Greene County Bancorp, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2024; filed May 10, 2024. The company operates community banking subsidiaries in New York’s Hudson Valley and Capital District. Financial statements are unaudited. Amounts below are in millions unless otherwise stated.
Financial performance
| Metric | Quarter ended March 31, 2024 | Nine months ended March 31, 2024 |
|---|---|---|
| Interest income | $26.1, up 18.9% year over year | $76.3, up 24.9% |
| Interest expense | $13.8, up 105.4% | $38.2, up 170.7% |
| Net interest income | $12.3, down 19.2% | $38.1, down 18.9% |
| Net interest margin (GAAP) | 1.90%, versus 2.43% | 1.99%, versus 2.53% |
| Net income | $5.9, down 27.6% | $18.0, down 25.8% |
| Diluted earnings per share | $0.34, versus $0.48 | $1.06, versus $1.43 |
| Noninterest income / expense | $3.4 / $9.2 | $10.2 / $27.4 |
Higher loan and securities yields lifted interest income, but deposit costs rose faster as the company repriced deposits in the higher-rate environment. Deposit interest expense was $12.9 million for the quarter, versus $5.6 million a year earlier. The company attributed lower profitability and returns principally to deposit repricing outpacing asset repricing. Nine-month provision for credit losses was $0.9 million, compared with a $1.2 million benefit in the prior-year period. The effective tax rate was 5.2% for the quarter and 9.8% for the nine months, reflecting tax-exempt income and bank-owned life insurance, among other factors.
Financial position, cash flow and liquidity
- At March 31, 2024, total assets were $2.87 billion, up 6.4% from June 30, 2023. Gross loans were $1.48 billion, up 4.9%; net loans were $1.46 billion, up 5.0%.
- Deposits totaled $2.56 billion, up 4.9% since June 30, 2023. Noninterest-bearing deposits declined to $131.5 million from $159.0 million. Brokered deposits rose to about $120 million from $60 million and were included in NOW deposits.
- Cash and cash equivalents were $255.8 million, compared with $196.4 million at June 30, 2023. For the nine months, operating cash flow was $13.8 million, investing cash flow was negative $108.0 million, and financing cash flow was positive $153.5 million.
- Total borrowings were $36.2 million, including $2.0 million short-term and $34.2 million long-term, versus none at June 30, 2023. The company also had $49.6 million of subordinated notes. It reported $260 million of unused lines of credit and $149.7 million of remaining FHLB borrowing capacity; immediately available liquidity, including cash and remaining borrowing capacity, was $425.8 million.
- Uninsured deposits after excluding affiliate and collateralized deposits were estimated at $269.6 million; reported immediately available liquidity covered 157.9% of that amount. Municipal deposits were 45.4% of total deposits.
- Shareholders’ equity was $199.2 million, up from $183.3 million. Equity was 6.94% of assets; book value per share was $11.70. The Bank of Greene County and Greene County Commercial Bank met applicable regulatory capital requirements.
Material changes, credit and unusual items
- Net interest income declined despite loan growth: the company’s quarterly net interest spread fell to 1.66% from 2.31%, while its nine-month spread fell to 1.75% from 2.43%.
- Commercial real estate represented 62.6% of gross loans; 81.5% of CRE loans were non-owner occupied. Management identified non-owner-occupied apartments as its largest CRE concentration and reported $53.6 million of office CRE loans.
- Nonaccrual loans were $5.6 million, versus $5.5 million at June 30, 2023; nonperforming assets were $5.9 million, or 0.21% of assets. No loans were over 90 days past due and still accruing. Loans rated substandard or special mention increased to $51.6 million from $41.9 million.
- The loan allowance was $20.4 million, or 1.38% of gross loans; the allowance for unfunded commitments was $1.3 million. Adoption of CECL on July 1, 2023 reduced retained earnings by $0.5 million. The company identifies credit-loss estimation as a critical accounting estimate.
- Available-for-sale securities had $27.4 million of gross unrealized losses at March 31, 2024. Held-to-maturity securities had $59.9 million of gross unrealized losses and a reported fair value of $647.5 million against a carrying value of $700.4 million. Management cautions that a required sale before recovery could realize losses and reduce earnings and regulatory capital.
- Bank-owned life insurance activity included a $23.1 million surrender and a $23.1 million purchase during the nine months. The surrender resulted in $23.2 million of restricted cash at March 31, 2024. BOLI income was $1.6 million for the nine months.
- Dividends were $0.08 per share for the quarter; the board announced the same rate for the quarter ended March 31, payable May 30, 2024. No shares were repurchased during the quarter.
Outlook, risks and contingencies
The filing provides no quantified earnings or margin guidance. Management said it expects sufficient funds to meet current commitments and other funding needs, drawing on cash, available-for-sale securities and borrowing capacity. It plans to continue monitoring and managing interest-rate risk and describes maintaining liquid assets and core deposits as mitigation measures.
Key stated risks include changes in interest rates, deposit flows, economic conditions, credit quality, competition, and regulatory or monetary policy changes. The company highlights interest-rate sensitivity, potential deposit-cost pressure, liquidity needs, and credit exposure—particularly in commercial real estate. It had $203.4 million of off-balance-sheet credit commitments, including $108.2 million of unfunded loan commitments and $94.8 million of unused lines. Management reported no material pending legal proceedings beyond ordinary banking litigation.
Important facts for investors to verify
- Whether deposit pricing stabilizes and net interest margin and earnings recover as assets reprice.
- Trends in deposit mix, brokered deposits, municipal deposit concentration, and funding costs.
- CRE portfolio performance, including non-owner-occupied property exposure, criticized loans, and the office portfolio.
- Allowance adequacy and future CECL provisions, given loan growth, criticized balances, and forecast assumptions.
- Interest-rate sensitivity and the duration or potential realization of securities’ unrealized losses; also verify the impact of pledged securities on available liquidity.
- Progress on borrowings and liquidity, including the $27 million BTFP balance and near-term stated maturities, and actual regulatory capital measures.