PCSB FINANCIAL CORP Discussion and analysis by management of the financial position and results of operations. (form 10-Q)
Management's discussion and analysis of financial condition at
September 30, 2021and June 30, 2021, and results of operations for the three months ended September 30, 2021and 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 ended June 30, 2021.
Caution 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 objectives, intentions and expectations;
• statements regarding our business plans, outlook, growth and operations
• 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 anticipated results or other expectations expressed in 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 commission income and lost operating expenses,
as well as their effects on our clients and issuers of securities,
including their ability to make timely payments on bonds, service
suppliers, and more generally on economies and markets;
• general economic conditions, whether at national level or in our market areas, which
are worse than expected;
• changes in the level and direction of delinquencies and loan write-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 residential and commercial real estate
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 returns, reduce the fair value of financial instruments or reduce
origination levels in our lending activities, or increase the level of
defaults, losses and prepayments on loans we have made and made, whether held
in portfolio or sold in the secondary markets; • adverse changes in the securities or credit markets;
• changes in laws or regulations or government policies affecting
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; 30
• our ability to enter new markets successfully and capitalize on growth
• our ability to successfully integrate all assets, liabilities, customers,
the management systems and personnel that we can acquire in 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 allocated 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 year ended.
As a result of these and other uncertainties, our actual future results may differ materially from the results indicated by these forward-looking statements. The Company assumes no obligation to update forward-looking statements, except as 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 the
June 30, 2021Form 10-K. There have been no significant changes in our application of critical accounting policies for the three months ended September 30, 2021. Loan Payment Deferrals The COVID-19 pandemic has created extensive disruptions to the local economy and our customers. Through September 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 of September 30, 2021, 11 loans totaling $18.5 millionwere still on deferral. Of those loans still on deferral as of September 30, 2021, $3.5 millionare scheduled to resume payments prior to December 31, 2021, with the remainder scheduled to resume payments prior to January 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 details on deferred loans in the
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
$ 11,590100.0 % 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 $ 18,52498.9 % 58.3 % 2.5 (1) Includes loans classified as special mention and substandard of $1.7 millionand $8.6 million, respectively. (2) Includes $3.6 millionof nonaccrual loans. All loans are considered current. (3) Generally based on collateral values upon origination.
The table below provides additional details regarding the type of deferral granted for deferred loans from
Total Principal only
$ 10,412Interest only 1,513 Principal and interest 6,599 Total $ 18,524
Comparison of financial position to
Total Assets. Total assets decreased
$1.8 million, or 0.1%, to $1.87 billionat September 30, 2021from June 30, 2021. The decrease is primarily the result of decreases of $18.8 millionin net loans receivable and $11.3 millionin cash and cash equivalents, partially offset by a $28.6 millionincrease in total investment securities. Cash and Cash Equivalents. Cash and cash equivalents decreased $11.3 million, or 7.1%, to $148.0 millionat September 30, 2021from $159.3 millionat June 30, 2021. The decrease is primarily due to a $28.5 millionincrease in total investment securities, an $11.1 milliondecrease in other liabilities and a $3.7 milliondecrease in mortgage escrow funds, partially offset by an $18.8 milliondecrease in loans receivable and a $13.0 millionincrease in deposits. Securities Held to Maturity. Total securities held to maturity increased $40.9 million, or 12.1%, to $378.5 millionat September 30, 2021from $337.6 millionat June 30, 2021. This increase was primarily due to increases of $27.1 millionin municipal securities, $6.3 millionin mortgage-backed securities, $5.5 millionin corporate bonds and $2.0 millionin U.S.government and agency obligations. Securities Available for Sale. Total securities available for sale decreased $12.4 million, or 21.6%, to $45.0 millionat September 30, 2021from $57.4 millionat June 30, 2021. This decrease was primarily due to decreases of $11.0 millionin U.S.government and agency obligations, $1.2 millionin mortgage-backed securities and a $187,000decrease in net unrealized gains. Net Loans Receivable. Net loans receivable decreased $18.8 million, or 1.5%, to $1.21 billionat September 30, 2021from $1.23 billionat June 30, 2021. The decrease in loans receivable was the result of decreases of $28.6 millionin commercial loans, $2.6 millionin residential mortgage loans, partially offset by increases of $11.4 millionin commercial mortgage loans and $1.5 millionin construction loans. The decrease in commercial loans includes a decrease of $17.3 millionin PPP loans, driven by paydowns and forgiveness. Deposits. Total deposits increased $13.0 million, or 0.9%, to $1.50 billionat September 30, 2021as compared to $1.49 billionat June 30, 2021. This increase primarily reflects increases of $30.2 millionin money market accounts, and $4.3 millionin NOW accounts, partially offset by decreases of $13.3 millionin time deposits, $5.6 millionin savings and $2.6 millionin demand deposits. 32 --------------------------------------------------------------------------------
Federal bank advances for home loans. FHLB advances have declined
Total Shareholder's Equity. Total shareholders' equity increased
$168,000to $274.7 millionat September 30, 2021from $274.6 millionat June 30, 2021. This increase was primarily due to net income of $3.6 millionand $1.3 millionof 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 $876,000of cash dividends declared and paid. On February 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 of September 30, 2021, the Company repurchased 462,028 shares of common stock at an average cost of $17.97per share. At September 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 millionfor the three months ended September 30, 2021compared to $2.7 millionfor the three months ended September 30, 2020. The increase was primarily due to a $958,000increase in net interest income, a $96,000decrease in provision for loan losses and a $19,000increase in noninterest income, partially offset by a $187,000increase in income tax expense. Net Interest Income. Net interest income increased $958,000, or 8.3%, to $12.5 millionfor the three months ended September 30, 2021compared to $11.6 millionfor the three months ended September 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 ended September 30, 2021compared to 2.69% for the three months ended September 30, 2020. The increase in average interest-earning assets reflects an $89.3 millionincrease in average investment securities and a $2.6 millionincrease in other interest-earning assets, partially offset by a $29.1 milliondecrease in average of loans receivable. Interest and Dividend Income. Interest and dividend income decreased $301,000, or 2.1%, to $14.2 millionfor the three months ended September 30, 2021compared to $14.5 millionfor the three months ended September 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 millionincrease 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 ended September 30, 2021from 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 billionfor the three months ended September 30, 2021from $1.25 billionfor 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 $381,000in the current quarter, compared to $217,000in the prior year quarter. Unearned origination fees (net of costs) on PPP loans totaled $698,000as of September 30, 2021and 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 millionincrease in the average balance of investment securities to $404.6 millionfor the three months ended September 30, 2021from $315.3 millionfor 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 ended September 30, 2021from 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 the Federal 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 ended September 30, 2021, from 0.31% for the same period last year, partially offset by a $2.7 millionincrease in the average balance of other interest-earning assets to $160.7 millionfor the three months ended September 30, 2021compared to $158.0 millionfor the three 33 -------------------------------------------------------------------------------- months ended September 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 millionfor the three months ended September 30, 2021compared to $3.0 millionfor the three months ended September 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 ended September 30, 2021from 0.89% for the three months ended September 30, 2020, partially offset by a $54.6 millionincrease in the average balance of interest-bearing liabilities to $1.36 billionfor the three months ended September 30, 2021from $1.31 billionfor 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 ended September 30, 2021from 0.80% for the same period last year, partially offset by a $94.7 millionincrease in the average balance to $1.30 billionfor the three months ended September 30, 2021from $1.20 billionfor the three months ended September 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 millionof 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 milliondecrease in the average balance to $65.9 millionfor the three months ended September 30, 2021from $106.1 millionfor the three months ended September 30, 2020, partially offset by a 9 basis point increase in the average cost to 2.03% for the three months ended September 30, 2021from 1.94% for the three months ended September 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 $13,000for the three months ended September 30, 2021, compared to $109,000for the three months ended September 30, 2020. The decrease is primarily due to a decrease in the loan portfolio. Recoveries, net of charge-offs, were $265,000for the three months ended September 30, 2021compared to charge-offs, net of recoveries, of $76,000for the three months ended September 30, 2020, respectively. Non-performing loans as a percent of total loans receivable (excluding PPP loans) were 0.48% as of September 30, 2021, unchanged compared to June 30, 2021. Loans on a COVID-19 related payment deferral totaled $18.5 million, or 1.52% of gross loans, as of September 30, 2021, compared to $27.3 million, or 2.21% of gross loans, as of June 30, 2021. Noninterest Income. Noninterest income increased $19,000, or 3.2%, to $613,000for the three months ended September 30, 2021compared to same period last year. The increase was caused primarily by increases of $79,000in fees and service charges, $60,000in bank-owned life insurance income and $9,000in all other noninterest income, partially offset by a $129,000decrease 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 ended September 30, 2021, noninterest income includes net gains on the sale of loans of $6,000, compared to none for the same period last year.
Non-interest charges. Non-interest charges of
Income Tax Expense. Income tax expense increased
$187,000, or 26.3%, for the three months ended September 30, 2021in comparison to the three months ended September 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 ended September 30, 2021as compared to 20.7% for the three months ended September 30, 2020, with the decrease largely driven by an increase in tax-exempt interest income on municipal investments. 34
Average balance sheet and interest rate.
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 $ 12,1073.96 % $ 1,252,595 $ 12,5474.01 % 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 remunerated 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 $ 1,797,851Liabilities and equity: NOW accounts $ 182,53170 0.15 $ 149,46689 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 0.89
Non-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 $ 1,797,851Net interest income $ 12,535 $ 11,577Interest 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) The tax-exempt return is shown on a tax equivalent basis for a proper comparison
using the statutory federal tax rate of 21% for all periods shown. See
reconciliation of GAAP and non-GAAP measures in the table below.
(2) The net interest rate differential represents the difference between the average yield
on average interest-bearing assets and the average cost of
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. 35
The following table presents information regarding the tax equivalent adjustment used in the calculation of certain financial measures (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 33
Net interest income – tax equivalent (non-GAAP) $ 12,624
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 )
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:
36 -------------------------------------------------------------------------------- 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, 2021and 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. 37
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. At
September 30, 2021, cash and cash equivalents totaled $148.0 million, a decrease from $159.3 millionas of June 30, 2021. Unpledged securities classified as available for sale, which provide an additional source of liquidity, totaled $27.9 millionat September 30, 2021, a decrease from $28.9 millionas of June 30, 2021. We had the ability to borrow up to $368.1 millionfrom the FHLB of New York, at September 30, 2021of which $65.9 millionwas outstanding as of September 30, 2021. Additionally, as of September 30, 2021, we had an available line of credit with the FRB of New York'sdiscount window program of $100.3 million, and $25.0 millionof fed funds lines of credit, neither of which had outstanding balances as of September 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 millionof loan commitments outstanding as of September 30, 2021and $176.6 millionof approved, but unadvanced, funds to borrowers. We also had $3.2 millionin outstanding letters of credit at September 30, 2021. Time deposits due within one year of September 30, 2021totaled $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 of New Yorkadvances. 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 at September 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 Companyis 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'sprimary 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. At September 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 the FDIC. At September 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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