PCSB FINANCIAL CORPORATION General
This section is intended to help investors understand the consolidated financial performance ofPCSB Financial through a discussion of the factors affecting our financial condition atJune 30, 2021 and 2020 and our results of operations for the years endedJune 30, 2021 and 2020. This section should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements contained in this annual report.
Overview
Income. Our primary source of income is net interest and dividend income. Net interest and dividend income is the difference between interest and dividend income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Other sources of income include earnings from customer service fees (mostly from service charges on deposit accounts), bank-owned life insurance and gains on the sale of securities. Provision for Loan Losses. The allowance for loan losses is maintained at a level representing management's best estimate of probable incurred losses in the loan portfolio, based upon management's evaluation of the portfolio's collectability. The allowance is established through the provision for loan losses, which is charged against income. Charge-offs are charged to the allowance. Subsequent recoveries, if any, are credited to the allowance. Allocation of the allowance may be made for specific loans or pools of loans, but the entire allowance is available for the entire loan portfolio.
Expenses. The noninterest expenses we incur in operating our business consist of salaries and employee benefits, occupancy and equipment, data processing, federal deposit insurance and other general and administrative expenses.
Salaries and employee benefits consist primarily of salaries and wages paid to our employees, payroll taxes, and expenses for health insurance, retirement plans, stock-based compensation and other employee benefits.
Occupancy and equipment expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, rental expenses, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using a straight-line method based on the estimated useful lives of the related assets or the expected lease terms, if shorter. Data processing expenses are the fees we pay to third parties for the use of their software and for processing customer information, deposits and loans.
Federal deposit insurance premiums are payments we make to the
Other expenses include expenses for professional services, advertising, office supplies, postage, telephone, insurance and other miscellaneous operating expenses.
Critical Accounting Policies
A summary of our accounting policies is described in Note 1 to Notes to
Consolidated Financial Statements. 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. Management believes that the
most critical accounting policies, which involve the most complex or subjective
decisions or assessments, are as follows:
Allowance for Loan Losses. The allowance for loan losses is a valuation
allowance for probable incurred loan losses. The allowance for loan losses is
increased by provisions for loan losses charged to income. Losses are charged to
the allowance for loan losses when all or a portion of a loan is deemed to be
uncollectible. Recoveries of
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loans previously charged off are credited to the allowance when realized. See
Note 4 to Notes to Consolidated Financial Statements for a complete discussion
of the allowance for loan losses.
Loan Portfolio
General. Loans are our primary interest-earning asset. At
Loan Portfolio Analysis. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.
At June 30,
2021 2020 2019 2018 2017
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
(Dollars in thousands)
Mortgage loans:
Residential $ 224,305 18.13 % $ 255,382 20.14 % $ 265,167 24.17 % $ 250,578 27.67 % $ 217,778 26.77 %
Commercial 826,624 66.79 807,106 63.65 651,396 59.38 495,265 54.70 437,651 53.80
Construction 10,151 0.82 11,053
0.87 13,231 1.21 17,352 1.92 22,404 2.75
Total 1,061,080 85.74 1,073,541 84.66 929,794 84.76 763,195 84.29 677,833 83.32 Commercial loans 150,658 12.17 164,257 12.95 133,614 12.18 104,135 11.50 93,631 11.50 Home equity lines of credit 25,439 2.06 29,838 2.35 33,204 3.03 37,395 4.13 41,927 5.15 Consumer and overdrafts 345 0.03 481 0.04 365 0.03 745 0.08 233 0.03 Total loans receivable 1,237,522 100.00 % 1,268,117 100.00 % 1,096,977 100.00 % 905,470 100.00 % 813,624 100.00 % Plus: net deferred loans origination (fees) costs (190 ) 1,469 1,808 1,770 1,174 Less: allowance for loan losses (7,881 ) (8,639 ) (5,664 ) (4,904 ) (5,150 ) Loans receivable, net$ 1,229,451 $ 1,260,947 $ 1,093,121 $ 902,336 $ 809,648 Loan Maturity. The following table sets forth certain information atJune 30, 2021 regarding the dollar amount of loan maturities for the periods indicated. The table does not include scheduled amortization or any estimate of prepayments that significantly shorten the average loan life and may cause actual repayment experience to differ from that shown below. Home equity Residential Commercial Commercial Lines of Consumer and Mortgage Loans Mortgage Loans Construction Loans Loans Credit Overdrafts Total Loans (in thousands) Amounts due in: One year or less $ 57$ 10,278 $ 10,151$ 40,256 $ - $ 135
More than one year through two years 298 8,371 - 25,142 - 121
33,932
More than two years through three years 464 18,656 - 7,426 4 71
26,621
More than three years through five years 1,292 107,937 - 44,263 9 18
153,519
More than five years through ten years 18,127 291,151 - 28,123 802 -
338,203
More than ten years through fifteen years 28,050 276,771 - 3,786 5,893 - 314,500 More than fifteen years 176,017 113,460 - 1,662 18,731 - 309,870 Total$ 224,305 $ 826,624 $ 10,151$ 150,658 $ 25,439 $ 345$ 1,237,522 42
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The following table sets forth the dollar amount of all loans at
Floating or
Adjustable
Fixed Rates % Rates % Total
(Dollars in thousands)
Residential mortgage loans
198,770 24.35 617,576 75.65 816,346
Commercial loans 87,222 79.00 23,180 21.00 110,402
Home equity lines of credit 82 0.32 25,357 99.68 25,439
Consumer and overdrafts 210 100.00 - - 210
Total $ 478,926 40.70 % $ 697,719 59.30 % $ 1,176,645
Loan Originations, Purchases and Sales. Loan originations come from a variety of
sources. The primary sources of loan originations are current customers,
business development by our relationship managers, walk-in traffic, referrals
from customers, and other professionals. We generally originate loans for our
portfolio rather than for sale in the secondary market.
We occasionally purchase whole loans and loan participation interests from other
financial institutions, which consist of interests in commercial mortgage loans,
multi-family mortgage loans and residential mortgage loans, primarily in our
market area. At June 30, 2021 , we had $174.7 million in purchased whole loan and
participation interests.
Asset Quality
Credit Risk Management. Our strategy for credit risk management focuses on
having well-defined credit policies and uniform underwriting criteria and
providing prompt attention to potential problem loans. Management of asset
quality is accomplished by internal controls, monitoring and reporting of key
risk indicators, and both internal and independent third-party loan reviews. The
primary objective of our loan review process is to measure borrower performance
and assess risk for the purpose of identifying loan weakness in order to
minimize loan loss exposure. From the time of loan origination through final
repayment, the borrowers on individual commercial real estate, construction and
land development and commercial business loans are assigned a risk rating,
including a collateral rating, based on pre-determined criteria and levels of
risk. The borrower and collateral risk ratings are generally monitored annually,
or more frequently should we become aware of a material adverse change in the
borrower's condition, and may change during the life of the loan as appropriate.
Internal and independent third-party loan reviews vary by loan type, as well as
the nature and complexity of the loan. Depending on the size and complexity of
the loan, some loans may warrant detailed individual review, while other loans
may have less risk based upon size or be of a homogeneous nature reducing the
need for detailed individual analysis. Assets with these characteristics, such
as consumer loans and loans secured by residential real estate, may be reviewed
on the basis of risk indicators such as delinquency or credit rating. In cases
of significant concern, a total re-evaluation of the loan and associated risks
are documented by completing a loan risk assessment and action plan. Some loans
may be re-evaluated in terms of their fair market value or net realizable value
in order to determine the likelihood of potential loss exposure and,
consequently, the adequacy of specific and general loan loss reserves.
When a borrower fails to make a required loan payment, we take a number of steps
to have the borrower cure the delinquency and restore the loan to current
status, including contacting the borrower by letter and phone at regular
intervals. When the borrower is in default, we may commence collection
proceedings. If a foreclosure action is instituted and the loan is not brought
current, paid in full, or refinanced before the foreclosure sale, the real
property securing the loan generally is sold at foreclosure. Management informs
the Loan Committee of the Board of Directors monthly of the amount of loans
delinquent more than 30 days and the Board of Directors monthly of the amount of
loans delinquent 90 days or more.
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--------------------------------------------------------------------------------Delinquent Loans. The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.
At June 30, 2021 At June 30, 2020
30-89 Days 90 Days or More 30-89 Days 90 Days or More
Carrying Carrying
Number of Loans Amount Numberof Loans Carrying Amount Number of Loans Amount
Number of Loans Carrying Amount
(Dollars in thousands)
Residential mortgage loans 2 $ 324 4 $ 948 3 $ 505 4 $ 806
Commercial mortgage loans 2 453 1 411 - - - -
Construction - - - - - - - -
Commercial loans 3 145 - - 1 76 - -
Home equity lines of credit 1 19 3 381 1 44 3 338
Consumer and overdrafts - - - - - - - -
Total 8 $ 941 8 $ 1,740 5$ 625 7 $ 1,144 Non-performing Assets. Non-performing assets include loans that are 90 or more days past due or on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession. Non-accrual loans exclude acquired loans that are accounted for as purchased credit impaired loans because the loans are in pools that are considered performing. Loans 90 days or greater past due may remain on an accrual basis if adequately collateralized and in the process of collection. For non-accrual loans, interest previously accrued but not collected is reversed and charged against income at the time a loan is placed on non-accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold. When property is acquired, it is initially recorded at the fair value less costs to sell at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value after acquisition of the property result in charges against income. The following table sets forth information regarding our non-performing assets at the dates indicated. At June 30, 2021 2020 2019 2018 2017 (Dollars in thousands) Non-accrual loans: Residential mortgage loans$ 1,391 $ 1,457 $ 1,331 $ 1,911 $ 4,357 Commercial mortgage loans 3,582 - 568 794 497 Construction loans - - - 2,260 3,661 Commercial loans - - 150 788 2,959 Home equity lines of credit 381 338 677 349 598 Total 5,354 1,795 2,726 6,102 12,072 Accruing loans past due 90 days or more: Commercial mortgage loans 411 - - - - Consumer and overdrafts - - 1 - - Total 411 - 1 - - Total non-performing loans 5,765 1,795 2,727 6,102 12,072 Foreclosed real estate - - 1,158 460 977 Total non-performing assets$ 5,765 $ 1,795 $ 3,885 $ 6,562 $ 13,049 Total non-performing loans to total loans 0.47 % 0.14 % 0.25 % 0.67 % 1.48 % Total non-performing assets to total assets 0.31 % 0.10 % 0.24 % 0.44 % 0.91 % 44
-------------------------------------------------------------------------------- Interest income that would have been recorded for the year endedJune 30, 2021 had non-accruing loans been current according to their original terms, amounted to$218,000 . Potential Problem Loans. Certain loans are identified during our loan review process that are currently performing according to their contractual terms and we expect to receive payment in full of principal and interest, but it is deemed probable that we will be unable to collect all the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. This may result from deteriorating conditions such as cash flows, collateral values or creditworthiness of the borrower. Other potential problem loans are those loans that are currently performing, but where known information about possible credit problems of the borrowers causes us to have concerns as to the ability of such borrowers to comply with contractual loan repayment terms. These loans include non-impaired classified loans or pass-rated loans currently on a COVID-19 related loan payment deferral. AtJune 30, 2021 , other potential problem loans totaled$30.8 million . Classified Assets. The following table sets forth information regarding our classified assets, as defined under applicable regulatory standards, at the dates indicated. At June 30, 2021 2020 (in thousands) Special mention $ 6,301 $ 4,562 Substandard (1) 21,602 7,338 Doubtful - - Loss - - Total $ 27,903 $ 11,900
(1) The increase in substandard assets is primarily due to the downgrade of certain loans associated with the extension of COVID-19-related payment deferrals.
COVID-19 Related Loan Payment Deferrals. The COVID-19 pandemic has created extensive disruptions to the local economy and our customers. In accordance with emergency regulations promulgated byNew York State Department of Financial Services , financial institutions are required to provide payment accommodations, which may include payment deferrals, to any consumer or small business who can demonstrate financial hardship caused by COVID-19. Throughout the pandemic and as ofJune 30, 2021 , the Company has granted loan payment deferrals for 113 residential mortgage loans and home equity lines of credit totaling$32.0 million , as well as deferrals for 217 commercial mortgage, commercial loan and construction loans totaling$188.1 million . The table below summarizes the deferrals granted to-date and their status as ofJune 30, 2021 (dollar amounts in thousands): Remain on deferral as of 6/30/21 Scheduled to resume payments on or before 6/30/2021 % of Total % of Loans % of Total Amount 30 Days or Number of Recorded Recorded Amount Granted Number of Recorded Granted More Past loans Investment Number of loans Investment Deferral loans Investment Deferral Due Consumer 113$ 32,042 7$ 3,147 9.8 % 106$ 28,895 90.2 % 0.8 % Commercial 217 188,141 12 24,160 12.8 205 163,981 87.2 0.8 Total 330$ 220,183 19$ 27,307 12.4 % 311$ 192,876 87.6 % 0.3 % 45
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The table below provides additional information for loans on deferral as of
Weighted
Recorded % secured by average
Number of Investment (2) real estate Loan-to-Value % (4) term of
loans (3) collateral remaining
deferral
Industry Sector: (in months)
Consumer (1) 7 $ 3,147 100.0 % 57.5 % 0.3
Commercial:
Retail (3) 3 11,591 100.0 48.7 4.8
Hotels and accommodation services 2 7,648 100.0 55.6 0.6
Food service 2 3,018 100.0 59.8 6.1
All other commercial 5 1,903 89.2 70.0 2.2
Total commercial 12 24,160 99.2 57.8 3.9
Total 19 $ 27,307 99.2 % 57.7 % 3.5
(1) Includes first and second lien residential mortgages of
(2) Includes loans classified as special mention and substandard of
(3) Includes
(4) 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 ofJune 30, 2021 (dollar amounts in thousands): Consumer Commercial Total Principal only $ -$ 16,047 $ 16,047 Interest only 294 1,513 1,807 Principal and interest 2,853 6,600 9,453 Total$ 3,147 $ 24,160 $ 27,307 Of those loans still on deferral as ofJune 30, 2021 ,$12.5 million are scheduled to resume payments prior toSeptember 30, 2021 , with the remainder scheduled to resume payments prior toJanuary 31, 2022 . As our borrowers' financial condition and individual circumstances are assessed in the future, additional payment deferrals may be granted. Allowance for Loan Losses. The allowance for loan losses is maintained at levels considered adequate by management to provide for probable incurred loan losses inherent in the loan portfolio at the consolidated balance sheet reporting dates. The allowance for loan losses is based on management's assessment of various factors affecting the loan portfolio, including portfolio composition, delinquent and non-accrual loans, national and local business conditions, loss experience and an overall evaluation of the quality of the underlying collateral. 46 -------------------------------------------------------------------------------- The following table sets forth activity in our allowance for loan losses for the years indicated. Year Ended June 30, 2021 2020 2019 2018 2017 (Dollars in thousands) Allowance for loan losses at beginning of period$ 8,639 $ 5,664 $ 4,904 $ 5,150 $ 4,042 (Benefit) provision for loan losses (673 ) 3,064 808 414 823 Charge-offs: Residential mortgage loans - 31 - 136 275 Commercial mortgage loans - - 129 - - Construction loans - - - 997 108 Commercial loans 258 181 - 54 743 Home equity lines of credit - - - 60 - Consumer and overdrafts 27 51 34 23 3 Total charge-offs$ 285 $ 263 $ 163 $ 1,270 $ 1,129 Recoveries: Residential mortgage loans 17 9 10 1 70 Commercial mortgage loans - 125 - 370 19 Construction loans - - 96 - - Commercial loans 172 20 2 220 1,321 Home equity lines of credit 8 12 - 19 - Consumer and overdrafts 3 8 7 - 4 Total recoveries 200 174 115 610 1,414 Net charge-offs (recoveries) 85 89 48 660 (285 ) Allowance for loan losses at end of period$ 7,881 $ 8,639 $ 5,664 $ 4,904 $ 5,150 Allowance for loan losses to non-performing loans at end of period 136.73 % 481.28 % 207.70 % 80.37 % 42.66 % Allowance for loan losses to total loans outstanding at end of period 0.64 % 0.69 % 0.52 % 0.54 % 0.63 % Net charge-offs (recoveries) to average loans outstanding during period 0.00 % 0.01 % 0.01 %
0.08 % (0.04 )%
Allocation of Allowance for Loan Losses. The following tables set forth the
allowance for loan losses allocated by loan category. The allowance for loan
losses allocated to each category is not necessarily indicative of future losses
in any particular category and does not restrict the use of the allowance to
absorb losses in other categories.
At June 30,
2021 2020
Percent of Percent of
Percent of Loans in Percent of Loans in
Allowance to Category to Allowance to Category to
Amount Total Allowance Total Loans Amount Total Allowance Total Loans
(Dollars in thousands)
Residential mortgage loans $ 337 4.28 % 18.13 % $ 373 4.32 % 20.14 %
Commercial mortgage loans 6,435 81.65 66.79 6,913 80.02 63.65
Construction loans 102 1.29 0.82 165 1.91 0.87
Commercial loans 948 12.03 12.17 1,124 13.01 12.95
Home equity lines of credit 54 0.69 2.06 60 0.69 2.35
Consumer and overdrafts 5 0.06 0.03 4 0.05 0.04
Total $ 7,881 100.00 % 100.00 % $ 8,639 100.00 % 100.00 %
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At June 30,
2019 2018 2017
Percent of Percent of Percent of
Percent of Loans in Percent of Loans in Percent of Loans in
Allowance to Category to Allowance to Category to Allowance to Category to
Amount Total Allowance Total Loans Amount Total Allowance Total Loans Amount Total Allowance Total Loans
(Dollars in thousands)
Residential mortgage loans $ 446 7.87 % 24.17 % $ 459 9.36 % 27.67 % $ 386 7.50 % 26.77 %
Commercial mortgage loans 3,853 68.03 59.38 3,073 62.66 54.70 2,589 50.26 53.80
Construction loans 159 2.81 1.21 505 10.30 1.92 1,150 22.33 2.75
Commercial loans 1,130 19.95 12.18 780 15.91 11.50 949 18.43 11.50
Home equity lines of credit 65 1.15 3.03 80 1.63 4.13 76 1.48 5.15
Consumer and overdrafts 11 0.19 0.03 7 0.14 0.08 - - 0.03
Total $ 5,664 100.00 % 100.00 % $ 4,904 100.00 % 100.00 % $ 5,150 100.00 % 100.00 %
See Note 4 to Notes to Consolidated Financial Statements for a complete
discussion of the allowance for loan losses. Although we believe that we use the
best information available to establish the allowance for loan losses, future
adjustments to the allowance for loan losses may be necessary and our results of
operations could be adversely affected if circumstances differ substantially
from the assumptions used in making the determinations. Furthermore, while we
believe we have established our allowance for loan losses in conformity with
generally accepted accounting principles in the United States of America , there
can be no assurance that regulators, in reviewing our loan portfolio, will not
require us to increase our allowance for loan losses. In addition, because
future events affecting borrowers and collateral cannot be predicted with
certainty, there can be no assurance that the existing allowance for loan losses
is adequate or that increases will not be necessary should the quality of any
loans deteriorate as a result of the factors discussed above. Any material
increase in the allowance for loan losses may adversely affect our financial
condition and results of operations.
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--------------------------------------------------------------------------------Securities Portfolio
The following table sets forth the amortized cost and estimated fair value of
our held to maturity and available for sale securities portfolios at the dates
indicated.
At June 30,
2021 2020 2019
Amortized Amortized Amortized
Cost Fair Value Cost Fair Value Cost Fair Value
(in thousands)
Securities held to maturity:
U.S. Government and agency
obligations $ 33,994 $ 34,112 $ 42,001 $ 42,450 $ 96,545 $ 96,491
Corporate 43,605 44,879 43,634 42,317 30,033 29,694
State and municipal 57,625 57,817 9,156 9,295 4,000 4,059
Mortgage-backed securities -
residential 96,181 98,787 117,160 121,434 133,602 134,048
Mortgage-backed securities -
collateralized mortgage
obligations 33,300 33,348 45,047 46,503 52,940 53,104
Mortgage-backed securities -
commercial 72,879 73,194 18,774 19,498 28,425 28,847
Total $ 337,584 $ 342,137 $ 275,772 $ 281,497 $ 345,545 $ 346,243
Securities available for sale:
U.S. Government and agency
obligations $ 21,931 $ 21,816 $ 11,002 $ 11,049 $ 37,027 $ 36,911
Corporate 8,013 8,189 5,038 5,120 8,349 8,360
State and municipal 7,041 7,115 - - - -
Mortgage-backed securities -
residential 17,738 17,654 20,844 21,257 27,115 26,957
Mortgage-backed securities -
commercial 2,490 2,613 - - - -
Total $ 57,213 $ 57,387 $ 36,884 $ 37,426 $ 72,491 $ 72,228 At
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Securities Portfolio Maturities and Yields. The following table sets forth the
stated maturities and weighted average yields of investment securities at June
30, 2021 . The table does not include any estimate of principal payments or
prepayments that significantly shorten the average life of mortgage-backed
securities. Certain mortgage-backed securities, corporate and other debt
securities have adjustable interest rates and will reprice annually within the
various maturity ranges. These repricing schedules are not reflected in the
following table. Weighted average yield calculations on investment securities
available for sale do not give effect to changes in fair value that are
reflected as a component of equity. At June 30, 2021 , we did not have any
investments in any private-label collateralized mortgage obligations.
One Year or Less More than One Year to Five Years More than Five Years to Ten Years
More than Ten Years Total
Weighted Amortized Weighted Amortized Weighted Weighted Amortized Weighted
Amortized Cost Average Yield Cost Average Yield Cost Average Yield Amortized Cost Average Yield Cost Fair Value Average Yield
(Dollars in thousands)
Securities held to maturity:
U.S. Government and agency
obligations $ 1,999 2.91 % $ 26,995 1.15 % $ 5,000 1.10 % $ - - % $ 33,994 $ 34,112 1.25 %
Corporate - - 10,000 1.53 33,605 4.10 - - 43,605 44,879 3.51
State and municipal 36 0.50 665 0.76 90 1.18 56,834 2.07 57,625 57,817 2.05
Mortgage-backed securities -
residential 24 2.25 926 1.54 17,548 2.12 77,683 2.20 96,181 98,787 2.18
Mortgage-backed securities -
collateralized mortgage
obligations - - - - 4,675 1.75 28,625 1.57 33,300 33,348 1.59
Mortgage-backed securities -
commercial 4,818 2.45 7,523 2.88 10,959 1.80 49,579 1.84 72,879 73,194 1.98
Total $ 6,877 2.57 % $ 46,109 1.52 % $ 71,877 2.90 % $ 212,721 2.00 % $ 337,584 $ 342,137 2.14 %
Securities available for sale:
U.S. Government and agency
obligations $ 1,000 1.35 % $ 13,000 1.06 % $ 7,931 1.06 % $ - - % $ 21,931 $ 21,816 1.08 %
Corporate 3,013 2.23 2,000 1.27 3,000 4.38 - - 8,013 8,189 2.80
State and municipal - - - - - 7,041 2.16 7,041 7,115 2.16
Mortgage-backed securities -
residential - - - - - - 17,738 1.27 17,738 17,654 1.27
Mortgage-backed securities -
commercial - 2,490 2.22 - - - 2,490 2,613 2.22
Total $ 4,013 2.01 % $ 17,490 1.25 % $ 10,931 1.97 % $ 24,779 1.52 % $ 57,213 $ 57,387 1.56 %
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Other-than-temporary Impairment. Each reporting period, we evaluate all
securities with a decline in fair value below the amortized cost of the
investment to determine whether or not the impairment is deemed to be
other-than-temporary. Other-than-temporary impairment ("OTTI") is required to be
recognized if (1) we intend to sell the security; (2) it is more likely than not
that we will be required to sell the security before recovery of its amortized
cost basis; or (3) for debt securities, the present value of expected cash flows
is not sufficient to recover the entire amortized cost basis. For impaired debt
securities that we intend to sell, or more likely than not will be required to
sell, the full amount of the depreciation is recognized as OTTI, resulting in a
realized loss that is a charged to earnings through a reduction in our
noninterest income. For all other impaired debt securities, credit-related OTTI
is recognized through earnings and non-credit related OTTI is recognized in
other comprehensive income/loss, net of applicable taxes. We did not recognize
any OTTI during the years ended June 30, 2021 or 2020.
Deposits
Deposits have traditionally been our primary source of funds for our lending and
investment activities. The substantial majority of our deposits are from
depositors who reside in our primary market area. Deposits are attracted through
the offering of a broad selection of deposit instruments for both individuals
and businesses. The following table sets forth the distribution of total
deposits by account type at the dates indicated.
At June 30,
2021 2020
Amount Percent Amount Percent
(Dollars in thousands)
Non interest-bearing demand accounts $ 219,072 14.69 % $ 191,898 13.97 %
NOW Accounts 177,223 11.88 151,797 11.05
Money market accounts 332,843 22.31 239,942 17.47
Savings accounts 387,529 25.99 343,352 25.01
Time deposits
Less than $100,000 156,946 10.52 176,732 12.87
Greater than or equal to $100,000 218,069 14.62 269,534 19.63
Total $ 1,491,682 100.00 % $ 1,373,255 100.00 %
At June 30, 2021 and 2020, we had municipal deposits of $74.4 million and
$44.1 million , respectively. Additionally, as of June 30, 2021 and 2020,
deposits included $30.0 million and $67.5 million , respectively, of brokered
time deposits with remaining maturities of between 12 and 32 months.
The following table indicates the amount of jumbo time deposits by time
remaining until maturity at June 30, 2021 . Jumbo time deposits require minimum
deposits of $100,000 .
Maturity Period Dollar Amount
(in thousands)
Three months or less $ 39,920
Over three through six months 39,958
Over six through twelve months 46,175
Over twelve months 92,016
Total $ 218,069
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-------------------------------------------------------------------------------- The following table sets forth time deposit accounts classified by rate and maturity atJune 30, 2021 . Amount Due Percent of More Than One More Than Two Total Time Less Than Year to Two Years to More Than Deposit One Year Years Three Years
Three Years Total Accounts
(Dollars in thousands)
0.00 - 1.00% $ 178,840 $ 22,277 $ 2,839 $ 16,042 $ 219,998 58.67 %
1.01 - 2.00% 37,412 22,597 21,830 6,128 87,967 23.46
2.01 - 3.00% 10,606 7,332 47,036 1,865 66,839 17.81
3.01 - 4.00% - 105 106 - 211 0.06
Total $ 226,858 $ 52,311 $ 71,811 $ 24,035 $ 375,015 100.00 %
Borrowings
We primarily utilize advances from the FHLBNY to supplement our supply of
investable funds. At June 30, 2021 we had the ability to borrow up to $264.3
million from the FHLBNY, of which $66.0 million was outstanding as of June 30,
2021 . Additionally, as of June 30, 2021 , we had an available line of credit with
the FRBNY's discount window program of $96.4 million as well as $25.0 million of
fed funds lines of credit, neither of which had outstanding balances as of June
30, 2021 . The following table sets forth information concerning our FHLBNY
borrowings at the dates and for the periods indicated.
Year Ended June 30,
2021 2020
(Dollars in thousands)
Maximum balance outstanding at any month-end during period:
$ 156,206 Average balance outstanding during period: 102,919
111,008
Weighted average interest rate during period: 1.97 % 2.21 % Balance outstanding at end of period:$ 65,957 $ 106,089 Weighted average interest rate at end of period: 2.03 % 1.95 %
Average Balance Sheets and Related Yields and 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
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.
52
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Year ended June 30,
2021 2020
Average Interest/ Average Average Interest/ Average
Balance Dividends Rate Balance Dividends Rate
(Dollars in thousands)
Assets:
Loans receivable (1)$ 1,245,818 $ 49,470 3.97 %$ 1,198,449 $ 52,107 4.35 % Investment securities (1) 327,879 7,340 2.29 346,569 8,870
2.57
Other interest-earning assets 169,855 454 0.27 69,371 933
1.34
Total interest-earning assets 1,743,552 57,264 3.30 1,614,389 61,910 3.84 Non-interest-earning assets 72,522 69,268 Total assets$ 1,816,074 $ 1,683,657 Liabilities and equity: NOW accounts $ 160,652 296 0.18 $ 127,091 270 0.21 Money market accounts 273,007 819 0.30 177,052 1,647 0.93 Savings accounts and mortgage escrow funds 369,681 611 0.17 350,897 866 0.25 Time deposits 421,168 6,165 1.46 469,336 9,992 2.13 Total interest-bearing deposits 1,224,508 7,891 0.64 1,124,376 12,775 1.14 FHLB advances 102,919 2,031 1.97 111,008 2,456 2.21 Total interest-bearing liabilities 1,327,427 9,922 0.75 1,235,384 15,231
1.23
Non-interest-bearing deposits 189,667 148,262 Other non-interest-bearing liabilities 25,707 21,563 Total liabilities 1,542,801 1,405,209 Total shareholders' equity 273,273 278,448 Total liabilities and shareholders' equity$ 1,816,074 $ 1,683,657 Net interest income$ 47,342 $ 46,679 Interest rate spread -tax equivalent (2) 2.55
2.61
Net interest margin - tax equivalent (3) 2.73
2.89
Average interest-earning assets to
interest-bearing liabilities 131.35 % 130.68 %
(1) Tax exempt yield is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21% for all periods presented. See
reconciliation of non-GAAP measures at the end of this release.
(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 tax equivalent net interest income divided by average interest-earning assets. See reconciliation of non-GAAP measures at the
end of this release.
53
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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.
Year ended June 30, 2021 Compared to 2020
Increase (Decrease) Due to
Rate Volume Net
(in thousands)
Interest income:
Loans receivable - tax equivalent $ (4,202 ) $ 1,565 $ (2,637 )
Investment securities - tax equivalent (1,562 ) 32 (1,530 )
Other interest-earning assets (1,132 ) 653 (479 )
Total interest-earning assets (6,896 ) 2,250 (4,646 )
Interest expense:
NOW accounts (38 ) 64 26
Money market accounts (1,452 ) 624 (828 )
Savings and escrow accounts (279 ) 24 (255 )
Time deposits (2,882 ) (945 ) (3,827 )
FHLB advances (254 ) (171 ) (425 )
Total interest-bearing liabilities (4,905 ) (404 ) (5,309 )
(Decrease) increase in net interest income
2,654 $ 663
Comparison of Financial Condition at
Total Assets. Total assets increased$83.0 million , or 4.6%, to$1.87 billion atJune 30, 2021 from$1.79 billion atJune 30, 2020 . The increase is primarily the result of increases of$81.8 million in total investment securities,$23.0 million in cash and cash equivalents and$10.5 million in bank-owned life insurance, partially offset by a$31.5 million decrease in net loans receivable. Cash and Cash Equivalents. Cash and cash equivalents increased$23.0 million , or 16.9%, to$159.3 million atJune 30, 2021 from$136.3 million atJune 30, 2020 . The increase is primarily due to a$118.4 increase in deposits and a$31.5 million decrease in net loans receivable, partially offset by an$81.8 million increase in investment securities and a$40.1 million decrease in FHLB advances. Securities Held to Maturity. Total securities held to maturity increased$61.8 million , or 22.4%, to$337.6 million atJune 30, 2021 from$275.8 million atJune 30, 2020 . This increase was primarily due to increases of$48.4 million in municipal securities and$21.4 million in mortgage-backed securities, partially offset by an$8.0 million decrease inU.S. government and agency obligations. Securities Available for Sale. Total securities available for sale increased$20.0 million , or 53.3%, to$57.4 million atJune 30, 2021 from$37.4 million atJune 30, 2020 . This increase was primarily due to increases of$10.9 million inU.S. government and agency obligations,$7.0 million in municipal securities and$3.0 million in corporate bonds, partially offset by a decrease of$616,000 in mortgage-backed securities and a$368,000 decrease in net unrealized gains. Net Loans Receivable. Net loans receivable decreased$31.5 million , or 2.5%, to$1.23 billion atJune 30, 2021 from$1.26 billion atJune 30, 2020 . The decrease in loans receivable was the result of decreases of$31.1 million in residential mortgages,$13.6 million in commercial loans,$4.4 million in home equity lines of credit and 54
--------------------------------------------------------------------------------$1.9 million in all other loans, partially offset by an increase of$19.5 million in commercial mortgage loans. The decrease in commercial loans includes a decrease of$12.6 million in PPP loans, driven by$23.8 million in PPP loan originations being more than offset by paydowns and forgiveness of$36.4 million . Deposits. Total deposits increased$118.4 million , or 8.6%, to$1.49 billion atJune 30, 2021 as compared to$1.37 billion atJune 30, 2020 . This increase primarily reflects increases of$92.9 million in money market accounts,$44.2 million in savings,$27.2 million in demand deposits and$25.4 million in NOW accounts, partially offset by a$71.3 million decrease in time deposits, which includes a decrease of$37.5 million in brokered time deposits. The Company continued to experience significant deposit inflows, likely the result of numerous economic trends associated with COVID-19, including reduced consumer and commercial spending, and various forms of government stimulus. Federal Home Loan Bank Advances. FHLB advances decreased$40.1 million , or 37.8%, to$66.0 million atJune 30, 2021 as compared to$106.1 million atJune 30, 2020 . This decrease is due to maturities and principal paydowns of$40.1 million . Total Shareholder's Equity. Total shareholders' equity increased$847,000 , or 0.3%, to$274.6 million atJune 30, 2021 from$273.7 million atJune 30, 2020 . This increase was primarily due to net income of$12.4 million ,$4.8 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the year and$3.3 million of other comprehensive income, partially offset by the repurchase of$16.9 million (1,121,774 shares) of common stock and$2.7 million of cash dividends declared and paid. A repurchase program authorized onAugust 20, 2020 by the Board of Directors to repurchase up to 844,907 shares was completed inJanuary 2021 at an average cost of$14.24 per share. OnFebruary 3, 2021 , a repurchase plan was authorized to repurchase up to 801,856 shares, or 5% of the Company's outstanding common stock. As ofJune 30, 2021 , the company repurchased 195,571 shares of common stock at an average cost of$18.31 per share. AtJune 30, 2021 , the Company's book value per share (GAAP) and tangible book value per share (Non-GAAP) were$17.41 and$17.01 , respectively, compared to$16.20 and$15.82 , respectively, atJune 30, 2020 . AtJune 30, 2021 , the Bank was considered "well capitalized" under applicable regulatory guidelines.
Comparison of Operating Results for the Year Ended
General. Net income increased$3.0 million , or 32.7%, to$12.4 million for the year endedJune 30, 2021 compared to$9.4 million for the year endedJune 30, 2020 . The increase was primarily due to a$3.7 million decrease in provision for loan losses and a$663,000 increase in net interest income, partially offset by a$643,000 increase in income tax expense, a$572,000 decrease in non-interest income and a$120,000 increase in non-interest expense. Net Interest Income. Net interest income increased$663,000 , or 1.4%, to$47.3 million for the year endedJune 30, 2021 compared to$46.7 million for the year endedJune 30, 2020 . The increase primarily reflects a$129.2 million , or 8.0%, increase in average interest-earning assets, partially offset by a 16 basis point decrease in net interest margin to 2.73% for the year endedJune 30, 2021 compared to 2.89% for the year endedJune 30, 2020 . The increase in average interest-earning assets reflects a$100.5 million increase in average other interest-earning assets and a$47.4 million increase in average of loans receivable, partially offset by an$18.7 million decrease in average investment securities. Despite continued asset growth and a decrease in funding costs, margin compression has resulted from significant decreases in market interest rates and a less profitable asset mix due to an increase in cash and cash equivalents. Interest and Dividend Income. Interest and dividend income decreased$4.6 million , or 7.5%, to$57.3 million for the year endedJune 30, 2021 compared to$61.9 million for the year endedJune 30, 2020 . The decrease primarily reflects a 54 basis point decrease in the yield on total interest-earning assets, partially offset by a$129.2 million increase in total average interest-earning assets. Interest income on loans receivable decreased$2.6 million , or 5.1%, primarily due to a 38 basis point decrease in the average tax equivalent yield on loans receivable to 3.97% for the year endedJune 30, 2021 from 4.35% for the same 55 -------------------------------------------------------------------------------- period last year, partially offset by a$47.4 million increase in the average balance of loans receivable to$1.25 billion for the year endedJune 30, 2021 from$1.20 billion for the same period last year. Decreases in market interest rates driven most significantly by the Fed Funds rate cuts inMarch 2020 , as well as the origination of lower yielding PPP loans, have resulted in a decreased yield. Interest income on investment securities decreased$1.5 million , or 17.2%, primarily due to a 28 basis point decrease in the average yield on investment securities on a tax equivalent basis to 2.29% for the year endedJune 30, 2021 from 2.57% for the same period last year, and an$18.7 million decrease in the average balance of investment securities to$327.9 million for the year endedJune 30, 2021 from$346.6 million for the same period last year. The decrease in yield is a result of lower market interest rates. The decrease in the average balance of investment securities is the result of the Company utilizing securities portfolio cash flows to fund loan growth. Interest income on other interest-earning assets, primarily consisting of cash balances at correspondent banks including theFederal Reserve , decreased$479,000 , or 51.3%, primarily due to a 107 basis point decrease in the average yield on other interest-earning assets to 0.27% for the year endedJune 30, 2021 , from 1.34% for the same period last year, partially offset by a$100.5 million increase in the average balance of other interest-earning assets to$169.9 million for the year endedJune 30, 2021 compared to$69.4 million for the year endedJune 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$5.3 million , or 34.9%, to$9.9 million for the year endedJune 30, 2021 compared to$15.2 million for the year endedJune 30, 2020 . The decrease primarily reflects a 48 basis point decrease in the average cost of interest-bearing liabilities to 0.75% for the year endedJune 30, 2021 from 1.23% for the year endedJune 30, 2020 , partially offset by a$92.0 million increase in the average balance of interest-bearing liabilities to$1.33 billion for the year endedJune 30, 2021 from$1.24 billion for the same period last year. Interest expense on interest-bearing deposits decreased$4.9 million , or 38.2%, primarily due to a 50 basis point decrease in the average cost of interest-bearing deposits to 0.64% for the year endedJune 30, 2021 from 1.14% for the same period last year, partially offset by a$100.1 million increase in the average balance to$1.22 billion for the year endedJune 30, 2021 from$1.12 billion for the year endedJune 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 67 and 63 basis points, respectively, when compared to last year. During the year endingJune 30, 2022 , the Company has$216.9 million of non-brokered time deposits maturing at a weighted average rate of 0.52% as well as$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$425,000 , primarily due to a 24 basis point decrease in the average cost to 1.97% for the year endedJune 30, 2021 from 2.21% for the year endedJune 30, 2020 and an$8.1 million decrease in the average balance to$102.9 million for the year endedJune 30, 2021 from$111.0 million for the year endedJune 30, 2020 . The decrease in the cost of FHLB funds is due to the maturity of higher-costing advances. Provision for Loan Losses. The benefit for loan losses was$673,000 for the year endedJune 30, 2021 , compared to a provision for loan losses of$3.1 million for the year endedJune 30, 2020 . Included in the current year was a benefit for loan losses associated with the release of qualitative reserves established in the prior year in response to the COVID-19 pandemic. As ofJune 30, 2021 , substantially all of these qualitative reserves had been released. Loans classified as substandard or doubtful totaled$21.6 million , an increase of$14.3 million fromJune 30, 2020 , driven primarily by the downgrade of certain exposures associated with COVID-19-related payment deferrals. Non-performing loans (excluding PPP loans) as a percent of total loans receivable was 0.48% as ofJune 30, 2021 , an increase from 0.15% as ofJune 30, 2020 . The increase in non-performing loans for the current year relates to one non-owner-occupied commercial mortgage loan with an outstanding principal balance of$3.6 million atJune 30, 2021 . The loan has been granted a principal and interest payment deferral throughJanuary 2022 and has a loan-to-value ratio of 53.9% based on the collateral value at origination. Charge-offs, net of recoveries, were$85,000 and$89,000 for the years endedJune 30, 2021 and 2020, respectively. 56
-------------------------------------------------------------------------------- Noninterest Income. Noninterest income decreased$572,000 , or 18.6%, to$2.5 million for the year endedJune 30, 2021 compared to same period last year. The decrease was caused primarily by decreases of$617,000 in swap income and$82,000 in other noninterest income, partially offset by increases of$75,000 in net gains on sale of securities,$31,000 in fees and service charges and$21,000 in bank-owned life insurance. The increase in fees and service charges compared to the prior year was the result of our waiver in the prior year of certain overdraft fees, ATM usage fees, wire and CD early withdrawal fees in response to COVID-19. Noninterest Expense. Noninterest expense increased$120,000 , or 0.3%, to$34.8 million for the year endedJune 30, 2021 compared to$34.6 million for the year endedJune 30, 2020 . The increase was caused primarily by increases of$376,000 inFDIC insurance premiums,$190,000 in occupancy and equipment costs and$20,000 in all other non-interest expense, partially offset by decreases of$417,000 in salaries and benefits expense and$49,000 in professional fees. The decrease in salaries and benefits was primarily due to a$238,000 decrease in ESOP expense driven by a lower average stock price in comparison to the same period last year and a$179,000 decrease in salaries and short-term incentives. The Bank applied small bank assessment credits of$314,000 which partially offset itsFDIC assessment for the prior period. All available credits were applied as ofJune 30, 2020 . Income Tax Expense. Income tax expense increased$643,000 , or 23.9%, for the year endedJune 30, 2021 in comparison to the year endedJune 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 21.2% for the year endedJune 30, 2021 as compared to 22.3% for the year endedJune 30, 2020 , with the decrease largely driven by an increase in tax-exempt interest income on municipal investments.
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 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.
57
-------------------------------------------------------------------------------- The following table presents the estimated changes in our NPV that would result from changes in market interest rates atJune 30, 2021 and 2020. All estimated changes presented in the table are within the policy limits approved by our Board of Directors. NPV as Percent of Portfolio NPV Value of Assets (dollars in thousands) Basis Point Change in Dollar Dollar Percent NPV Change Interest Rates Amount Change Change Ratio (in bps)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 June 30, 2020: 200$ 285,720 $ (20,631 ) (6.7 ) % 16.42 % (40 ) 100 304,004 (2,347 ) 0.8 17.03 21 - 306,351 - - 16.82 - (50) 312,596 6,245 2.0 16.99 17 (100) 323,494 17,143 5.6 17.44 62 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. 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. AtJune 30, 2021 , cash and cash equivalents totaled$159.3 million , an increase from$136.3 million as ofJune 30, 2020 . Unpledged securities classified as available for sale, which provide an additional source of liquidity, totaled$28.9 million atJune 30, 2021 , an increase from$13.9 million as ofJune 30, 2020 . We had the ability to borrow up to$264.3 million from the FHLBNY, atJune 30, 2021 , of which$66.0 million was outstanding as ofJune 30, 2021 . Additionally, as ofJune 30, 2021 , we had an available line of credit with the FRBNY's discount window program of$96.4 million and$25.0 million of fed funds lines of credit, neither of which had outstanding balances as ofJune 30, 2021 . 58 -------------------------------------------------------------------------------- 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 capacity with the FHLBNY or the FRBNY. We had$58.4 million of loan commitments outstanding as ofJune 30, 2021 , and$134.8 million of approved, but unadvanced, funds to borrowers. We also had$3.2 million in outstanding letters of credit atJune 30, 2021 . Time deposits due within one year ofJune 30, 2021 totaled$226.9 million , a decrease of$43.6 million from$270.5 million as ofJune 30, 2020 . If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and FHLBNY 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 atJune 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. Liquidity is needed for financing and investing activities. The following table sets forth our primary investing and financing activities for the periods presented. Year ended June 30, 2021 2020 (in thousands) Investing activities: Loan purchases $ -$ (44,065 ) Loan principal repayments (disbursement), net 32,928 (127,125 ) Proceeds from maturities and calls of securities held to maturity 105,684
126,237
Proceeds from maturities and calls of securities available for sale 17,496
33,017
Proceeds from sales of securities available for sale 3,339
4,245
Purchases of securities held to maturity (158,420 ) (55,183 ) Purchases of securities available for sale (41,307 ) (1,954 ) Financing activities: Net increase in deposits 118,427
147,434
(Decrease) increase in FHLB advances (30,132 ) 44,873 Repurchase of common stock (16,608 ) (17,789 ) The Company is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its stockholders and for other corporate purposes. The Company's primary source of liquidity is dividend payments it may receive from the Bank. The Bank's ability to pay dividends to the Company is governed by applicable law and regulations. AtJune 30, 2021 , the Company (on an unconsolidated, stand-alone basis) had liquid assets of$26.6 million . Capital Resources.PCSB Bank is subject to various regulatory capital requirements administered by the NYSDFS and theFDIC . AtJune 30, 2021 ,PCSB Bank exceeded all applicable regulatory capital requirements, and the Bank was considered "well capitalized" under applicable regulatory guidelines. See Note 15 of Notes to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
We are a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of our customers. These
financial instruments include commitments to originate loans, unused lines of
credit and standby letters of credit, which involve elements of credit and
interest rate risk in excess of the amount recognized in the consolidated
balance sheets. Our exposure to credit loss is represented by the contractual
amount of the instruments. We use the same credit policies in making commitments
as we do for on-balance sheet instruments. See Note 9 of Notes to the
Consolidated Financial Statements.
59
--------------------------------------------------------------------------------Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information regarding quantitative and qualitative disclosures about market risk
appears under Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," under the caption "Management of Market
Risk".
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