Business context and reporting period
Greene County Bancorp, Inc. is a New York community banking company operating through The Bank of Greene County and subsidiaries. Its business centers on gathering deposits and investing in loans and securities, primarily in New York’s Hudson Valley and Capital District. This unaudited Form 10-Q covers the three months ended September 30, 2022, the first quarter of fiscal 2023. The filing period differs from the “2022 Q1” label in the request.
Financial performance and condition
Unless otherwise noted, amounts are in millions of dollars. Income and cash-flow comparisons are with the three months ended September 30, 2021; balance-sheet comparisons are with June 30, 2022.
| Metric | September 2022 quarter / period-end | Comparison |
|---|---|---|
| Interest income | $18.6 | Up 19.4% |
| Interest expense | $2.8 | Up 131.1% |
| Net interest income | $15.8 | Up $1.4, or about 10% |
| Net interest margin | 2.58% | Down 9 basis points year over year; up 8 basis points from the June quarter |
| Provision for loan losses | Benefit of $0.5 | Compared with $1.0 provision expense |
| Noninterest income / expense | $3.1 / $8.8 | Income up 5.8%; expense up 10.5% |
| Net income / diluted EPS | $9.0 / $1.06 | Net income up 27.0%; prior-year EPS was $0.84 |
| Operating cash flow | $4.4 | Down from $6.9 |
| Total assets | $2,584.2 | Up $12.5, or 0.5% |
| Net loans / deposits | $1,327.9 / $2,326.9 | Loans up 8.0%; deposits up 5.2% |
| Cash and cash equivalents | $66.9 | Down from $69.0 |
| Short-term FHLB borrowings / subordinated notes | $23.4 / $49.4 | FHLB borrowings down from $123.7; subordinated notes broadly unchanged |
| Shareholders’ equity | $159.6 | Up from $157.7; 6.18% of total assets |
Net interest income benefited from growth in average loans and securities, while higher funding costs reduced spread and margin year over year. Return on average assets was 1.43% versus 1.28%, and return on average equity was 22.55% versus 18.60%.
Material changes and notable items
- Net loans rose $98.5 million, led by $82.0 million of commercial real estate growth. Commercial real estate represented 50.2% of gross loans at quarter-end.
- Securities declined $83.4 million as maturities helped fund loan growth. Rising interest rates contributed to $6.6 million of after-tax other comprehensive loss in the quarter. At September 30, total securities had $113.5 million of gross unrealized losses; management said the losses did not indicate other-than-temporary impairment.
- Deposits grew $114.3 million, primarily due to municipal deposits and new account relationships. NOW deposits increased $108.6 million; certificates of deposit increased $31.1 million and included $40.0 million of brokered CDs.
- Cash from investing activities was negative $19.9 million, principally reflecting $98.1 million of net loan growth; financing activities provided $13.4 million, including $114.3 million of deposit growth and a $100.3 million reduction in short-term FHLB advances.
- The quarterly dividend was $0.14 per share, up from $0.13 a year earlier. The company announced the same $0.14 dividend for the following quarter.
Outlook, risks and contingencies
- No specific earnings, growth, or margin guidance is provided. Management said it expects sufficient funds to meet current loan commitments, based on cash, available-for-sale securities, and borrowing capacity.
- Management identified interest-rate and credit risk as particularly significant. Rate changes can affect funding costs, asset yields, deposit mix, loan demand, repayments, and security values. Management noted that higher rates could benefit yields on new loans and securities, while also increasing deposit costs.
- Credit monitoring remains important given the commercial real estate concentration. Nonperforming loans were $5.4 million, or 0.41% of net loans, down from $6.3 million at June 30. The allowance was $22.1 million, or 1.64% of gross loans. The quarter included a $0.5 million provision benefit.
- Unfunded loan commitments, unused lines of credit, and standby letters of credit totaled $238.1 million. The company reported $299.2 million of unused lines of credit and $66.9 million in cash and cash equivalents.
- The bank reported that it met applicable regulatory capital requirements. The company was preparing for CECL adoption for fiscal 2024 and had not yet quantified the adoption impact; it anticipated a significant effect on its allowance methodology.
- The filing reports no material legal proceedings. Forward-looking results remain subject to interest rates, economic conditions, regulation, portfolio quality, deposit flows, competition, and demand for financial services.
Most important facts for investors to verify
- Confirm the reporting-period interpretation: the filing covers the quarter ended September 30, 2022 (fiscal Q1 2023), not a quarter ended in calendar Q1 2022.
- Track net interest margin and funding costs as rates change, including the pace of repricing of NOW deposits and certificates of deposit.
- Assess the size and performance of the commercial real estate portfolio, loan classifications, nonaccrual balances, and allowance adequacy.
- Review the effect of unrealized security losses and rising rates on accumulated other comprehensive loss, liquidity, and potential funding flexibility.
- Monitor deposit mix, brokered CDs, short-term borrowings, available borrowing capacity, and the ability to fund loan growth and commitments.
- Check future disclosures for CECL adoption estimates and any changes to credit-loss methodology or reserves.