
ASSETS
Interest Earning Assets:
Loans, including fees(1) $ 821,141 $ 7,653 3.73 % $ 967,615 $ 8,895 3.68 %
Investment securities 107,472 729 2.71 % 63,693 408 2.56 %
Interest-bearing cash accounts 48,161 95 0.79 % 16,914 6 0.14 %
Dividends, restricted stock 6,068 80 5.27 % 8,118 110 5.42 %
Total interest-earning assets(1) 982,842 8,557 3.48 % 1,056,340 9,419 3.57 %
Non-interest-earning assets:
Cash and due from banks 36,316 105,792
Bank-owned life insurance 25,953 25,793
Other assets 26,317 26,925
Other real estate owned 4,894 5,778
Allowance for loan losses (9,312 ) (12,603 )
Total non-interest-earning assets 84,168 151,685
Total assets $ 1,067,010 $ 1,208,025
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Money Market deposits $ 315,738 206 0.26 % $ 367,290 586 0.64 %
Savings deposits 54,261 11 0.08 % 49,487 13 0.11 %
Certificates of deposits 112,454 280 1.00 % 126,240 416 1.32 %
Other interest-bearing deposits 285,391 315 0.44 % 325,082 431 0.53 %
Total interest-bearing deposits 767,844 812 0.42 % 868,099 1,446 0.67 % Borrowings
85,000 452 2.13 % 124,382 844 2.71 %
Total interest-bearing liabilities 852,844 1,264 0.59 % 992,481 2,290 0.92 %
Non-interest-bearing liabilities:
Demand deposits 57,479 52,799
Other liabilities 11,657 15,399
Total non-interest bearing
liabilities 69,136 68,198
Shareholders' equity 145,030 147,346
Total liabilities and shareholders'
equity $ 1,067,010 $ 1,208,025
Net interest spread 2.89 % 2.65 %
Net interest margin 2.97 % 2.70 %
Net interest income $ 7,293 $ 7,129 (1) Includes non-accrual loans during the respective periods. Calculated net of deferred loan fees and loan discounts.
-51-
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Nine Months Ended June 30,
2022 2021
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
ASSETS
Interest Earning Assets:
Loans, including fees(1) $ 864,096 $ 23,509 3.63 % $ 997,156 $ 28,040 3.75 %
Investment securities 91,385 1,805 2.63 % 54,379 1,123 2.75 % Interest-bearing cash accounts
39,116 124 0.42 % 20,037 21 0.14 %
Dividends, restricted stock 6,345 246 5.17 % 8,791 370 5.61 %
Total interest-earning assets(1) 1,000,942 25,684 3.42 % 1,080,363 29,554 3.65 %
Non-interest-earning assets:
Cash and due from banks 78,038 90,740
Bank-owned life insurance 26,119 25,630
Other assets 25,949 29,069
Other real estate owned 4,939 5,790
Allowance for loan losses (11,342 ) (12,698 )
Total non-interest-earning assets 123,703 138,531
Total assets $ 1,124,645 $ 1,218,894
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Money Market deposits $ 341,689 703 0.27 % $ 334,779 2,053 0.82 %
Savings deposits 54,045 37 0.09 % 47,657 47 0.13 %
Certificates of deposits 113,395 838 0.99 % 174,998 1,951 1.49 % Other interest-bearing deposits
315,346 1,107 0.47 % 305,491 1,457 0.64 % Total interest-bearing deposits
824,475 2,685 0.43 % 862,925 5,508 0.85 % Borrowings
87,329 1,594 2.43 % 143,368 2,811 2.61 % Total interest-bearing liabilities
911,804 4,279 0.63 % 1,006,293 8,319 1.10 %
Non-interest-bearing liabilities: Demand deposits 55,442 50,418 Other liabilities 12,427 17,283 Total non-interest liabilities 67,869 67,701 Shareholders' equity 144,972 144,900 Total liabilities and shareholders' equity$ 1,124,645 $ 1,218,894 Net interest spread 2.79 % 2.55 % Net interest margin 2.85 % 2.62 % Net interest income$ 21,405 $ 21,235
(1) Includes non-accrual loans during the respective periods. Calculated net of deferred loan fees and loan discounts.
-52-
--------------------------------------------------------------------------------Other Income
The following table presents the principal categories of other income for the
periods indicated:
Three Months Ended June 30, Nine Months Ended June 30,
Increase Percent Increase Percent
2022 2021 (Decrease) Change 2022 2021 (Decrease) Change
(Dollars in thousands)
Service charges and other fees $ 248 $ 344 $ (96 ) (27.91 )%
48 55 (7 ) (12.73 ) 148 163 (15 ) (9.20 )
Net gains on sale and call of
investments - 165 (165 ) (100.00 ) - 779 (779 ) (100.00 )
Net gains on sale of loans 15 65 (50 ) (76.92 ) 78 743 (665 ) (89.50 )
Earnings on bank-owned life
insurance 171 164 7 4.27 623 489 134 27.40
Total other income $ 482 $ 793 $ (311 ) (39.22 )% $ 1,770 $ 3,184 $ (1,414 ) (44.41 )%
For the three months ended June 30, 2022 , total other income amounted to
$482,000 , a decrease of $311,000 , or 39.2%, compared to the three months ended
June 30, 2021 . The decrease in total other income was primarily due to a
decrease of $261,000 in net gains on sale and calls of investments and service
charges and other fees during the quarter ended June 30, 2022 .
Similar to the quarter ended June 30 , 222, other income for the nine months
ended June 30, 2022 , decreased $1.4 million , or 44.4% to $1.8 million compared
to the same period in 2021. This decrease was primarily the result of a $1.4
million decrease in net gains on sale of investments and loans.
Other Expense
The following table presents the principal categories of other expense for the
periods indicated:
Three Months Ended June 30, Nine Months Ended June 30,
Increase Percent Increase Percent
2022 2021 (Decrease) Change 2022 2021 (Decrease) Change
(Dollars in thousands)
Salaries and employee
benefits $ 2,350 $ 2,259 $ 91 4.03 %
542 546 (4 ) (0.73 ) 1,603 1,656 (53 ) (3.20 )
Federal deposit insurance
premium 68 77 (9 ) (11.69 ) 215 236 (21 ) (8.90 )
Advertising 33 12 21 175.00 97 76 21 27.63
Data processing 305 301 4 1.33 984 935 49 5.24
Professional fees 1,053 841 212 25.21 2,976 2,388 588 24.62Other real estate owned expense, net 244 835 (591 ) (70.78 ) 249 866 (617 ) (71.25 ) Pennsylvania shares tax 127 170 (43 ) (25.29 ) 466 509 (43 ) (8.45 ) Other operating expenses 717 791 (74 )
(9.36 ) 3,930 2,395 1,535 64.09 Total other expense$ 5,439 $ 5,832 $ (393 ) (6.74 )%$ 17,512 $ 15,867 $ 1,645 10.37 % For the three months endedJune 30, 2022 , total other expense decreased$393,000 , or 6.7 percent, to$5.4 million when compared to the quarter endedJune 30, 2021 . The decrease was primarily due to a decrease of$591,000 in OREO expense, partially offset by an increase of$212,000 in professional fees. The increase in professional fees was primarily due to legal fees associated with loan workouts and disclosure and other matters concerning nonperforming loans. Also, during the quarter endedJune 30, 2022 , the Company reduced the carrying value of the OREO property by$198,000 based on a negotiated sales price. A purchase agreement for the OREO property has been executed and the parties are currently in a due diligence period, and we expect to close on the transaction during the fourth fiscal quarter. For the nine months endedJune 30, 2022 , total other expense increased$1.6 million , or 10.4%, when compared to the nine months endedJune 30, 2021 . The increase was primarily due to an increased valuation allowance of$395,000 and$1.3 million in real estate tax expense recorded during the nine months endedJune 30, 2022 , on loans held for sale. -53- --------------------------------------------------------------------------------
Income Taxes
The Company recorded income tax expense of$502,000 during the quarter endedJune 30, 2022 , compared to$489,000 for the quarter endedJune 30, 2021 . The effective tax rates for the Company for the quarters endedJune 30, 2022 , andJune 30, 2021 , were 21.5% and 23.4%, respectively. For the nine months endedJune 30, 2022 income tax expense decreased by$614,000 , or 32.2% to$1.3 million from$1.9 million for the nine months endedJune 30, 2021 . The effective tax rates for the Company for the nine months endedJune 30, 2022 , and 2021 were 22.8% and 23.8%, respectively.
Investment Portfolio
For the three months endedJune 30, 2022 , the average volume of investment securities increased by$43.8 million to$107.5 million , or 10.9% of average earning assets, from$63.7 million , or 6.0% of average earning assets, for the three months endedJune 30, 2021 . During the nine months endedJune 30, 2022 , the average volume of investment securities increased$37.0 million to$91.4 million , or 9.1% of average earnings assets, from$54.4 million , or 5.0% of average earning assets, for the nine months endedJune 30, 2021 . AtJune 30, 2022 , the total investment portfolio amounted to$106.8 million , an increase of$36.0 million or 50.9% fromSeptember 30, 2021 . This increase in the investment portfolio was primarily due to purchases of$45.3 million of investment securities, partially offset by payments, maturities, and calls of$4.0 million of investment securities. AtJune 30, 2022 , the principal components of the investment portfolio were government agency obligations, federal agency obligations, including mortgage-backed securities, obligations ofU.S. states and political subdivisions,U.S. treasury note, corporate bonds and notes, a trust preferred security, and taxable mutual funds. During the three month period endedJune 30, 2022 , rate-related factors increased investment revenue by$41,000 , while volume-related factors increased investment revenue by$280,000 from the three month period endedJune 30, 2021 . The yield on investments increased by 15 basis points to 2.71% for the three month period endedJune 30, 2022 , as compared to 2.56% for the three month period endedJune 30, 2021 . During the nine month period endedJune 30, 2022 , volume-related factors increased investment revenue by$763,000 and rate-related factors decreased investment revenue by$81,000 from the nine month period endedJune 30, 2021 . The yield on investments decreased by 12 basis points to 2.63% for the nine month period endedJune 30, 2022 , as compared to 2.75% for the nine month period endedJune 30, 2021 . Loan Portfolio The Company's loan portfolio consists of residential, construction and development, commercial, and consumer loans, serving the diverse customer base in its market area. The composition of the Company's portfolio continues to change due to local competition. Factors such as the economic climate, interest rates, real estate values and employment all contribute to changes in the composition of the Company's portfolio. Any growth of the loan portfolio is generated through business development efforts, repeat customer requests for new financings, penetration into existing markets, and entry into new markets. The Company seeks to create growth in commercial lending, which primarily includes commercial real estate, multi-family, farmland, and commercial and industrial lending, by offering customer-focused products and competitive pricing and by capitalizing on the positive trends in its market area. Products offered are designed to meet the financial requirements of the Company's customers. It is the objective of the Company's credit policies to diversify the commercial loan portfolio and limit concentrations in any single industry. Total gross loans amounted to$814.7 million atJune 30, 2022 and$913.8 million atSeptember 30, 2021 . The$99.1 million or 10.8% decrease in the gross loan portfolio atJune 30, 2022 compared toSeptember 30, 2021 , for the period was driven by higher loan payoffs and paydowns during the period primarily in the commercial loan category. Commercial loans declined to$596.5 million atJune 30, 2022 from$629.7 million atSeptember 30, 2021 or a 5.3% decline as compared toSeptember 30, 2021 . Residential loans were$176.5 million and$198.7 million atJune 30, 2022 andSeptember 30, 2021 , respectively. Loans held-for-sale amounted to$13.9 million atJune 30, 2022 , compared to$33.2 million atSeptember 30, 2021 . The decline was primarily related to the sale in theDecember 31, 2021 , quarter of three commercial loans totaling$18.9 million combined with a valuation allowance of$395,000 and$1.3 million in real estate tax expense recorded during the nine months endedJune 30, 2022 , on loans held for sale. -54- -------------------------------------------------------------------------------- AtJune 30, 2022 , the Company had$130.9 million in overall undisbursed loan commitments, which consisted primarily of available usage from active construction facilities, unused commercial lines of credit and home equity lines of credit. Average loan balances decreased$146.5 million , or 15.1% for the three months endedJune 30, 2022 , as compared to the same period in fiscal 2021, while the average yield on loans increased by 5 basis points for the three months endedJune 30, 2022 , compared with the same period in fiscal 2021. The decrease in average total loan volume was primarily due to increased paydowns and payoff activity. During th third quarter of fiscal year 2022 compared to the same period in fiscal year 2021, the volume-related factors contributed to the decrease of income on loans of$1.3 million , while the rate-related factors increased interest income on loans by$106,000 . The average balance of our total loans decreased$133.1 million , or 13.3% for the nine months endedJune 30, 2022 , as compared to the same period in fiscal year 2021, while the average yield on loans decreased by 12 basis points for the nine months endedJune 30, 2022 , compared with the same period in fiscal year 2021. The decrease in average total loan volume was primarily due to increased paydowns and payoff activity. During the nine months endedJune 30, 2022 , compared to the same period in fiscal year 2021, the volume-related factors during the period contributed to a decrease of interest income on loans of$3.7 million , while the rate-related factors decreased interest income on loans by$789,000 .
Allowance for Loan Losses and Related Provision
The purpose of the ALLL is to absorb the impact of losses inherent in the loan portfolio. Additions to the ALLL are made through provisions charged against current operations and through recoveries made on loans previously charged-off. The ALLL is maintained at an amount considered adequate by management to provide for probable loan losses inherent in the loan portfolio based upon a periodic evaluation of the portfolio's risk characteristics. In establishing an appropriate ALLL, an assessment of the individual borrowers, a determination of the value of the underlying collateral, a review of historical loss experience and an analysis of the levels and trends of loan categories, delinquencies and problem loans are considered. Such factors as the level and trend of interest rates and current economic conditions and peer group statistics are also reviewed. Given the economic volatility impacting national, regional, and local markets, the Company's analysis of its ALLL takes into consideration the potential impact that current trends may have on the Company's borrower base. Although management uses the best information reasonably available to management, the level of the ALLL remains an estimate, which is subject to significant judgment and short-term change. Our regulators, as an integral part of their examination process, periodically review the Company's ALLL. Our regulators may require the Company to increase the ALLL based on their analysis of information available to them at the time of their examination. Furthermore, the majority of the Company's loans are secured by real estate in theState of New Jersey and theState of Pennsylvania . Future adjustments to the ALLL may be necessary due to economic factors impactingNew Jersey andPennsylvania real estate and the economy in general, as well as operating, regulatory and other conditions beyond the Company's control. The allowance for loan losses atJune 30, 2022 amounted to$9.3 million , or 1.14% of total gross loans excluding loans held for sale, compared to$11.5 million , or 1.26% of total gross loans, atSeptember 30, 2021 . The Company did not record a provision for loan losses for the quarter endedJune 30, 2022 , compared to$10.6 million provision for loan losses for the quarter endedSeptember 30, 2021 . The decline reflected a$2.2 million charge off for the nine months endedJune 30, 2022 period and the overall decline in total loans atJune 30, 2022 of$99.1 million compared toSeptember 30, 2021 . The net charge-offs were ($8,000 ) and$2.2 million for the three and nine months endedJune 30, 2022 , respectively. Net charge-off were$1.0 million and$1.4 million for the three and nine months endedJune 30, 2021 , respectively. We will continue to experience periodic charge-offs in the future as exit strategies are considered and executed, in particular as it relates to our clients impacted by the COVID-19 pandemic. Loans with previously established specific reserves may ultimately result in a charge-off under a variety of scenarios. The level of the ALLL for the respective periods of fiscal year 2022 and fiscal year 2021 reflects the credit quality within the loan portfolio, the loan volume recorded or lost during the periods, the changing composition of the commercial and residential real estate loan portfolios and other related factors. In management's view, the level of the ALLL atJune 30, 2022 was adequate to cover losses inherent in the loan portfolio. Actual results could differ materially from management's analysis, based principally upon the factors considered by management in establishing the ALLL. -55- -------------------------------------------------------------------------------- Changes in the ALLL are presented in the following table for the periods indicated: Nine Months Ended June 30, 2022 2021 (Dollars in thousands) Average loans outstanding$ 864,096 $ 997,156 Total gross loans at end of period$ 814,700 $ 951,650 Analysis of the Allowance of Loan Losses: Balance at beginning of period$ 11,472 $ 12,433 Charge-offs: Commercial: Commercial real estate - 1,128 Commercial and industrial 2,194 379 Consumer: Second mortgages 106 - Other - 1 Total charge-offs 2,300 1,508 Recoveries: Residential Mortgage 4 1 Commercial: Commercial real estate 77 1 Commercial and industrial 1 2 Consumer: Home equity lines of credit 1 16 Second mortgages 54 103 Second mortgages - 2 Total recoveries 137 125 Net charge-offs 2,163 1,383 Provision for loan losses - 550 Balance at end of period$ 9,309 $ 11,600 Ratios: Ratio of allowance for loan losses to non-performing loans 630.69 %
48.82 % Ratio of net charge-offs to average loans outstanding (1)
0.30 % 0.18 %
Ratio of net charge-offs to total allowance for loan
losses 23.24 % 11.92 %
(1) Annualized
Asset Quality
The Company manages asset quality and credit risk by maintaining diversification
in its loan portfolio and through review processes that include analysis of
credit requests and ongoing examination of outstanding loans, delinquencies, and
potential problem loans, with particular attention to the loan portfolio's
dynamics and mix of assets. The Company endeavors to identify loans experiencing
difficulty early in the process in an attempt to correct the problems, to record
charge-offs promptly based on realistic assessments of current collateral values
and cash flows, and to maintain an adequate ALLL at all times.
It is generally the Company's policy to discontinue interest accruals once a
loan is past due as to interest or principal payments for a period of 90 days.
When a loan is placed on non-accrual status, interest accruals cease, and
uncollected accrued interest is reversed and charged against current income.
Payments received on non-accrual loans are applied against principal. A loan
only may be restored to an accruing basis when it again becomes well-secured,
all past due amounts have been collected and a satisfactory period of ongoing
repayments exist. Accruing loans past due 90 days or more are generally
well-secured and in the process of collection.
-56-
--------------------------------------------------------------------------------Non-Performing Assets, OREO and Troubled Debt Restructured Loans
Non-performing loans include non-accrual loans and accruing loans that are
contractually past due 90 days or more. Non-accrual loans represent loans on
which interest accruals have been suspended. It is the Company's general policy
to consider the charge-off of loans at the point they become past due in excess
of 90 days, with the exception of loans that are both well-secured and in the
process of collection.
TDR loans represent loans to borrowers experiencing financial difficulties on
which a concession was granted, such as a reduction in interest rate which is
lower than the current market rate for new debt with similar risks, or modified
repayment terms, and are performing under the restructured terms. Such loans, as
long as they are performing in accordance with their restructured terms, are not
included within the Company's non-performing loans. For additional information
regarding loans, see Note 6 of the Notes to the Unaudited Consolidated Financial
Statements.
The following table sets forth, as of the dates indicated, the amount of the
Company's non-accrual loans, accruing loans past due 90 days or more, OREO and
performing TDR loans:
June 30, September 30,
2022 2021
(In thousands)
Non-accruing loans:
Non-accrual loans $ 1,075 $ 3,697
Accruing loans more than 90 days past due 401 -
Total non-performing loans 1,476 3,697
OREO 4,763 4,961
Total non-performing assets $ 6,239 $ 8,658
TDR loans - performing $ 5,753 $ 17,601
Non-accrual loans totaled $1.1 million at June 30, 2022 and $3.7 million at
September 30, 2021 . OREO was $4.8 million at June 30, 2022 , a decline of
$198,000 or 4.0 percent from $5.0 million and September 30, 2021 . The decrease
in non-accrual loans was primarily due a partial charge off of $2.2 million
related to one non-accrual commercial and industrial loan during the March 31,
2022 period. The partial charge-off was the result of the ongoing monitoring and
evaluation of classified loan values and is reflective of changes in current
market and economic conditions. Performing TDR loans were $5.8 million at
June 30, 2022 and $17.6 million at September 30, 2021 . The decrease is primarily
related to two TDR commercial real estate loans totaling $11.4 million that were
sold during the December 31, 2021 period.
Credit quality risk ratings include categories of "pass," "special mention,"
"substandard" and "doubtful." Assets classified as "pass" are those protected by
the current net worth and paying capacity of the obligor or by the value of the
underlying collateral. Assets which do not currently expose the Company to
sufficient risk to warrant classification as substandard or doubtful but possess
certain identified weaknesses are required to be designated as "special
mention." If uncorrected, the potential weaknesses may result in deterioration
of the repayment prospects. An asset is considered "substandard" if it is
inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include those
characterized by the "distinct possibility" that the Company will sustain "some
loss" if the deficiencies are not corrected. Assets classified as "doubtful"
have all of the weaknesses inherent in those classified "substandard" with the
added characteristic that the weaknesses present make "collection or liquidation
in full," on the basis of currently existing facts, conditions, and values,
"highly questionable and improbable."
At June 30, 2022 , special mention loans were $43.0 million compared to $58.1
million at September 30, 2021 . The decrease was primarily due to one $9.3
million commercial real estate loan that paid off during the first fiscal
quarter ended December 31, 2021 . Substandard loans were $11.7 million and $16.1
million at June 30, 2022 and September 30, 2021 , respectively. This decrease in
substandard loans is primarily due to a $2.2 million charge-off of one
commercial and industrial loan for the nine months ended June 30, 2022
period. Our loans that have been identified as special mention or substandard
are considered potential problem loans due to a variety of changing conditions
affecting the credits, including general economic conditions and/or conditions
applicable to the specific borrowers.
Recent Accounting Pronouncements
Note 2 of the Notes to the Unaudited Consolidated Financial Statements discusses
the expected impact of accounting pronouncements recently issued or proposed but
not yet required to be adopted.
-57-
--------------------------------------------------------------------------------Asset and Liability Management
Asset and liability management encompasses an analysis of market risk, the control of interest rate risk (interest sensitivity management) and the ongoing maintenance and planning of liquidity and capital. The composition of the Company's statement of condition is planned and monitored by the Company'sAsset and Liability Committee ("ALCO"). In general, management's objective is to optimize net interest income and minimize market risk and interest rate risk by monitoring the components of the statement of condition and the interaction of interest rates. Short-term interest rate exposure analysis is supplemented with an interest sensitivity gap model. The Company utilizes interest sensitivity analysis to measure the responsiveness of net interest income to changes in interest rate levels. Interest rate risk arises when an earning asset matures or when its interest rate changes in a time period different than that of a supporting interest-bearing liability, or when an interest-bearing liability matures or when its interest rate changes in a time period different than that of an earning asset that it supports. While the Company matches only a small portion of specific assets and liabilities, total earning assets and interest-bearing liabilities are grouped to determine the overall interest rate risk within a number of specific time frames. The difference between interest-sensitive assets and interest-sensitive liabilities is referred to as the interest sensitivity gap. At any given point in time, the Company may be in an asset-sensitive position, whereby its interest-sensitive assets exceed its interest-sensitive liabilities, or in a liability-sensitive position, whereby its interest-sensitive liabilities exceed its interest-sensitive assets, depending in part on management's judgment as to projected interest rate trends. The Company's interest rate sensitivity position in each time frame may be expressed as assets less liabilities, as liabilities less assets, or as the ratio between rate sensitive assets ("RSA") and rate sensitive liabilities ("RSL"). For example, a short-funded position (liabilities repricing before assets) would be expressed as a net negative position, when period gaps are computed by subtracting repricing liabilities from repricing assets. When using the ratio method, an RSA/RSL ratio of 1 indicates a balanced position, a ratio greater than 1 indicates an asset-sensitive position and a ratio less than 1 indicates a liability-sensitive position. A negative gap and/or a rate sensitivity ratio less than 1 tends to expand NIMs in a falling rate environment and reduce NIMs in a rising rate environment. Conversely, when a positive gap occurs, generally margins expand in a rising rate environment and contract in a falling rate environment. From time to time, the Company may elect to deliberately mismatch liabilities and assets in a strategic gap position.
At
Estimates of Fair Value
The estimation of fair value is significant to a number of the Company's assets,
including loans held for sale, investment securities available-for-sale and loan
swaps. These are all recorded at either fair value or the lower of cost or fair
value. Fair values are volatile and may be influenced by a number of factors.
Circumstances that could cause estimates of the fair value of certain assets and
liabilities to change include a change in prepayment speeds, discount rates, or
market interest rates. Fair values for most available-for-sale investment
securities are based on quoted market prices. If quoted market prices are not
available, fair values are based on judgments regarding future expected loss
experience, current economic condition, risk characteristics of various
financial instruments, and other factors. These estimates are subjective in
nature, involve uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.
Liquidity
The liquidity position of the Company is dependent primarily on successful
management of the Bank's assets and liabilities so as to meet the needs of both
deposit and credit customers. Liquidity needs arise principally to accommodate
possible deposit outflows and to meet customers' requests for loans. Scheduled
principal loan repayments, maturing investments, short-term liquid assets, and
deposit inflows can satisfy such needs. The objective of liquidity management is
to enable the Company to maintain sufficient liquidity to meet its obligations
in a timely and cost-effective manner.
Management monitors current and projected cash flows and adjusts positions as
necessary to maintain adequate levels of liquidity. Under its liquidity risk
management program, the Company regularly monitors correspondent bank funding
exposure and credit exposure in accordance with guidelines issued by the banking
regulatory authorities. Management uses a variety of potential funding sources
and staggering maturities to reduce the risk of potential funding pressure.
Management also maintains a detailed contingency funding plan designed to
respond adequately to situations which could lead to stresses on liquidity.
Management believes that the Company has the funding capacity to meet the
liquidity needs arising from potential events.
-58-
--------------------------------------------------------------------------------
The Company's primary sources of short-term liquidity consist of cash and cash
equivalents, interest bearing deposits with banks (including the FHLB
Pittsburgh ), investment securities held to maturity that are maturing within 90
days or would otherwise qualify as maturities if sold (i.e., 85 percent of
original cost basis has been repaid), investment securities available-for-sale,
loans held or sale, and from time to time federal funds sold and receivables
related to unsettled securities transactions.
Additionally, liquidity is derived from scheduled loan payments of principal and
interest, as well as prepayments received. As a contingency plan for any
liquidity constraints, liquidity could also be derived from the sale of
conforming residential mortgages from our loan portfolio or alleviated from the
temporary curtailment of lending activities. At June 30, 2022 , the Company had
$39.8 million in cash and cash equivalents compared to $136.6 million at
September 30, 2021 . In addition, our available for sale investment securities
amounted to $53.1 million at June 30, 2022 and $40.8 million at September 30,
2021 .
Deposits
Total deposits decreased $146.5 million , or 15.6 percent, from $938.2 million at
September 30, 2021 to $791.7 million at June 30, 2022 . The reduction in deposits
was in line with the Company's overall funding strategy to reduce excess balance
sheet cash and better match funding needs.
Total interest-bearing deposits decreased $149.4 million from $884.3 million at
September 30, 2021 to $734.9 million at June 30, 2022 . Time deposits $250,000
and over decreased $330,000 as compared to September 30, 2021 . Time deposits
$250,000 and over represented 2.1% of total deposits at June 30, 2022 compared
to 1.8% at September 30, 2021 . We had brokered deposits totaling $9.1 million at
June 30, 2022 compared to $6.1 million at September 30, 2021 .
The Company continues to focus on the maintenance, development, and expansion of
its deposit base strategically with its funding requirements and liquidity
needs, with an emphasis on serving the needs of its communities to provide a
long-term relationship base to efficiently compete for and retain deposits in
its market.
The following table depicts the Company's deposits classified by type, with
percentages to total deposits, at
June 30, September 30,
2022 2021 Dollar
Amount Percentage Amount Percentage Change
Balances by types of deposit: (Dollars in thousands)
Savings $ 54,184 6.84 % $ 50,582 5.39 % $ 3,602
Money market accounts 301,165 38.04 385,480 41.09 (84,315 )
Interest bearing demand 270,532 34.17 336,645 35.88 (66,113 )
Non-interest bearing demand 56,731 7.17 53,849 5.74 2,882
682,612 86.22 826,556 88.10 (143,944 )
Certificates of deposit 109,082 13.78 111,603 11.90 (2,521 )
Total $ 791,694 100.00 % $ 938,159 100.00 % $ (146,465 )
Borrowings
Advances from FHLB Pittsburgh are available to supplement the Company's
liquidity position and, to the extent that maturing deposits do not remain with
the Company, management may replace such funds with these advances. As of
June 30, 2022 and September 30, 2021 , the Company's outstanding balance of FHLB
Pittsburgh advances totaled $60.0 million and $90.0 million , respectively. Of
the $60.0 million in advances, all are short-term fixed-rate advances having a
rolling 90-day maturity.
The Company did not purchase any securities as of
Cash Flows
The Consolidated Statements of Cash Flows present the changes in cash and cash equivalents resulting from the Company's operating, investing, and financing activities. During the nine months endedJune 30, 2022 , cash and cash equivalents decreased by$96.8 million from the balance atSeptember 30, 2021 . Net cash of$1.5 million was provided by operating activities. Net cash provided by investing activities amounted to approximately$76.7 million primarily due to a net decrease in loans of$97.4 million which was partially offset by purchases of$46.8 million of investment securities. The decrease in net cash from financing activities of -59- --------------------------------------------------------------------------------
Shareholders' Equity
Total shareholders' equity amounted to$145.2 million , or 14.1% of total assets, atJune 30, 2022 , compared to$142.2 million , or 11.8% of total assets, atSeptember 30, 2021 . Book value per common share was$19.03 atJune 30, 2022 , compared to$18.65 atSeptember 30, 2021 . June 30, September 30, 2022 2021 (In thousands, except for per share data) Shareholders' equity 145,290 142,168 Book value per common share $ 19.03 $ 18.65 Capital AtJune 30, 2022 , the Bank's common equity Tier 1 capital ratio was 18.79%, Tier 1 leverage ratio was 15.33 percent, Tier 1 risk-based capital ratio was 18.79% and the total risk-based capital ratio was 19.87%. AtSeptember 30, 2021 , the Bank's common equity Tier 1 capital ratio was 16.13 percent, Tier 1 leverage ratio was 13.14%, Tier 1 risk-based capital ratio was 16.13% and the total risk-based capital ratio was 17.32%. AtJune 30, 2022 , the Bank was in compliance with all applicable regulatory capital requirements.
Information on Stock Repurchases
Information on Stock Repurchases is provided in "Part II. Other Information,
Item 2, Unregistered Sales of
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