PCSB FINANCIAL CORPORATION General
Management's discussion and analysis of financial condition atSeptember 30, 2021 andJune 30, 2021 , and results of operations for the three months endedSeptember 30, 2021 and 2020 is intended to assist in understanding the consolidated financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q and with the audited consolidated financial statements included in the annual report on Form 10-K for the fiscal year endedJune 30, 2021 .
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect," "will," "may" and words of similar meaning. These forward-looking statements include, but are not limited to:
• statements of our goals, intentions and expectations;
• statements regarding our business plans, prospects, growth and operating
strategies;
• statements regarding the quality of our loan and investment portfolios; and
• estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
• extent, duration and severity of the COVID-19 pandemic and government action
in response to the pandemic, including their impact on our business and
operations, including the impact on lost fee revenue and operating expenses,
as well as their effects on our customers and issuers of securities,
including their ability to make timely payments on obligations, service
providers, and on economies and markets more generally;
• general economic conditions, either nationally or in our market areas, that
are worse than expected;
• changes in the level and direction of loan delinquencies and charge-offs and
changes in estimates of the adequacy of the allowance for loan losses;
• our ability to access cost-effective funding;
• fluctuations in real estate values and both residential and commercial real
estate market conditions;
• demand for loans and deposits in our market area;
• our ability to continue to implement our business strategies;
• competition among depository and other financial institutions;
• inflation and changes in the interest rate environment that reduce our
margins and yields, reduce the fair value of financial instruments or reduce
the origination levels in our lending business, or increase the level of
defaults, losses and prepayments on loans we have made and make whether held
in portfolio or sold in the secondary markets;
• adverse changes in the securities or credit markets;
• changes in laws or government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital requirements;
• our ability to manage market risk, credit risk and operational risk in the
current economic conditions;
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• our ability to enter new markets successfully and capitalize on growth
opportunities;
• our ability to successfully integrate any assets, liabilities, customers,
systems and management personnel we may acquire into our operations and our
ability to realize related revenue synergies and cost savings within
expected time frames and any goodwill charges related thereto;
• changes in consumer spending, borrowing and savings habits;
• changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Financial Accounting Standards Board , or the
Securities and Exchange Commission ;
• our ability to retain key employees;
• our compensation expense associated with equity allocated or awarded to our
employees; and
• changes in the financial condition, results of operations or future
prospects of issuers of securities that we own.
Additional factors that may affect our results are discussed in the annual
report on Form 10-K for the fiscal year ended
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.
Critical Accounting Policies
Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. For additional information regarding critical accounting policies, refer to the section captioned "Critical Accounting Policies" in Management's Discussion and Analysis of Financial Condition and Results of Operations included in theJune 30, 2021 Form 10-K. There have been no significant changes in our application of critical accounting policies for the three months endedSeptember 30, 2021 . Loan Payment Deferrals The COVID-19 pandemic has created extensive disruptions to the local economy and our customers. ThroughSeptember 30, 2021 , the Company has granted loan payment deferrals on 330 consumer and commercial loans whose borrowers have demonstrated financial hardship caused by COVID-19 with loan balances totaling$220.2 million . As ofSeptember 30, 2021 , 11 loans totaling$18.5 million were still on deferral. Of those loans still on deferral as ofSeptember 30, 2021 ,$3.5 million are scheduled to resume payments prior toDecember 31, 2021 , with the remainder scheduled to resume payments prior toJanuary 31, 2022 , however as we continue to assess our borrowers' financial condition and individual circumstances in the coming weeks and months, additional payment deferrals may be granted.
The table below provides additional detail for those loans on deferral as of
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Weighted
Recorded % secured by average
Number of Investment (1) real estate Loan-to-Value % (3) term of
loans (2) collateral remaining
deferral
Industry Sector: (in months)
Retail 3 $ 11,590 100.0 % 59.8 % 3.1
Hotels and accommodation services 1 2,013 100.0 54.8 0.1
Food service 2 3,018 100.0 48.7 1.7
All other commercial 5 1,903 89.2 70.0 2.7
Total 11 $ 18,524 98.9 % 58.3 % 2.5
(1) Includes loans classified as special mention and substandard of $1.7 million and $8.6 million , respectively.
(2) Includes $3.6 million of nonaccrual loans. All loans are considered current.
(3) Generally based on collateral values upon origination.
The table below provides additional detail regarding the type of deferral
granted for those loans on deferral as of
Total
Principal only $ 10,412
Interest only 1,513
Principal and interest 6,599
Total $ 18,524 Comparison of Financial Condition at
Total Assets. Total assets decreased$1.8 million , or 0.1%, to$1.87 billion atSeptember 30, 2021 fromJune 30, 2021 . The decrease is primarily the result of decreases of$18.8 million in net loans receivable and$11.3 million in cash and cash equivalents, partially offset by a$28.6 million increase in total investment securities. Cash and Cash Equivalents. Cash and cash equivalents decreased$11.3 million , or 7.1%, to$148.0 million atSeptember 30, 2021 from$159.3 million atJune 30, 2021 . The decrease is primarily due to a$28.5 million increase in total investment securities, an$11.1 million decrease in other liabilities and a$3.7 million decrease in mortgage escrow funds, partially offset by an$18.8 million decrease in loans receivable and a$13.0 million increase in deposits. Securities Held to Maturity. Total securities held to maturity increased$40.9 million , or 12.1%, to$378.5 million atSeptember 30, 2021 from$337.6 million atJune 30, 2021 . This increase was primarily due to increases of$27.1 million in municipal securities,$6.3 million in mortgage-backed securities,$5.5 million in corporate bonds and$2.0 million inU.S. government and agency obligations. Securities Available for Sale. Total securities available for sale decreased$12.4 million , or 21.6%, to$45.0 million atSeptember 30, 2021 from$57.4 million atJune 30, 2021 . This decrease was primarily due to decreases of$11.0 million inU.S. government and agency obligations,$1.2 million in mortgage-backed securities and a$187,000 decrease in net unrealized gains. Net Loans Receivable. Net loans receivable decreased$18.8 million , or 1.5%, to$1.21 billion atSeptember 30, 2021 from$1.23 billion atJune 30, 2021 . The decrease in loans receivable was the result of decreases of$28.6 million in commercial loans,$2.6 million in residential mortgage loans, partially offset by increases of$11.4 million in commercial mortgage loans and$1.5 million in construction loans. The decrease in commercial loans includes a decrease of$17.3 million in PPP loans, driven by paydowns and forgiveness. Deposits. Total deposits increased$13.0 million , or 0.9%, to$1.50 billion atSeptember 30, 2021 as compared to$1.49 billion atJune 30, 2021 . This increase primarily reflects increases of$30.2 million in money market accounts, and$4.3 million in NOW accounts, partially offset by decreases of$13.3 million in time deposits,$5.6 million in savings and$2.6 million in demand deposits. 32 --------------------------------------------------------------------------------
Federal Home Loan Bank Advances. FHLB advances decreased
Total Shareholder's Equity. Total shareholders' equity increased$168,000 to$274.7 million atSeptember 30, 2021 from$274.6 million atJune 30, 2021 . This increase was primarily due to net income of$3.6 million and$1.3 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period, partially offset by the repurchase of$3.7 million (204,335 shares) of common stock and$876,000 of cash dividends declared and paid. OnFebruary 3, 2021 , a repurchase plan was authorized to repurchase up to 801,856 shares, or 5% of the Company's then outstanding common stock. As ofSeptember 30, 2021 , the Company repurchased 462,028 shares of common stock at an average cost of$17.97 per share. AtSeptember 30, 2021 , the Bank was considered "well capitalized" under applicable regulatory guidelines.
Comparison of Operating Results for the Three months ended
General. Net income increased$886,000 , or 32.5%, to$3.6 million for the three months endedSeptember 30, 2021 compared to$2.7 million for the three months endedSeptember 30, 2020 . The increase was primarily due to a$958,000 increase in net interest income, a$96,000 decrease in provision for loan losses and a$19,000 increase in noninterest income, partially offset by a$187,000 increase in income tax expense. Net Interest Income. Net interest income increased$958,000 , or 8.3%, to$12.5 million for the three months endedSeptember 30, 2021 compared to$11.6 million for the three months endedSeptember 30, 2020 . The increase primarily reflects a$62.8 million , or 3.6%, increase in average interest-earning assets and a 13 basis point increase in the tax equivalent net interest margin to 2.82% for the three months endedSeptember 30, 2021 compared to 2.69% for the three months endedSeptember 30, 2020 . The increase in average interest-earning assets reflects an$89.3 million increase in average investment securities and a$2.6 million increase in other interest-earning assets, partially offset by a$29.1 million decrease in average of loans receivable. Interest and Dividend Income. Interest and dividend income decreased$301,000 , or 2.1%, to$14.2 million for the three months endedSeptember 30, 2021 compared to$14.5 million for the three months endedSeptember 30, 2020 . The decrease primarily reflects a 17 basis point decrease in the yield on total interest-earning assets, partially offset by a$62.8 million increase in total average interest-earning assets. The decline in asset yields (excluding the effect of PPP income), which resulted from lower market interest rates, has slowed in recent quarters due to a more stable yield curve and a more favorable earning asset composition. Interest income on loans receivable decreased$440,000 , or 3.5%, primarily due to a 5 basis point decrease in the average tax equivalent yield on loans receivable to 3.96% for the three months endedSeptember 30, 2021 from 4.01% for the same period last year and a$29.1 million , or 2.3%, decrease in the average balance of loans receivable to$1.22 billion for the three months endedSeptember 30, 2021 from$1.25 billion for the same period last year. Decreases in market interest rates have resulted in a decreased yield on loans receivable. The Company recognized PPP loan interest income and origination fee income (net of costs) of$381,000 in the current quarter, compared to$217,000 in the prior year quarter. Unearned origination fees (net of costs) on PPP loans totaled$698,000 as ofSeptember 30, 2021 and will be recognized in income over the remaining lives of the loans and the timing of such recognition is largely dependent on the timing of forgiveness. Interest income on investment securities increased$155,000 , or 8.4%, primarily due to an$89.3 million increase in the average balance of investment securities to$404.6 million for the three months endedSeptember 30, 2021 from$315.3 million for the same period last year, partially offset by a 31 basis point decrease in the average yield on investment securities on a tax equivalent basis to 2.07% for the three months endedSeptember 30, 2021 from 2.38% for the same period last year. The increase in the average balance of investment securities is the result of the Company utilizing excess liquidity to fund securities portfolio growth. The decrease in yield is a result of lower market interest rates. Interest income on other interest-earning assets, primarily consisting of cash balances at correspondent banks including theFederal Reserve , decreased$16,000 , or 12.8%, primarily due to a 4 basis point decrease in the average yield on other interest-earning assets to 0.27% for the three months endedSeptember 30, 2021 , from 0.31% for the same period last year, partially offset by a$2.7 million increase in the average balance of other interest-earning assets to$160.7 million for the three months endedSeptember 30, 2021 compared to$158.0 million for the three 33 -------------------------------------------------------------------------------- months endedSeptember 30, 2020 . The decrease in yield on other interest-earning assets was primarily due to is a decrease in market interest rates, specifically Fed Funds. Interest Expense. Interest expense decreased$1.3 million , or 42.7%, to$1.7 million for the three months endedSeptember 30, 2021 compared to$3.0 million for the three months endedSeptember 30, 2020 . The decrease primarily reflects a 40 basis point decrease in the average cost of interest-bearing liabilities to 0.49% for the three months endedSeptember 30, 2021 from 0.89% for the three months endedSeptember 30, 2020 , partially offset by a$54.6 million increase in the average balance of interest-bearing liabilities to$1.36 billion for the three months endedSeptember 30, 2021 from$1.31 billion for the same period last year. Interest expense on interest-bearing deposits decreased$1.1 million , or 44.3%, primarily due to a 39 basis point decrease in the average cost of interest-bearing deposits to 0.41% for the three months endedSeptember 30, 2021 from 0.80% for the same period last year, partially offset by a$94.7 million increase in the average balance to$1.30 billion for the three months endedSeptember 30, 2021 from$1.20 billion for the three months endedSeptember 30, 2020 . The decrease in the average rate paid on interest-bearing deposits was primarily caused by a decrease in market interest rates affecting most significantly the average rates paid on time deposits and money market accounts, which decreased 64 and 17 basis points, respectively, when compared to last year. During the remainder of the current fiscal year, the Company has$27.5 million of wholesale funding maturing, comprised of FHLB advances and brokered time deposits, with a weighted average cost of 2.43%. Interest expense on FHLB advances decreased$181,000 , or 34.9%, primarily due to a$40.2 million decrease in the average balance to$65.9 million for the three months endedSeptember 30, 2021 from$106.1 million for the three months endedSeptember 30, 2020 , partially offset by a 9 basis point increase in the average cost to 2.03% for the three months endedSeptember 30, 2021 from 1.94% for the three months endedSeptember 30, 2020 . The decrease in the cost of FHLB funds is due to the maturity of higher-costing advances. Provision for Loan Losses. The provision for loan losses was$13,000 for the three months endedSeptember 30, 2021 , compared to$109,000 for the three months endedSeptember 30, 2020 . The decrease is primarily due to a decrease in the loan portfolio. Recoveries, net of charge-offs, were$265,000 for the three months endedSeptember 30, 2021 compared to charge-offs, net of recoveries, of$76,000 for the three months endedSeptember 30, 2020 , respectively. Non-performing loans as a percent of total loans receivable (excluding PPP loans) were 0.48% as ofSeptember 30, 2021 , unchanged compared toJune 30, 2021 . Loans on a COVID-19 related payment deferral totaled$18.5 million , or 1.52% of gross loans, as ofSeptember 30, 2021 , compared to$27.3 million , or 2.21% of gross loans, as ofJune 30, 2021 . Noninterest Income. Noninterest income increased$19,000 , or 3.2%, to$613,000 for the three months endedSeptember 30, 2021 compared to same period last year. The increase was caused primarily by increases of$79,000 in fees and service charges,$60,000 in bank-owned life insurance income and$9,000 in all other noninterest income, partially offset by a$129,000 decrease in swap income. The increase in fees and service charges compared to the same period last year was partially the result of the waiver in the prior year of certain overdraft fees, ATM usage fees, wire and CD early withdrawal fees in response to COVID-19, as well an increase in debit card and interchange income. For the three months endedSeptember 30, 2021 , noninterest income includes net gains on the sale of loans of$6,000 , compared to none for the same period last year.
Noninterest Expense. Noninterest expense of
Income Tax Expense. Income tax expense increased$187,000 , or 26.3%, for the three months endedSeptember 30, 2021 in comparison to the three months endedSeptember 30, 2020 . The increase was caused by higher pre-tax income, partially offset by a lower effective tax rate. The effective income tax rate was 19.9% for the three months endedSeptember 30, 2021 as compared to 20.7% for the three months endedSeptember 30, 2020 , with the decrease largely driven by an increase in tax-exempt interest income on municipal investments. 34
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Average Balance Sheet and Interest Rates.
The following table presents information regarding average balances of assets
and liabilities, the total dollar amounts of interest income and dividends from
average interest-earning assets, the total dollar amounts of interest expense on
average interest-bearing liabilities, and the resulting annualized average tax
equivalent yields and costs. The yields and costs for the periods indicated are
derived by dividing income or expense by the average balances of assets or
liabilities, respectively, for the periods presented. Average balances have been
calculated using daily balances. Nonaccrual loans are included in average
balances only. Loan fees are included in interest income on loans and are not
material (dollars in thousands).
Three Months Ended September 30,
2021 2020
Average Interest/ Average Average Interest/ Average
Balance Dividends Rate Balance Dividends Rate
Assets:
Loans receivable (1) $ 1,223,532 $ 12,107 3.96 % $ 1,252,595 $ 12,547 4.01 %
Investment securities (1) 404,565 2,011 2.07 315,292 1,856 2.38
Other interest-earning assets 160,659 109 0.27 158,038 125 0.31
Total interest-earning assets 1,788,756 14,227 3.20
1,725,925 14,528 3.37
Non-interest-earning assets 76,375 71,926
Total assets $ 1,865,131 $ 1,797,851
Liabilities and equity:
NOW accounts $ 182,531 70 0.15 $ 149,466 89 0.24
Money market accounts 350,575 186 0.21 250,297 238 0.38
Savings accounts and escrow 397,292 113 0.11 360,091 202 0.22
Time deposits 367,641 985 1.06 443,487 1,903 1.70
Total interest-bearing deposits 1,298,039 1,354 0.41 1,203,341 2,432 0.80
FHLB advances 65,935 338 2.03 106,067 519 1.94
Total interest-bearing
liabilities 1,363,974 1,692 0.49 1,309,408 2,951 0.89Non-interest-bearing deposits 207,806 184,085 Other non-interest-bearing liabilities 19,943 28,958 Total liabilities 1,591,723 1,522,451 Total shareholders' equity 273,408 275,400 Total liabilities and shareholders' equity$ 1,865,131 $ 1,797,851 Net interest income$ 12,535 $ 11,577 Interest rate spread - tax equivalent (2) 2.71 2.48 Net interest margin - tax equivalent (3) 2.82 2.69 Average interest-earning assets to interest-bearing liabilities 131.14 % 131.81 %
(1) Tax exempt yield is shown on a tax equivalent basis for proper comparison
using statutory federal income tax rate of 21% for all periods presented. See
reconciliation of GAAP to non-GAAP measures in the table below.
(2) Net interest rate spread represents the difference between the average yield
on average interest-earning assets and the average cost of average
interest-bearing liabilities.
(3) Net interest margin represents annualized net interest income divided by
average interest-earning assets. See reconciliation of GAAP to non-GAAP
measures in the table below.
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The following table presents information regarding tax equivalent adjustment used in the calculation of certain financial metrics (in thousands).
Three Months Ended September 30,
2021 2020
Total interest income $ 14,227 $ 14,528
Total interest expense 1,692 2,951
Net interest income (GAAP) 12,535 11,577
Tax equivalent adjustment 89 33Net interest income - tax equivalent (non-GAAP) $ 12,624 $
11,610
Rate/Volume Analysis. The following table sets forth the effects of changing
rates and volumes on our net interest income. 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. Changes attributable to changes in both rate and volume that
cannot be segregated have been allocated proportionally based on the changes due
to rate and the changes due to volume (in thousands).
Three Months Ended September 30,
2021 versus 2020
Rate Volume Net
Interest income:
Loans receivable $ (251 ) $ (189 ) $ (440 )
Investment securities (343 ) 498 155
Other interest-earning assets (16 ) - (16 )
Total interest-earning assets (610 ) 309 (301 )
Interest expense:
NOW accounts (36 ) 17 (19 )
Money market accounts (127 ) 75 (52 )
Savings and escrow accounts (107 ) 18 (89 )
Time deposits (630 ) (288 ) (918 )
FHLB advances 22 (203 ) (181 )
Total interest-bearing liabilities (878 ) (381 ) (1,259 )
Net increase in net interest income
Management of Market Risk General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, we have established a management-level Asset/Liability Management Committee, which takes initial responsibility for developing an asset/liability management process and related procedures, establishing and monitoring reporting systems and developing asset/liability strategies. On at least a quarterly basis, the Asset/Liability Management Committee reviews asset/liability management with the Investment Asset/Liability Committee of the Board of Directors. This Committee also reviews any changes in strategies as well as the performance of any specific asset/liability management actions that have been implemented previously. On a quarterly basis, an outside consulting firm provides us with detailed information and analysis as to asset/liability management, including our interest rate risk profile. Ultimate responsibility for effective asset/liability management rests with our Board of Directors.
We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk: originating
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loans with adjustable interest rates; utilizing interest rate swaps, promoting
core deposit products; and adjusting the interest rates and maturities of
funding sources, as necessary. By following these strategies, we believe that we
are better positioned to react to changes in market interest rates.
Net Portfolio Value Simulation. We analyze our sensitivity to changes in
interest rates through a net portfolio value of equity ("NPV") model. NPV
represents the present value of the expected cash flows from our assets less the
present value of the expected cash flows arising from our liabilities. The NPV
ratio represents the dollar amount of our NPV divided by the present value of
our total assets for a given interest rate scenario. NPV attempts to quantify
our economic value using a discounted cash flow methodology while the NPV ratio
reflects that value as a form of equity ratio. We estimate what our NPV would be
at a specific date. We then calculate what the NPV would be at the same date
throughout a series of interest rate scenarios representing immediate and
permanent, parallel shifts in the yield curve. We currently calculate NPV under
the assumptions that interest rates increase 100 and 200 basis points from
current market rates and that interest rates decrease 50 and 100 basis points
from current market rates.
The following table presents the estimated changes in our NPV that would result
from changes in market interest rates at September 30, 2021 and June 30, 2021 .
All estimated changes presented in the table are within the policy limits
approved by our Board of Directors (dollars in thousands).
NPV as Percent of Portfolio
NPV Value of Assets
Basis Point Change in Dollar Dollar Percent NPV Change
Interest Rates Amount Change Change Ratio (in bps)
September 30, 2021:
200 $ 269,318 $ (39,868 ) (12.9 ) % 15.21 % (132 )
100 290,936 (18,250 ) (5.9 ) 15.98 (55 )
- 309,186 - - 16.53 -
(50) 329,936 20,750 6.7 17.35 82
(100) 356,452 47,266 15.3 18.45 192
June 30, 2021:
200 $ 270,679 $ (37,814 ) (12.3 ) % 15.21 % (122 )
100 291,715 (16,778 ) (5.4 ) 15.95 (48 )
- 308,493 - - 16.43 -
(50) 324,999 16,506 5.4 17.06 63
(100) 346,539 38,046 12.3 17.94 151
Certain shortcomings are inherent in the methodologies used in the above
interest rate risk measurements. Modeling changes require making certain
assumptions that may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. The above table assumes that
the composition of our interest-sensitive assets and liabilities existing at the
date indicated remains constant uniformly across the yield curve regardless of
the duration or repricing of specific assets and liabilities. Accordingly,
although the table provides an indication of our interest rate risk exposure at
a particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
our NPV and will differ from actual results.
Liquidity and Capital Resources
Liquidity. Liquidity is the ability to meet current and future financial
obligations of a short-term nature. Our primary sources of funds consist of
deposit inflows, loan repayments and maturities and sales of securities. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit flows and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition.
We regularly review the need to adjust our investments in liquid assets based
upon our assessment of: (1) expected loan demand, (2) expected deposit flows,
(3) yields available on interest-earning deposits and securities, and (4) the
objectives of our asset/liability management program. Excess liquid assets are
invested generally in interest-earning deposits and short- and intermediate-term
securities.
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Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. AtSeptember 30, 2021 , cash and cash equivalents totaled$148.0 million , a decrease from$159.3 million as ofJune 30, 2021 . Unpledged securities classified as available for sale, which provide an additional source of liquidity, totaled$27.9 million atSeptember 30, 2021 , a decrease from$28.9 million as ofJune 30, 2021 . We had the ability to borrow up to$368.1 million from the FHLB ofNew York , atSeptember 30, 2021 of which$65.9 million was outstanding as ofSeptember 30, 2021 . Additionally, as ofSeptember 30, 2021 , we had an available line of credit with the FRB ofNew York's discount window program of$100.3 million , and$25.0 million of fed funds lines of credit, neither of which had outstanding balances as ofSeptember 30, 2021 . We have no material commitments or demands that are likely to affect our liquidity other than as set forth below. If loan demand was to increase faster than expected, or any unforeseen demand or commitment was to occur, we could access our borrowing sources detailed above. We had$63.1 million of loan commitments outstanding as ofSeptember 30, 2021 and$176.6 million of approved, but unadvanced, funds to borrowers. We also had$3.2 million in outstanding letters of credit atSeptember 30, 2021 . Time deposits due within one year ofSeptember 30, 2021 totaled$220.6 million . If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and FHLB ofNew York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the time deposits atSeptember 30, 2021 . We believe, however, based on past experience that a significant portion of our time deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.The Holding Company is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its shareholders, to repurchase shares of its common stock and for other corporate purposes.The Holding Company's primary source of liquidity is dividend payments it may receive from the Bank. The Bank's ability to pay dividends to the Holding Company is governed by applicable law and regulations. AtSeptember 30, 2021 , the Holding Company (on an unconsolidated, stand-alone basis) had liquid assets of$22.7 million . Capital Resources. The Bank is subject to various regulatory capital requirements administered by the NYSDFS and theFDIC . AtSeptember 30, 2021 , the Bank exceeded all applicable regulatory capital requirements, and the Bank was considered "well capitalized" under applicable regulatory guidelines. See Note 8 to the accompanying unaudited consolidated financial statements.
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