Greene County Bancorp, Inc. — Form 10-Q Summary
Reporting period: The filing covers the quarter ended March 31, 2023, and the nine months then ended (the company’s fiscal third quarter). The request metadata says “2022 Q3,” which does not match the filing period. Unless noted otherwise, amounts below are in U.S. dollars; financial statement amounts are in millions.
Business context
The company operates The Bank of Greene County and related subsidiaries, serving the Hudson Valley and Capital District regions of New York. Its primary activities are gathering deposits and investing in loans and securities; the Commercial Bank also serves local municipalities.
Financial performance
| Metric | Three months ended March 31, 2023 | Year-over-year change | Nine months ended March 31, 2023 | Year-over-year change |
|---|---|---|---|---|
| Net interest income | $15.2 million | +$1.1 million | $47.0 million | +$4.0 million |
| Net income | $8.1 million | +12.6% | $24.3 million | +14.9% |
| Basic and diluted EPS | $0.48 | $0.42 prior year | $1.43 | $1.24 prior year |
| Net interest margin, GAAP | 2.43% | +2 basis points | 2.53% | −1 basis point |
| Noninterest income | $3.1 million | +5.3% | $9.1 million | −0.2% |
| Noninterest expense | $9.9 million | +18.5% | $28.6 million | +16.2% |
Interest income rose 43.3% in the quarter and 30.8% over nine months, while interest expense rose 450.7% and 272.5%, respectively, reflecting higher deposit and borrowing costs as rates increased. The nine-month GAAP provision for loan losses was a benefit of $1.2 million, compared with a $2.4 million expense a year earlier; the quarterly provision was a $944,000 benefit. The reported nine-month effective tax rate was 15.0%.
Financial position, liquidity, and capital
- At March 31, 2023, total assets were $2.73 billion, up 6.1% from June 30, 2022. Net loans were $1.39 billion, up 12.9%; deposits were $2.47 billion, up 11.7%.
- Cash and cash equivalents were $178.3 million, compared with $69.0 million at June 30, 2022. The company reported $281.8 million of unused lines of credit and no short-term FHLB borrowings at quarter-end.
- Nine-month cash flows were $17.7 million provided by operations, $42.8 million used in investing, and $134.4 million provided by financing. Cash increased by $109.3 million to $178.3 million.
- Subordinated notes payable, net, were $49.4 million. Shareholders’ equity was $178.7 million, or 6.55% of assets. The Bank of Greene County reported total risk-based capital of 16.3% and a Tier 1 leverage ratio of 8.7%; management said both banks met applicable regulatory capital requirements.
- The allowance for loan losses was $21.2 million, equal to 1.50% of gross loans. Nonperforming assets were $5.2 million, or 0.19% of assets; nonaccrual loans were $4.7 million, down from $6.3 million at June 30, 2022.
Material changes, risks, and management commentary
- Loan growth was concentrated in commercial real estate: commercial real estate loans were $702.8 million, or 49.9% of gross loans, at quarter-end. Management cited continued customer growth and loan participations, while noting that commercial real estate and construction lending carry elevated risks.
- Management increased cash and brokered deposits in response to banking-sector turmoil. Brokered certificates of deposit were $74.6 million, versus $7.2 million at June 30, 2022. The filing says management expects sufficient liquidity for commitments and seasonal deposit declines; the company had not drawn on the Federal Reserve’s Bank Term Funding Program as of quarter-end.
- Available-for-sale and held-to-maturity securities had $81.7 million of gross unrealized losses at March 31, 2023. Management attributed the losses primarily to higher interest rates, concluded the securities were not other-than-temporarily impaired, and said values improved from December 2022. The filing warns that forced sales could realize losses and reduce earnings and regulatory capital. Securities’ fair value was $1.003 billion versus $1.080 billion amortized cost.
- Management said rapidly rising rates increased deposit costs faster than asset yields could reprice, pressuring spread and margin. Continued rate changes, deposit flows, economic conditions, credit quality, and competition are identified as factors that could affect results.
- Nine-month noninterest expense included a $1.2 million litigation reserve recorded in the prior quarter. A proposed overdraft-fee class settlement provides for a $1.15 million cash payment, waiver of $64,500 in uncollected fees, and changes to certain fee practices; preliminary court approval remained pending. The reserve was already accrued at December 31, 2022.
- The bank donated $300,000 to its charitable foundation during the quarter. A 2-for-1 stock split took effect March 23, 2023; share and per-share data were adjusted retrospectively. The company declared a post-split quarterly dividend of $0.07 per share.
- The company planned to adopt CECL in fiscal 2024, beginning July 1, 2023. It had not yet calculated the estimated impact, but anticipated a significant change to its allowance methodology and an effect on financial position at adoption.
No specific earnings or financial guidance was provided. The filing cautions that interim results are not necessarily indicative of full-year results.
Important facts for investors to verify
- Confirm the intended period: the filed report is for the quarter ended March 31, 2023, not 2022 Q3.
- Track deposit pricing, brokered-deposit levels, liquidity sources, and seasonal municipal deposit movements.
- Assess commercial real estate concentration, construction exposure, credit classifications, nonaccrual loans, and the allowance as CECL adoption approaches.
- Monitor unrealized securities losses, interest-rate sensitivity, and whether liquidity needs could require securities sales.
- Check the court’s status and final terms of the overdraft-fee settlement, and reconcile its accounting treatment with the reserve already recorded.