Greene County Bancorp, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2023, the company’s fiscal first quarter of fiscal 2024—not calendar Q1 2023 as stated in the request metadata. Financial statements are unaudited; amounts below are in millions unless stated otherwise.
Business context and financial position
The company operates community banks in New York’s Hudson Valley and Capital District, gathering deposits and investing primarily in loans and securities. At September 30, 2023, total assets were $2.688 billion, compared with $2.698 billion at June 30, 2023. Net loans were $1.428 billion, up $40.4 million (2.9%) during the quarter; total deposits were $2.420 billion, down $16.7 million.
Results and key metrics
| Metric | Quarter ended September 30, 2023 | Prior-year quarter | Change |
|---|---|---|---|
| Interest income | $24.672 million | $18.640 million | +32.4% |
| Interest expense | $11.233 million | $2.806 million | +300.3% |
| Net interest income | $13.439 million | $15.834 million | −15.1% |
| Provision for credit losses | $0.457 million expense | $0.499 million benefit | — |
| Noninterest income | $3.299 million | $3.098 million | +6.5% |
| Noninterest expense | $8.845 million | $8.797 million | +0.5% |
| Net income | $6.469 million | $9.036 million | −28.4% |
| Diluted earnings per share | $0.38 | $0.53 | — |
| Net interest margin (GAAP) | 2.12% | 2.58% | −46 basis points |
| Return on average assets / equity | 0.99% / 14.09% | 1.43% / 22.55% | Lower |
Cash provided by operating activities was $6.3 million, versus $4.4 million a year earlier. Investing activities used $58.8 million, largely reflecting loan growth and securities activity; financing activities used $13.7 million, including a $16.7 million net deposit decline and $1.4 million of dividends paid. Cash and cash equivalents fell $66.2 million during the quarter to $130.3 million.
Shareholders’ equity was $184.2 million, or 6.85% of assets. The Bank of Greene County reported a 16.6% total risk-based capital ratio and a 9.1% tier 1 leverage ratio at quarter-end. The company had $49.5 million of subordinated notes and $4.4 million of FHLB term borrowings. It reported $270.2 million of available unused lines of credit and no Federal Reserve borrowings.
Material changes and management commentary
- Interest income rose with higher asset yields and loan growth, but the cost of deposits increased much faster. The average cost of interest-bearing liabilities rose to 2.00% from 0.52%; the average yield on interest-earning assets rose to 3.89% from 3.04%. Deposit interest expense was the principal pressure on net interest income and margin.
- Commercial real estate loans were 62.8% of gross loans. Management attributed quarterly loan growth mainly to commercial real estate, residential real estate, home equity and commercial lending.
- The company adopted CECL on July 1, 2023. The adoption reduced retained earnings by $0.510 million, including a $1.332 million reduction in the loan allowance, a $0.503 million new HTM securities allowance, a $1.5 million allowance for unfunded commitments, and a deferred-tax impact. Quarter-end loan allowance was $20.249 million, or 1.40% of gross loans; the allowance for unfunded commitments was $1.5 million.
- Nonperforming assets were $5.8 million, 0.21% of assets; nonaccrual loans were $5.5 million, and there were no loans over 90 days past due and still accruing. Loans rated special mention or substandard totaled $43.8 million, up $1.9 million from June 30.
- Available-for-sale securities had $33.7 million of gross unrealized losses at September 30. HTM securities had $82.0 million of gross unrealized losses and a fair value of $632.2 million versus a carrying amount of $711.7 million. Management cautioned that rising rates could further reduce bond values and book value; selling securities at a loss could affect earnings and regulatory capital.
- Management described liquidity and capital as strong, maintained brokered deposits to support liquidity, and said available cash, securities and borrowing capacity were expected to meet commitments. No quantified earnings or margin guidance was provided; management noted that deposit repricing may outpace asset repricing.
Outlook, risks, contingencies and unusual items
Key risks identified include interest-rate changes, economic conditions, deposit flows, competition, credit quality, regulatory changes and demand for financial services. Commercial real estate and other larger commercial relationships carry borrower, collateral and concentration risks. The company had $220.5 million of unfunded loan commitments, unused lines and standby letters of credit.
A putative overdraft-fee class action settlement provides for a $1.15 million cash payment, forgiveness or waiver of $64,500 in uncollected fees, and changes to certain fee practices. The court granted final approval on October 25, 2023; the settlement fund had been accrued in prior periods, with distribution expected in the quarter ending December 31, 2023. The board declared a subsequent quarterly dividend of $0.08 per share, payable November 30, 2023.
The filing states that results for this quarter are not necessarily indicative of the full fiscal year. Management’s forward-looking statements are subject to uncertainty, and the filing gives no specific financial forecast.
Most important facts for investors to verify
- Confirm the reporting period: this filing covers the quarter ended September 30, 2023, not calendar Q1 2023.
- Track deposit pricing, deposit mix and outflows, brokered-deposit use, and the effect on net interest margin.
- Assess the commercial real estate concentration, criticized loans, nonaccrual trends and the adequacy of CECL allowances, including the unfunded-commitment reserve.
- Monitor the market value and unrealized losses in the securities portfolio, available liquidity and borrowing capacity, and any need to sell securities.
- Confirm the overdraft settlement’s payment and implementation, and review subsequent-quarter results and capital and liquidity disclosures.