SUNNYSIDE BANCORP, INC. This section is intended to help a reader understand the financial performance ofSunnyside Bancorp and its subsidiaries through a discussion of the factors affecting our financial condition atDecember 31, 2021 andDecember 31, 2020 and our results of operations for the years endedDecember 31, 2021 and 2020. This section should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear elsewhere in
this Annual Report on Form 10-K. 41 Overview Sunnyside Federal is a federal savings association that was founded in 1930. Sunnyside Federal conducts business from its full-service banking office located inIrvington, New York which is located inWestchester County, New York approximately 25 miles north ofNew York City . We consider our deposit market area to be theWestchester County, New York towns ofIrvington ,Tarrytown ,Sleepy Hollow ,Hastings ,Dobbs Ferry andArdsley-on-Hudson , and consider our lending area to beWestchester ,Putnam andRockland Counties,New York . Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one-to-four family residential real estate loans, commercial and multi-family real estate loans, and student loans, and to a much more limited extent, commercial, home equity lines of credit and other loans (consisting primarily of loans secured by deposits and marketable securities).AtDecember 31, 2021 ,$14.4 million , or 45.0% of our total loan portfolio, was comprised of commercial real estate and multi-family mortgage loans,$11.1 million , or 34.7% of our total loan portfolio was comprised of owner-occupied, one-to-four family residential real estate loans,$2.9 million , or 8.9% of our total loan portfolio, was comprised of student loans,$2.4 million , or 7.4% of our total loan portfolio, was comprised of Paycheck Protection Program ("PPP") loans and$1.3 million , or 4.0% of our total loan portfolio, was comprised of commercial, home equity
and passbook loans. As a result of our conservative underwriting and credit monitoring processes, we had$580,000 in non-performing assets atDecember 31, 2021 and$622,000 atDecember 31, 2020 . There were$541,000 of delinquent loans atDecember 31, 2021 compared to$572,000 of delinquent loans atDecember 31, 2020 . We also invest in securities, which consist primarily ofU.S. government agency obligations and mortgage-backed securities and to a lesser extent, securities of states, counties and political subdivisions. We offer a variety of deposit accounts, including certificate of deposit accounts, money market accounts, savings accounts, NOW accounts and individual retirement accounts. We can borrow from theFederal Home Loan Bank of New York to fund our operations and we had$1.0 million and$1.4 million in advances atDecember 31, 2021 and 2020, respectively. We can also borrow from theFederal Reserve Bank of New York and had$0 and$5.1 million in advances atDecember 31, 2021 and 2020, respectively.
Critical Accounting Policies
The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with generally accepted accounting principles used inthe United States of America . The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. 42
The following represent our critical accounting policies:
Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for losses on loans which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies. Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change. The analysis has two components, specific and general allocations. Specific percentage allocations can be made for unconfirmed losses related to loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. If the fair value of the loan is less than the loan's carrying value, a charge is recorded for the difference. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general reserve. Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results. EffectiveJanuary 1, 2023 , we will adopt the CECL standard for determining the amount of our allowance for credit losses, which could increase our allowance for loan and lease losses upon adoption and cause our historic allowance for loan and lease losses not to be indicative of how we will maintain our allowance for credit losses beginningJanuary 1, 2023 . Securities Valuation and Impairment. We classify our investments in debt and equity securities as either held-to-maturity or available-for-sale. Securities classified as held-to maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. We obtain our fair values from a third party service. This service's fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting our financial position, results of operations and cash flows. If the estimated value of investments is less than the cost or amortized cost, we evaluate whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and we determine that the impairment is other-than-temporary, we expense the impairment of the investment in the period in which the event or change occurred. We also consider how long a security has been in a loss position in determining if it is other than temporarily impaired. Management also assesses the nature of the unrealized losses taking into consideration factors such as changes in risk-free interest rates, general credit spread widening, market supply and demand, creditworthiness of the issuer, and quality of the underlying collateral. AtDecember 31, 2021 , 75.9% of our securities were issued byU.S. government agencies orU.S. government-sponsored enterprises. 43
Comparison of Financial Condition at
Total assets decreased$3.1 million , or 3.2%, to$94.4 million atDecember 31, 2021 from$97.5 million atDecember 31, 2020 . The decrease was primarily the result of a decrease in loans. Securities available for sale increased$3.4 million , or 6.8%, to$53.4 million atDecember 31, 2021 from$50.0 million atDecember 31, 2020 while securities held to maturity decreased$4,000 , or 0.9%, to$417,000 atDecember 31, 2021 from$421,000 atDecember 31, 2020 . The increase in securities available for sale was primarily due to purchases of government and mortgage-backed securities exceeding maturities and pay-downs while the decrease in securities held to maturity was primarily due to pay-downs on mortgage backed securities. Net loans receivable decreased$7.6 million , or 19.4%, to$31.6 million atDecember 31, 2021 from$39.3 million atDecember 31, 2020 . The decrease in loans receivable during 2021 was primarily due to a decrease of$1.1 million , or 28.0% in the student loan portfolio, a decrease of$3.0 million , or 21.2%, in residential one-to-four family loans and a decrease of$2.8 million , or 24.7%, in PPP loans.
Cash and cash equivalents increased
Principal payments decreased the held to maturity securities portfolio by
AtDecember 31, 2021 , our investment in bank-owned life insurance was$2.5 million , an increase of$66,000 or 2.7% from$2.4 million atDecember 31, 2020 . We invest in bank-owned life insurance to provide us with a funding offset for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses, and we have not made any additional contributions to our bank-owned life insurance since 2002. Net deferred tax assets increased$237,000 , or 34.6%, to$923,000 atDecember 31, 2021 from$685,000 atDecember 31, 2020 . The increase resulted primarily from an increase in unrealized losses on securities. Other assets, consisting primarily of prepaid insurance premiums, prepaid expenses, and investment receivables decreased$54,000 , or 19.4%, to$223,000 atDecember 31, 2021 from$276,000 atDecember 31, 2020 . The decrease was primarily due to decreases in prepaid insurance and prepaid expenses of$40,000 and$18,000 , respectively, partly offset by increases in prepaid NY franchise tax of$4,000 . 44 Total deposits increased$4.6 million , or 5.9%, to$82.9 million atDecember 31, 2021 from$78.3 million atDecember 31, 2020 . The increase was primarily due to higher savings, NOW and non-interest bearing checking balances, partly offset by lower certificates of deposit and money market balances. Savings deposits increased$1.0 million or 3.9%, NOW balances increased$2.4 million , or 18.8%, non-interest bearing balances increased$2.2 million , or 37.1% while money market balances decreased$481,000 , or 15.0%, and certificates of deposits decreased$550,000 , or 1.9%. We had$0 inFederal Reserve Bank advances outstanding atDecember 31, 2021 and$5.1 million atDecember 31, 2020 . We had$1.0 million inFederal Home Loan Bank advances outstanding atDecember 31, 2021 and$1.4 million atDecember 31, 2020 . AtDecember 31, 2021 , we had the ability to borrow approximately$27.4 million from theFederal Home Loan Bank of New York , subject to our pledging sufficient assets. Additionally, atDecember 31, 2021 , we had the ability to borrow up to$2.0 million on a Fed Funds line of credit withAtlantic Community Bankers Bank . Total equity decreased$2.0 million , or 17.2%, to$9.6 million atDecember 31, 2021 compared to$11.6 million atDecember 31, 2020 primarily due to an increase in unrealized losses in our investment portfolio which is included in accumulated other comprehensive loss and our net loss of$1.3 million for 2021.
Comparison of Operating Results for the Years Ended
General. For the year endedDecember 31, 2021 , the Company recorded a net loss of$1.3 million compared to net loss of$236,000 in 2020. The increase in net loss was primarily from$1.2 million of professional fees associated with the Company's announced merger, offset in part by an increase in net interest income. Our current business strategy includes increasing the Bank's asset size, diversifying our loan portfolio to increase our non-residential lending, including commercial and multi-family real estate lending and commercial lending and increasing our non-interest income, as ways to improve our profitability in future periods. Our ability to achieve profitability depends upon a number of factors, including general economic conditions, competition with other financial institutions, changes to the interest rate environment that may reduce our profit margins or impair our business strategy, adverse changes in the securities markets, changes in laws or government regulations, changes in consumer spending, borrowing, or saving, and changes in accounting policies. Net Interest Income. Net interest income increased$319,000 , or 16.7%, to$2.2 million for the year endedDecember 31, 2021 from$1.9 million for the year endedDecember 31, 2020 . The increase in net interest income was primarily due to a$316,000 , or 47.2% decrease in interest expense. 45 Interest income on loans decreased$72,000 , or 4.2%, primarily due to decreases in the loan balances partly offset by higher yields. Interest income on investment securities increased$33,000 or 14.4%, primarily due to higher balances offset by lower rates. Interest income on mortgage-backed securities increased$58,000 or 9.9%, primarily due to an increase in yields partly offset by lower balances. Interest income on federal funds sold and other interest-earning assets decreased$16,000 , or 44.2% mainly due to lower rates partly offset by higher balances. The average yield on our loans increased 20 basis points, while average balances decreased$3.4 million . The average yield on our mortgage-backed securities increased 32 basis points while average balances decreased$1.9 million . The average yield on investment securities decreased 15 basis points, while the average balance increased$3.7 million during 2021. Our net interest rate spread increased 42 basis points to 2.46% for the year endedDecember 31, 2021 from 2.04% for the year endedDecember 31, 2020 , and our net interest margin increased 35 basis points to 2.52% for 2021 from 2.17% for 2020.
Interest and Dividend Income. Interest and dividend income increased$3,000 to$2.6 million for the year endedDecember 31, 2021 from$2.6 million for the year endedDecember 31, 2020 . Interest on mortgage-backed securities and investment securities increased$58,000 , or 9.9% and$33,000 , or 14.4%, respectively, but was offset by a decrease in loan interest income of$72,000 or 4.2% and a decrease in interest on federal funds sold and other earning assets of$16,000 , or 44.2%, compared to 2020. Interest income on loans decreased$72,000 , or 4.2%, to$1.7 million for the year endedDecember 31, 2021 from$1.7 million for the year endedDecember 31, 2020 . The decrease resulted primarily from a decrease of$3.4 million in average loan balances to$37.5 million in 2021 from$41.0 million in 2020, partly offset by a 20 basis point increase in the yield to 4.43% in 2021 from 4.23% in 2020 primarily resulting from amortized fees collected under the SBA's PPP program. Interest income on mortgage-backed securities increased$58,000 to$644,000 primarily due to a 32 basis point increase in yield to 2.21% in 2021 from 1.89% in 2020, partly offset by a decrease of$1.9 million in average balances. Interest on investment securities increased$33,000 to$263,000 primarily due to an increase of$3.7 million in average balances partly offset by a 15 basis point decrease in yield to 1.48% for 2021 from 1.63% in 2020. Interest and dividend income of federal funds sold and other earning assets decreased$16,000 to$20,000 mainly due to a 115 basis point decrease in yield from 1.62% in 2020 to 0.47% in 2021, partly offset by an increase in average balances of$2.1 million . Interest Expense. Interest expense, consisting of the cost of interest-bearing deposits and borrowings, decreased$316,000 to$354,000 for the year endedDecember 31, 2021 from$670,000 for the year endedDecember 31, 2020 . The cost of interest-bearing deposits and borrowings decreased 43 basis points to 0.46% for 2021 compared to 0.89% for 2020, mainly reflecting a decrease in rates
on certificates of deposit. 46
Provision for Loan Losses. We establish provisions for loan losses that are charged to operations in order to maintain the allowance for loan losses at a level believed, to the best of management's knowledge, to cover all known and inherent losses in the portfolio both probable and reasonable to estimate at each reporting date. We recorded a provision for loan losses of$146,000 for the year endedDecember 31, 2021 compared to$122,000 for the year endedDecember 31, 2020 . The increase was mainly due to higher provisions for the student loan portfolio. The allowance for loan losses was$364,000 atDecember 31, 2021 compared to$401,000 atDecember 31, 2020 . We had$580,000 in non-performing loans atDecember 31, 2021 and$622,000 atDecember 31, 2020 . During the years endedDecember 31, 2021 and 2020 we had loan charge-offs of$193,000 and$150,000 , respectively. There were$10,000 and$0 recoveries in 2021 and 2020, respectively. EffectiveJanuary 1, 2023 , we will adopt the CECL standard for determining the amount of our allowance for credit losses, which could increase our allowance for loan and lease losses upon adoption and cause our historic allowance for loan and lease losses not to be indicative of how we will maintain our allowance for credit losses beginningJanuary 1, 2023 . Noninterest Income. Noninterest income decreased$121,000 , or 45.7% to$143,000 for the year endedDecember 31, 2021 from$264,000 for the year endedDecember 31, 2020 . The decrease was primarily due to gains of$124,000 from the sale of securities recorded in 2020 versus$0 in gains in 2021. Noninterest Expense. Noninterest expense increased$1.2 million , or 50.6%, to$3.6 million for the year endedDecember 31, 2021 from$2.4 million for the year endedDecember 31, 2020 . This increase was primarily due to merger-related expenses of$1.2 million as well as increases in data processing expenses, occupancy and equipment expenses, and professional fees, partly offset by decreases in salaries and benefits. Merger-related expenses increased$1.2 million primarily due to higher legal and investment banking fees. Compensation and benefits decreased$52,000 , or 4.4%, to$1.1 million for 2021 from$1.2 million for 2020, primarily due to lower salaries and benefits expense. Occupancy and equipment expense increased$23,000 , or 9.4%, primarily due to higher depreciation, repairs, taxes and utilities. Data processing fees increased$30,000 or 10.1%, primarily due to higher costs related to the Bank's core processing and upgraded computer equipment. Federal deposit insurance premium expense increased$7,000 , or 42.5% because theFDIC returned overpayments to theDeposit Insurance Fund which were primarily applied against premiums due in 2020. Other non-interest expense increased$14,000 , or 7.6% primarily due to increases in correspondent service charges, stock transfer agent fees and shareholder costs. Income Tax Expense. We recorded an income tax benefit of$34,000 for the year endedDecember 31, 2021 based on a loss before taxes of$1.3 million . In 2021, we recorded an income tax benefit of$71,000 based on a loss before taxes of$306,000 . The decrease in tax benefit was primarily due to non-deductible merger related expenses. 47
Analysis of Net Interest Income
The following table sets forth average balance sheets, average yields and costs,
and certain other information for the periods indicated. All average balances
are daily average balances and include non-accrual loans. The yields set forth
below include the effect of deferred fees, discounts and premiums that are
amortized or accreted to interest income or expense. No taxable equivalent
adjustments have been made.
For the Years Ended December 31,
2021 2020
Interest Interest
Average Income/ Yield/ Average Income/ Yield
Balance Expense Cost Balance Expense Cost
(In thousands)
Interest-earning assets:
Loans: $ 37,546 $ 1,663 4.43 % $ 40,987 $ 1,735 4.23 %
Investment securities 17,736 263 1.48 % 14,085 230 1.63 %Mortgage-backed securities 29,196 644 2.21 % 31,082 586 1.89 % Fed funds sold and other interest-earning assets 4,291 20 0.47 % 2,224 36 1.62 % Total interest-earning assets 88,769 2,590 2.92 % 88,378 2,587 2.93 % Non-interest-earning assets 7,933
5,940
Total assets$ 96,702
Interest Bearing Liabilities Transaction Accounts$ 13,496 $ 7 0.05 %$ 11,855 $ 6 0.05 % Regular Savings 27,208 49 0.18 % 24,944 39 0.16 % Money Markets 2,929 3 0.10 % 2,816 3 0.11 % Certificates of Deposits 30,862 265 0.86 % 30,708 577 1.88 %
Advances from FHLB and FRB of NY 2,363 30 1.27 % 4,909 45 0.92 % Total Interest Bearing Liabilities 76,858 354 0.46 % 75,232 670 0.89 % Non-Interest Bearing Liabilities 9,321
7,202 Total Liabilities 86,179 82,434 Equity 10,523 11,884 Total Liabilities and Equity$ 96,702 $ 94,318 Net Interest Income$ 2,236 $ 1,917 Interest Rate Spread (1) 2.46 % 2.04 % Net Interest-Earning Assets (2)$ 11,911 $ 13,146 Net Interest Margin (3) 2.52 % 2.17 % Average Interest-Earning Assets to Average Interest-Bearing Liabilities 115.50 % 117.47 %
(1) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.
(2) Net interest-earning assets represents total interest-earning assets less
total interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average total
interest-earning assets
48
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our
net interest income for the fiscal years indicated. 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. For purposes of this table, changes attributable to both
rate and volume, which cannot be segregated, have been allocated
proportionately, based on the changes due to rate and the changes due to volume.
For the
Years Ended December 31
2021 vs. 2020
Increase (Decrease) Due to
Total
Increase
Volume Rate (Decrease)
Interest-earning assets:
Loans $ (151 ) $ 79 $ (72 )
Investment Securities 56 (23 ) 33
Mortgage-backed securities (38 ) 96 58
Fed funds sold and other
interest-earning assets 20 (36 ) (16 )
Total Interest Income (113 ) 116 3
Interest-bearing liabilities:
NOW accounts 1 - 1
Regular savings 4 6 10
Money Market - - -
Certificates of deposit 3 (315 ) (312 )
Other borrowings (28 ) 13 (15 )
Total interest expense (20 ) (296 ) (316 )
Increase (decrease) in net interest
income $ (93 ) $ 412 $ 319
Management of Market Risk
General. Our most significant form of market risk is interest rate risk. As a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset-Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. 49 Historically, we have operated as a traditional thrift institution. A significant portion of our assets consist of longer-term, fixed-rate, one- to four-family residential real estate loans and securities, which we have funded primarily with deposits. Historically we have retained in our portfolio all of the one- to four-family residential real estate loans that we have originated. We have revised our business strategy with an increased emphasis on the origination of commercial and multi-family real estate loans, student loans and commercial loans. Such loans generally have shorter maturities than one- to four-family residential real estate loans. Additionally, subject to favorable market conditions, we will consider the sale or brokerage of certain newly originated longer-term (terms of 15 years or greater), one- to four-family residential real estate loans rather than retain all of such loans in portfolio as we have done in the past. Additionally, we have implemented aSmall Business Administration ("SBA") lending program and we will consider selling the government-guaranteed portions of such loans to generate additional fee income and manage interest rate risk. We are an SBA-approved lender. Net Interest Income Analysis. We analyze our sensitivity to changes in interest rates through our net interest income simulation model which is provided to us by an independent third party. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a one-year period based on current interest rates. We then calculate what the net interest income would be for the same period under different interest rate assumptions. We also estimate the impact over a five year time horizon. The following table shows the estimated impact on net interest income for the one-year period beginningDecember 31, 2021 resulting from potential changes in interest rates. These estimates require certain assumptions to be made, including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain. As a result, no simulation model can precisely predict the impact of changes in interest rates on our net interest income. Although the net interest income table below provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results. Net Interest Income Year 1 Change Rate Shift (1) Year 1 Forecast from Level (In thousands) +400 $ 2,119 9.42 % +300 $ 2,132 10.10 % +200 $ 2,086 7.75 % +100 $ 1,997 3.14 % Level $ 1,936 0.00 % -100 $ 1,897 -2.02 %
(1) The calculated changes assume an immediate shock of the static yield curve.
50 Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. The tables also do not measure the changes in credit and liquidity risk that may occur as a result of changes in general interest rates. Accordingly, although the tables provide 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 economic value of equity and will differ from actual results.
We do not engage in hedging activities, such as investing in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities and funds provided by our operations. In addition, we have the ability to borrow from theFederal Home Loan Bank of New York and theFederal Reserve Bank of New York . AtDecember 31, 2021 , we had the capacity to borrow an additional$27.4 million from theFederal Home Loan Bank of New York , subject to our pledging sufficient assets. Additionally, atDecember 31, 2021 , we had the ability to borrow up to$2 million on a Fed Funds line of credit withAtlantic Community Bankers Bank . AtDecember 31, 2021 and 2020, we had$1.1 million and$1.4 million in outstanding advances from theFederal Home Loan Bank of New York and$0 and$5.1 million in outstanding advances at theFederal Reserve Bank of New York . Loan repayments and maturing securities are a relatively predictable source of funds. However, deposit flows, calls of securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of these sources of funds. Our primary investing activities are the origination or purchase of one- to four-family real estate loans and commercial and multi-family real estate loans and the purchase of securities. For the year endedDecember 31, 2021 , loan originations totaled$5.8 million compared to originations of$9.1 million , for the year endedDecember 31, 2020 . Purchases of investments, mortgage-backed securities and bank certificates of deposit totaled$65.1 million for the year endedDecember 31, 2021 and$109.4 million for the year endedDecember 31, 2020 . Total deposits increased$4.6 million during the year endedDecember 31, 2021 , while total deposits increased$6.4 million during the year endedDecember 31, 2020 . Deposit flows are affected by the level of interest rates, the interest rates and products offered by competitors and other factors. AtDecember 31, 2021 , certificates of deposit scheduled to mature within one year totaled$20.8 million . Our ability to retain these deposits will be determined in part by the interest rates we are willing to pay on such deposits. 51
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. AtDecember 31, 2021 and 2020, our capital ratios were all above the minimum levels required for it to be considered a "well capitalized" financial institution under "prompt corrective action" regulations. In order to be classified as "well-capitalized" under federal banking regulations, we were required to have Tier I and total risked-based capital ratios of 8.0% and 10.0%, respectively, as ofDecember 31, 2021 . Our Tier 1 and total risked-based capital was$10.0 million and$10.4 million , respectively, or 20.6% and 21.4% of total risk weighted assets atDecember 31, 2021 . AtDecember 31, 2020 , our Tier 1 and total risked-based capital was$11.3 million and$11.7 million , respectively, or 26.0% and 27.0% of risk weighted assets.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.
Recent Accounting Pronouncements
Please see Note 1 to our audited financial statements.
Impact of Inflation and Changing Price
Our financial statements and related notes have been prepared in accordance withU.S. GAAP.U.S. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
52
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