CULLMAN BANCORP, INC. Cautionary Statement Regarding Forward-Looking Information
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," "continue" and words of similar meaning. These forward-looking statements include, but are not limited to:
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statements of our goals, intentions and expectations;
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statements regarding our business plans, prospects, growth and operating strategies;
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statements regarding the asset quality of our loan and investment portfolios; and
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estimates of our risks and future costs and benefits.
These forward-looking statements are based on our current beliefs and expectations 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. You should not place undue reliance on such statements. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
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conditions relating to the COVID-19 or any other pandemic, including the severity and duration of the associated economic slowdown either nationally or in our market areas, that are worse than expected;
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general economic conditions, either nationally or in our market areas, that are worse than expected;
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changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;
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our ability to access cost-effective funding;
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fluctuations in real estate values and both residential and commercial real estate market conditions;
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demand for loans and deposits in our market area;
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our ability to implement and change our business strategies;
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competition among depository and other financial institutions;
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inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
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adverse changes in the securities or secondary mortgage markets;
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changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;
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changes in the quality or composition of our loan or investment portfolios;
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technological changes that may be more difficult or expensive than expected;
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the inability of third-party providers to perform as expected;
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a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
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our ability to manage market risk, credit risk and operational risk;
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our ability to enter new markets successfully and capitalize on growth opportunities;
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our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we have acquired or may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
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changes in consumer spending, borrowing and savings habits;
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changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the
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our ability to retain key employees;
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our compensation expense associated with equity allocated or awarded to our employees; and
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changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Comparison of Financial Condition at
Total assets increased
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Cash and cash equivalents decreased$37.1 million , or 60.0%, to$24.8 million atJune 30, 2022 from$61.9 million atDecember 31, 2021 . The decrease was due to loan growth, payoff of advances and investment purchases. Gross loans held for investment increased$55.7 million , or 21.9%, to$310.3 million atJune 30, 2022 from$254.6 million atDecember 31, 2021 . The increase was primarily due to an increase in one-to-four family loans, which increased$25.0 million , or 19.6%, to$152.8 million atJune 30, 2022 from$127.8 million atDecember 31, 2021 . The increase was also due to an increase in commercial real estate loans, which increased$14.4 million , or 18.8%, to$91.4 million atJune 30, 2022 from$77.0 million atDecember 31, 2021 . Securities available for sale increased$6.3 million , or 29.5%, to$27.6 million atJune 30, 2022 from$21.3 million atDecember 31, 2021 . We used a portion of the excess cash we received from deposits during the six months endedJune 30, 2022 to invest in securities. Total deposits increased$48.2 million , or 20.8%, to$280.2 million atJune 30, 2022 from$232.0 million atDecember 31, 2021 . We experienced increases in regular savings and other deposits of$28.4 million , or 51.4%, to$83.7 million atJune 30, 2022 from$55.3 million atDecember 31, 2021 , and in interest-bearing demand deposits of$23.3 million , or 29.8%, to$101.5 million atJune 30, 2022 from$78.2 million atDecember 31, 2021 . Noninterest bearing demand deposits increased$2.6 million or 19.5% to$15.9 million atJune 30, 2022 from$13.3 million atDecember 31, 2021 . The increases are a result of an increase in new accounts. Borrowings decreased$18.5 million , or 100.0%, to no borrowings atJune 30, 2022 from$18.5 million atDecember 31, 2021 . We used a portion of the excess cash we received from deposits during the six months endedJune 30, 2022 to decrease our borrowings, and recognized a net gain of$87,000 for repaying$18.5 million of borrowings. Stockholders' equity decreased$1.0 million , or 1.0%, to$98.7 million atJune 30, 2022 from$99.7 million atDecember 31, 2021 . The decrease was mainly due to the decrease in accumulated other income (unrealized losses on securities available for sale) of$2.8 million for the six months endedJune 30, 2022 , partially offset by a increase in retained earnings of$1.4 million for the six months endedJune 30, 2022 . Stockholders' equity (book value) per share atJune 30, 2022 was$13.33 . Average Balance Sheets The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled$11,000 and$216,000 as ofJune 30, 2022 andJune 30, 2021 , respectively. Loan balances exclude loans held for sale. 40
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Three Months Ended June 30,
2022 2021
Average Average Average Average
Outstanding Yield/Rate Outstanding Yield/Rate
Balance Interest (1) Balance Interest (1)
(Dollars in thousands)
Interest-earning
assets:
Loans (excluding PPP
loans) $ 288,646 $ 3,809 5.28 % $ 239,408 $ 3,203 5.35 %
PPP loans 157 2 5.10 % 3,565 37 4.15 %
Securities 28,965 202 2.79 % 19,868 110 2.21 %
Federal Home Loan Bank
stock 176 3 6.82 % 1,623 22 5.42 %
Federal funds sold 40,228 74 0.74 % 56,941 12 0.08 %
Total interest-earning
assets 358,172 4,090 4.57 % 321,405 3,384 4.21 %
Noninterest-earning
assets 21,731 20,239
Total assets $ 379,903 $ 341,644
Interest-bearing
liabilities:
Interest-bearing demand
deposits $ 98,007 27 0.11 % $ 83,699 24 0.11 %
Regular savings and
other deposits 79,984 34 0.17 % 50,445 24 0.19 %
Money market deposits 4,296 2 0.19 % 4,360 2 0.18 %
Certificates of deposit 77,134 153 0.79 % 85,147 234 1.10 %
Total interest-bearing
deposits 259,421 216 0.33 % 223,651 284 0.51 %
Federal Home Loan Bank
advances
and other borrowings - - 0.00 % 38,876 170 1.75 %
Total interest-bearing
liabilities 259,421 216 0.33 % 262,527 454 0.69 %
Noninterest-bearing
demand deposits 15,313 16,546
Other
noninterest-bearing
liabilities 6,242 5,542
Total liabilities 280,976 284,615
Total shareholders'
equity 98,927 57,029
Total liabilities and
shareholders'
equity $ 379,903 $ 341,644
Net interest income $ 3,874 $ 2,930
Net interest rate
spread (2) 4.23 % 3.52 %
Net interest-earning
assets (3) $ 98,751 $ 58,878
Net interest margin (4) 4.33 % 3.65 %
Average
interest-earning assets
to
interest-bearing
liabilities 1.38x 1.22x
(1)
Annualized.
(2)
Net interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate of
interest-bearing liabilities.
(3)
Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.
(4)
Net interest margin represents net interest income divided by average total
interest-earning assets.
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For the Six Months Ended June 30,
2022 2021
Average Average Average Average
Outstanding Yield/Rate Outstanding Yield/Rate
Balance Interest (1) Balance Interest (1)
(Dollars in thousands)
Interest-earning assets:
Loans (excluding PPP
loans) $ 274,985 $ 7,182 5.22 % $ 234,583 $ 6,210 5.29 %
PPP loans 157 36 45.86 % 3,730 216 11.58 %
Securities 25,494 334 2.62 % 19,374 217 2.24 %
Federal Home Loan Bank
stock 249 15 4.02 % 2,022 46 4.55 %
Federal funds sold 42,270 92 0.44 % 57,994 23 0.08 %
Total interest-earning
assets 343,155 7,659 4.46 % 317,703 6,712 4.23 %
Noninterest-earning
assets 20,369 19,149
Total assets $ 363,524 $ 336,852
Interest-bearing
liabilities:
Interest-bearing demand
deposits $ 91,730 52 0.11 % $ 76,348 46 0.12 %
Regular savings and
other deposits 68,302 60 0.18 % 47,098 44 0.19 %
Money market deposits 4,510 4 0.18 % 4,725 4 0.17 %
Certificates of deposit 77,130 318 0.82 % 85,596 494 1.15 %
Total interest-bearing
deposits 241,672 434 0.36 % 213,767 588 0.55 %
Federal Home Loan Bank
advances
and other borrowings 2,066 21 2.03 % 45,213 394 1.74 %
Total interest-bearing
liabilities 243,738 455 0.37 % 258,980 982 0.76 %
Noninterest-bearing
demand deposits 14,575 15,741
Other
noninterest-bearing
liabilities 6,015 5,570
Total liabilities 264,328 280,291
Total shareholders'
equity 99,196 56,561
Total liabilities and
shareholders'
equity $ 363,524 $ 336,852
Net interest income $ 7,204 $ 5,730
Net interest rate spread
(2) 4.09 % 3.47 %
Net interest-earning
assets (3) $ 99,417 $ 58,723
Net interest margin (4) 4.20 % 3.61 %
Average interest-earning
assets to
interest-bearing
liabilities 1.41x 1.23x
(1)
Annualized.
(2)
Net interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate of
interest-bearing liabilities.
(3)
Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.
(4)
Net interest margin represents net interest income divided by average total
interest-earning assets.
The following tables present the effects of changing rates and volumes on our
net interest income for the three and six months ended June 30, 2022 and 2021.
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 total column represents the sum of the prior columns. For purposes of these
tables, changes attributable to both rate and volume, which cannot be
segregated, have been allocated
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proportionately based on the changes due to rate and the changes due to volume.
There were no out-of-period items or adjustments required to be excluded from
the tables below.
For the Three Months ended June 30, 2022 vs. 2021
Increase (Decrease) Due to Total Increase
Volume Rate (Decrease)
(In thousands)
Interest-earning assets:
Loans (excluding PPP loans) $ 2,634 $ (2,028 ) $ 606
PPP Loans (140 ) 105 (35 )
Securities 202 (110 ) 92
Federal Home Loan Bank stock (82 ) 63 (19 )
Federal funds sold (15 ) 77 62
Total interest-earning assets 2,599 (1,893 ) 706
Interest-bearing liabilities:
Interest-bearing demand Deposits 149 (146 ) 3
Regular savings and other deposits 56 (46 ) 10
Money market deposits - - -
Certificates of deposit (88 ) 7 (81 )
Total interest-bearing deposits 117 (185 ) (68 )
Federal Home Loan Bank advances (680 ) 510 (170 )
Total interest bearing liabilities (563 ) 325 (238 )
Change in net interest income $ 3,162 $ (2,218 ) $ 944
For the Six Months ended June 30, 2022 vs. 2021
Increase (Decrease) Due to Total Increase
Volume Rate (Decrease)
(In thousands)
Interest-earning assets:
Loans (excluding PPP loans) $ 2,139 $ (1,167 ) $ 972
PPP Loans (414 ) 234 (180 )
Securities 137 (20 ) 117
Federal Home Loan Bank stock (81 ) 50 (31 )
Federal funds sold (12 ) 81 69
Total interest-earning assets 1,769 (822 ) 947
Interest-bearing liabilities:
Interest-bearing demand Deposits 151 (145 ) 6
Regular savings and other deposits 40 (24 ) 16
Money market deposits - - -
Certificates of deposit (98 ) (78 ) (176 )
Total interest-bearing deposits 93 (247 ) (154 )
Federal Home Loan Bank advances (752 ) 379 (373 )
Total interest bearing liabilities (659 ) 132 (527 )
Change in net interest income $ 2,428 $ (954 ) $ 1,474
Comparison of Operating Results for the three months ended
General. Net income was$1.3 million for the three months endedJune 30, 2022 compared to$847,000 for the three months endedJune 30, 2021 . The increase in net income was primarily due to an increase an interest income resulting from an increase in loans. Interest Income. Interest income increased$706,000 , or 20.1%, to$4.1 million for the three months endedJune 30, 2022 from$3.4 million for the three months endedJune 30, 2021 . The increase was due primarily to an increase in interest income on loans (excluding PPP loans), 43
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which is our primary source of interest income. Interest income on loans increased$571,000 , or 17.6%, to$3.8 million for the three months endedJune 30, 2022 from$3.2 million for the three months endedJune 30, 2021 . Our average balance of loans (excluding PPP loans) increased$49.2 million , or 20.6%, to$288.6 million for the three months endedJune 30, 2022 , from$239.4 million for the three months endedJune 30, 2021 . The increase is due to our decision to continue to retain longer-term, fixed-rate loans instead of selling them as well as the continued growth of commercial lending. Our weighted average yield on loans (excluding PPP loans) decreased seven basis point to 5.28% for the three months endedJune 30, 2022 compared to 5.35% for the three months endedJune 30, 2021 . The decrease was a reflection of the low rate environment when the loans were originated. We recognized$2,000 interest income on PPP loans during the three months endedJune 30, 2022 compared to$37,000 during the three months endedJune 30, 2021 . The decrease was due to loans being paid off by the SBA. Interest Expense. Interest expense decreased$238,000 , or 52.4%, to$216,000 for the three months endedJune 30, 2022 compared to$454,000 for the three months endedJune 30, 2021 . The decrease was mainly due to a decrease in borrowing balances. Interest expense on deposits decreased$68,000 , or 23.9%, to$216,000 for the three months endedJune 30, 2022 compared to$284,000 for the three months endedJune 30, 2021 . The decrease was due primarily to a decrease in interest expense on certificates of deposit. Interest expense on certificates of deposit decreased$81,000 , or 34.6%, to$153,000 for the three months endedJune 30, 2022 compared to$234,000 for the three months endedJune 30, 2021 . We experienced decreases in the average balance of certificates of deposit of$8.0 million , or 9.4%. We also experienced a decrease in average rates paid on certificates of deposit. Rates decreased 31 basis points, from 1.10% for the three months endedJune 30, 2021 to 0.79% three months endedJune 30, 2022 . We have allowed higher-rate certificates of deposit to run off during the current interest rate environment, and rates decreased due to changes in market interest rates when the certificates mature. Due to paying off advances, interest expense on borrowings decreased$170,000 , or 100%, to no expense for the three months endedJune 30, 2022 compared to$170,000 for the three months endedJune 30, 2021 . The average balance of borrowings decreased$38.9 million , or 100% to a zero balance for the three months endedJune 30, 2022 compared to$38.9 million for the three months endedJune 30, 2021 . Net Interest Income. Net interest income increased$944,000 , or 32.2%, to$3.9 million for the three months endedJune 30, 2022 from$2.9 million for the three months endedJune 30, 2021 . Our interest rate spread increased 71 basis points to 4.23% for the three months endedJune 30, 2022 compared to 3.52% for the three months endedJune 30, 2021 , while our net interest margin increased 68 basis points to 4.33% for the three months endedJune 30, 2022 compared to 3.65% for the three months endedJune 30, 2021 . Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management's ongoing review and grading of loans, facts and issues related to specific loans, 44
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historical loan loss and delinquency experience, trends in past due and nonaccrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. After an evaluation of these factors,$115,000 was recorded in the provision for loan losses for the three months endedJune 30, 2022 compared to$25,000 for the three months endedJune 30, 2021 . Our allowance for loan losses was$2.56 million atJune 30, 2022 compared to$2.41 million atDecember 31, 2021 and$2.39 million atJune 30, 2021 . The ratio of our allowance for loan losses to total loans was 0.83% atJune 30, 2022 compared to 0.95% atDecember 31, 2021 and 0.97% atJune 30, 2021 , while the allowance for loan losses to non-performing loans was 21,350.0% atJune 30, 2022 compared to 810.1% atDecember 31, 2021 . We had$1,000 of net recoveries for the three months endedJune 30, 2022 compared to$2,000 of charge-offs for the three months endedJune 30, 2021 . To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate atJune 30, 2022 . However, future changes in the factors we use to calculate the allowance for loan losses, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, theOffice of the Comptroller of the Currency , as an integral part of its examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. Non-interest Income. Non-interest income increased$88,000 to$434,000 for the three months endedJune 30, 2022 from$346,000 for the three months endedJune 30, 2021 . Our service charges on deposit accounts increased$56,000 to$256,000 for the three months endedJune 30, 2022 from$200,000 for the three months endedJune 30, 2021 due to our increase in new accounts. We also recognized a gain on the sale of a foreclosure of$44,000 during the three months endedJune 30, 2022 . These increases were offset by the gain on sale of mortgage loans decreasing by$17,000 , or 30.4%, as we sold$1.3 million of mortgage loans during the three months endedJune 30, 2022 compared to$1.8 million of such sales during the three months endedJune 30, 2021 . Non-interest Expense. Non-interest expense increased$383,000 , or 17.5%, to$2.6 million for the three months endedJune 30, 2022 compared to$2.2 million for the three months endedJune 30, 2021 . The increase was primarily due to an increase in salaries and employee benefits expense of$288,000 , or 19.6%, to$1.8 million for the three months endedJune 30, 2022 compared to$1.5 million for the three months endedJune 30, 2021 , mainly due to additional employees. Income Tax Expense. We recognized income tax expense of$315,000 and$221,000 for the three months endedJune 30, 2022 and 2021, respectively, resulting in effective rates of 19.4% and 20.69%, respectively.
Comparison of Operating Results for the six months ended
General. Net income was$2.3 million for the six months endedJune 30, 2022 compared to$1.6 million for the six months endedJune 30, 2021 . The increase in net income was primarily due to an increase in interest income resulting from an increase in loans. 45
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Interest Income. Interest income increased$947,000 , or 14.1%, to$7.7 million for the six months endedJune 30, 2022 from$6.7 million for the three months endedJune 30, 2021 . The increase was due primarily to an increase in interest income on loans (excluding PPP loans), which is our primary source of interest income. Interest income on loans increased$792,000 , or 12.3%, to$7.2 million for the six months endedJune 30, 2022 from$6.4 million for the six months endedJune 30, 2021 . Our average balance of loans (excluding PPP loans) increased$40.4 million , or 17.2%, to$275.0 million for the six months endedJune 30, 2022 , from$239.6 million for the six months endedJune 30, 2021 . The increase is due to our decision to continue to retain longer-term, fixed-rate loans instead of selling them as well as the continued growth of commercial lending. Our weighted average yield on loans (excluding PPP loans) decreased seven basis point to 5.22% for the six months endedJune 30, 2022 compared to 5.29% for the six months endedJune 30, 2021 . The decrease was a reflection of the low rate environment when loan were originated. We recognized$36,000 income on PPP loans during the six months endedJune 30, 2022 compared to$216,000 during the six months endedJune 30, 2021 . The decrease was due to loans being paid off by the SBA. Interest Expense. Interest expense decreased$527,000 , or 53.7%, to$455,000 for the six months endedJune 30, 2022 compared to$982,000 for the six months endedJune 30, 2021 . These decreases are mainly due to a decrease in borrowing balances. Interest expense on deposits decreased$154,000 , or 26.2%, to$434,000 for the six months endedJune 30, 2022 compared to$588,000 for the six months endedJune 30, 2021 . The decrease was due primarily to a decrease in interest expense on certificates of deposit. Interest expense on certificates of deposit decreased$176,000 , or 35.6%, to$318,000 for the six months endedJune 30, 2022 compared to$494,000 for the six months endedJune 30, 2021 . We experienced decreases in the average balance of certificates of deposit of$8.5 million , or 9.9%. We also experienced a decrease in average rates paid on certificates of deposit. Average rates decreased 33 basis points, from 1.15% for the six months endedJune 30, 2021 to 0.82% six months endedJune 30, 2022 . The decline in balances, which were at higher rates, caused our decrease in average rates. Interest expense on borrowings decreased$373,000 , or 94.7%, to$21,000 for the six months endedJune 30, 2022 compared to$394,000 for the six months endedJune 30, 2021 . The average balance of borrowings decreased$43.2 million , or 95.4%, to$2.0 million for the six months endedJune 30, 2022 compared to$45.2 million for the six months endedJune 30, 2021 . Net Interest Income. Net interest income increased$1.5 million , or 25.7%, to$7.2 million for the six months endedJune 30, 2022 from$5.7 million for the six months endedJune 30, 2021 . Our interest rate spread increased 62 basis points to 4.09% for the six months endedJune 30, 2022 compared to 3.47% for the six months endedJune 30, 2021 , while our net interest margin increased 59 basis points to 4.20% for the six months endedJune 30, 2022 compared to 3.61% for the six months endedJune 30, 2021 . Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, 46
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management's ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and nonaccrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. After an evaluation of these factors,$155,000 was recorded in the provision for loan losses for the six months endedJune 30, 2022 compared to$25,000 for the six months endedJune 30, 2021 . Our allowance for loan losses was$2.56 million atJune 30, 2022 compared to$2.41 million atDecember 31, 2021 and$2.39 million atJune 30, 2021 . The ratio of our allowance for loan losses to total loans was 0.83% atJune 30, 2022 compared to 0.95% atDecember 31, 2021 and 0.97% atJune 30, 2021 , while the allowance for loan losses to non-performing loans was 21,350.0% atJune 30, 2022 compared to 810.1% atDecember 31, 2021 . We had$1,000 of net recoveries for both the six months endedJune 30, 2022 and the six months endedJune 30, 2021 . To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate atJune 30, 2022 . However, future changes in the factors we use to calculate the allowance for loan losses, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, theOffice of the Comptroller of the Currency , as an integral part of its examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. Non-interest Income. Non-interest income increased$42,000 to$854,000 for the six months endedJune 30, 2022 from$812,000 for the six months endedJune 30, 2021 . Our service charges on deposit accounts increased$92,000 to$481,000 for the six months endedJune 30, 2022 from$389,000 for the six months endedJune 30, 2021 due to our increase in new accounts. We also recognized a gain on the sale of foreclosures of$46,000 during the six months endedJune 30, 2022 . These increases were offset by the gain on sale of mortgage loans decreasing by$60,000 , or 49.2%, as we sold$2.3 million of mortgage loans during the six months endedJune 30, 2022 compared to$4.3 million of such sales during the six months endedJune 30, 2021 . Non-interest Expense. Non-interest expense increased$517,000 , or 11.6%, to$5.0 million for the six months endedJune 30, 2022 compared to$4.5 million for the six months endedJune 30, 2021 . The increase was primarily due to an increase in salaries and employee benefits expense of$306,000 , or 10.0%, to$3.4 million for the six months endedJune 30, 2022 compared to$3.1 million for the six months endedJune 30, 2021 , mainly due to additional employees.
Income Tax Expense. We recognized income tax expense of
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,
principal and interest payments on loans and securities, proceeds
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from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from theFederal Home Loan Bank of Atlanta . AtJune 30, 2022 andDecember 31, 2021 , we had a$105.4 million and$111.3 million line of credit with theFederal Home Loan Bank of Atlanta , and had$0 and$18.5 million outstanding as of those dates, respectively. In addition, atJune 30, 2022 , we had an unsecured federal funds line of credit of$10.0 million . No amount was outstanding on this line of credit atJune 30, 2022 . While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was$3.1 million and$1.3 million for the six months endedJune 30, 2022 and 2021, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities and bank owned life insurance, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was$69.1 million and$11.2 million for the six months endedJune 30, 2022 and 2021, respectively. Net cash provided by financing activities, consisting primarily of activity in deposit accounts and proceeds fromFederal Home Loan Bank borrowings, offset by repayment ofFederal Home Loan Bank borrowings, was$28.9 million and$42.7 million for the six months endedJune 30, 2022 and 2021, respectively. 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. AtJune 30, 2022 ,Cullman Savings Bank exceeded all of its regulatory capital requirements, and was categorized as well capitalized. Management is not aware of any conditions or events since the most recent notification that would change our category.
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