Greene County Bancorp, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended December 31, 2023; comparisons are with the periods ended December 31, 2022 unless stated otherwise. Balance-sheet comparisons are with June 30, 2023. Greene County Bancorp operates community banking subsidiaries in New York’s Hudson Valley and Capital District. Amounts below are in millions except per-share data and ratios.
Financial performance and position
| Metric | Quarter | Six months |
|---|---|---|
| Interest income | $25.6, up 24.7% | $50.3, up 28.3% |
| Interest expense | $13.2, up 186.8% | $24.4, up 229.8% |
| Net interest income | $12.4, down 22.2% | $25.8, down 18.7% |
| Net interest margin (GAAP) | 1.94%, down 63 basis points | 2.03%, down 54 basis points |
| Provision for credit losses | $0.17 expense | $0.63 expense; prior-year period included a $0.26 benefit |
| Net income | $5.7, down 20.8%; diluted EPS $0.34 versus $0.42 | $12.2, down 25.0%; diluted EPS $0.72 versus $0.95 |
| Net cash from operating activities | Not separately reported for the quarter | $8.3 versus $10.0 |
Noninterest income rose 20.1% to $3.5 million for the quarter and 13.1% to $6.8 million for the half year, supported by income from bank-owned life insurance and customer interest-rate swap fees. Noninterest expense fell 6.3% to $9.3 million and 3.1% to $18.2 million, mainly reflecting lower legal and professional fees versus the prior year; software and IT-related costs, salaries, and FDIC premiums increased. The effective tax rate was 10.4% for the quarter and 11.8% for the half year.
At December 31, total assets were $2.74 billion, up 1.4% from June 30. Gross loans were $1.46 billion, up 3.4%, and net loans were $1.44 billion, up 3.6%. Commercial real estate represented 62.6% of gross loans. Total deposits were $2.33 billion, down $102.3 million, or 4.2%. Cash and cash equivalents were $176.1 million, down from $196.4 million. Shareholders’ equity was $195.3 million, up from $183.3 million; book value per share was $11.47.
Borrowings at period-end were $129.4 million from the FHLB ($125.0 million short-term and $4.4 million long-term), compared with none at June 30. Subordinated notes, net, were $49.6 million. The company reported $175.4 million available in unused lines of credit and stated it expected sufficient liquidity for commitments and other funding needs. Brokered deposits totaled $64.1 million. The Bank of Greene County reported a 15.6% common equity tier 1 ratio and a 9.3% tier 1 leverage ratio; both it and Greene County Commercial Bank met applicable regulatory capital requirements.
Material changes and credit profile
- Deposit pricing pressure drove a sharp increase in funding costs: the average cost of interest-bearing liabilities rose to 2.31% from 0.84% for the quarter. Asset yields also rose, but more slowly, compressing net interest spread and margin.
- The loan allowance was $20.3 million, or 1.39% of gross loans, versus $21.2 million and 1.51% at June 30. The company adopted CECL on July 1, 2023, recording a $0.51 million reduction to retained earnings; this change affects comparability of credit-loss measures with prior periods. The allowance for unfunded commitments was $1.6 million.
- Nonaccrual loans were $5.65 million and nonperforming assets were $5.95 million, or 0.22% of total assets. Nonperforming assets were $5.76 million at June 30. There were no loans over 90 days past due and still accruing. Loans rated special mention or substandard increased to $55.0 million from $41.9 million.
- Available-for-sale securities were carried at $307.8 million fair value, with $26.0 million of gross unrealized losses. Held-to-maturity securities had $56.4 million of gross unrealized losses and a $485,000 CECL allowance. The filing cautions that a required sale of securities before recovery could realize losses and reduce earnings and regulatory capital.
- Accumulated other comprehensive loss improved by $2.3 million over the six months, largely reflecting higher fair values of available-for-sale securities. Total shareholders’ equity also benefited from net income, partly offset by dividends and CECL adoption.
Outlook, risks and unusual items
The filing provides no quantified earnings or balance-sheet guidance. Management says it will continue to monitor interest-rate risk and manage asset-liability mix; it notes that deposits repriced faster than loans and securities as rates rose. Principal stated risks include interest rates, deposit flows and liquidity, credit quality and economic conditions, competition, regulation, and operational and cybersecurity risks. The CECL allowance depends on estimates and forecasts that could change materially.
Liquidity and funding developments include $125.0 million of overnight FHLB borrowings at December 31, compared with none at June 30, and a $102.3 million decline in deposits. The company had not drawn on the Bank Term Funding Program as of period-end. A $23.1 million surrender and purchase of bank-owned life insurance during the quarter resulted in restricted cash included in interest-bearing deposits.
The overdraft-fee class action settlement received final court approval on October 25, 2023 and the case was closed. The settlement provided for a $1.15 million cash payment, substantially distributed by the filing date, and waiver of $64,500 in uncollected fees. Management said it knew of no other pending or threatened proceedings expected to have a material adverse effect. On January 17, 2024, the Board declared a $0.08-per-share dividend; the company also disclosed termination of its $7.5 million unsecured line of credit on January 18, 2024.
Important facts for investors to verify
- Whether deposit outflows and higher deposit costs persist, and how they affect net interest margin and earnings.
- Liquidity sources and use of FHLB advances, brokered deposits, and unused credit lines, particularly following the deposit decline.
- Commercial real estate concentration, the increase in criticized loans, nonaccrual trends, and the adequacy of loan and unfunded-commitment allowances.
- Interest-rate sensitivity and the potential effect of securities unrealized losses if liquidity needs require sales; distinguish AFS fair-value effects from HTM carrying values.
- CECL adoption effects and the basis for comparing current-period credit costs with prior-year results.
- The filing’s period-end balance-sheet data, dividend details, and post-period termination of the $7.5 million credit line.