Greene County Bancorp, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2021; financial statements are unaudited. The supplied filing covers fiscal 2021 Q3, notwithstanding the request metadata’s “2020 Q3.” Dollar amounts below are in millions unless stated otherwise.
Business context and financial position
The company operates The Bank of Greene County and related subsidiaries, serving the Hudson Valley and Capital District regions of New York. Its principal activities are gathering deposits and investing in loans and securities.
| Metric | March 31, 2021 | Comparison |
|---|---|---|
| Total assets | $2,142.8 | $1,676.8 at June 30, 2020; up 27.8% |
| Total deposits | $1,960.0 | $1,501.1 at June 30, 2020; up 30.6% |
| Net loans | $1,068.5 | $993.5 at June 30, 2020; up 7.5% |
| Securities, available-for-sale and held-to-maturity | $848.3 | $610.4 at June 30, 2020; up 39.0% |
| Cash and cash equivalents | $145.8 | $40.5 at June 30, 2020 |
| Shareholders’ equity | $139.1 | $128.8 at June 30, 2020 |
Results and key financial metrics
| Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Nine months ended March 31, 2021 | Nine months ended March 31, 2020 |
|---|---|---|---|---|
| Net interest income | $13.6 | $11.1 | $39.0 | $32.6 |
| Provision for loan losses | $1.4 | $1.4 | $3.9 | $2.7 |
| Noninterest income | $2.4 | $2.1 | $6.8 | $6.7 |
| Noninterest expense | $8.4 | $7.2 | $23.0 | $20.2 |
| Net income | $5.3 | $4.1 | $16.3 | $14.0 |
| Diluted earnings per share | $0.62 | $0.47 | $1.92 | $1.64 |
| Net interest margin, GAAP | 2.76% | 2.99% | 2.84% | 3.12% |
Quarterly net income rose 29.8%, and nine-month net income rose 16.4%. Net interest income growth reflected higher average loan and securities balances and lower deposit costs; PPP loan forgiveness fees contributed $1.3 million in the quarter and $2.8 million year to date to interest income. Margin contraction reflected lower asset yields and the changing funding mix. Nine-month annualized return on average assets was 1.17% versus 1.32%; return on average equity was 16.12% versus 15.80%.
For the nine months, operating cash flow was $15.8 million, versus $17.8 million in the prior-year period. Investing activities used $363.6 million, while financing activities provided $453.1 million, principally from deposit growth. Cash increased $105.3 million to $145.8 million. Dividends declared were $0.12 per share for the quarter; the filing reports $0.36 per share for the nine-month period.
Material changes, debt and liquidity
- Deposits increased $459.0 million, mainly from new account and corporate cash-management relationships and municipal deposits. NOW deposits made up 67.6% of deposits at period-end.
- Gross loans increased $78.2 million; commercial real estate loans grew $73.4 million. PPP loans totaled $90.3 million across 1,151 loans, down from $99.8 million at June 30, 2020.
- The company issued $20.0 million of subordinated notes in September 2020, with a 4.75% fixed-to-floating rate and a September 2030 maturity; $19.6 million remained outstanding net of issuance costs. The notes are callable beginning September 2025. Period-end short-term bank borrowings were $2.0 million; no FHLB long-term borrowings remained.
- Management reported $145.8 million of cash and cash equivalents and $372.3 million of unused lines of credit. Available FHLB funding was $288.4 million, with no FHLB borrowings outstanding. The company said it expects sufficient liquidity to meet current loan commitments.
- Bank of Greene County regulatory capital ratios included 16.4% total risk-based capital and 8.0% Tier 1 leverage. Greene County Commercial Bank reported 38.8% total risk-based capital and 8.3% Tier 1 leverage. The filing states both banks met applicable capital requirements.
Credit quality, outlook and risks
- Allowance for loan losses was $19.7 million, or 1.80% of gross loans (1.97% excluding SBA-guaranteed PPP loans). Nine-month provision rose to $3.9 million from $2.7 million, reflecting pandemic uncertainty, loan growth and adverse classifications. Net charge-offs were $0.7 million in both nine-month periods.
- Nonperforming assets were $2.8 million, or 0.13% of total assets, compared with $4.1 million, or 0.24%, at June 30, 2020. Nonaccrual loans were $2.7 million. Loans rated special mention or substandard increased to $43.0 million from $32.8 million; the newly classified loans were reported as performing at March 31.
- COVID-19 payment deferrals fell to $18.8 million across 30 loans from $193.5 million across 706 loans at June 30, 2020. Management cautioned that losses could emerge after fiscal support programs end and deferrals expire; it continues monitoring affected borrowers and credit quality.
- Management expects the low interest-rate environment to continue pressuring spread and margin during fiscal 2021. It also noted that the pandemic’s effects on operations, earnings, credit, capital and liquidity remain uncertain. Key risks include interest-rate changes, borrower repayment capacity, deposit flows, economic conditions, regulation and competition.
- Available-for-sale securities generated a $3.9 million after-tax quarterly OCI loss and a $4.1 million nine-month OCI loss, reducing equity; management attributed unrealized declines to lower interest rates and COVID-19 uncertainty and reported no other-than-temporary impairment. The company also purchased $40.0 million of bank-owned life insurance during the period.
The filing provides no earnings or revenue guidance. Management’s outlook is qualified by continuing economic and pandemic uncertainty. Disclosure controls were deemed effective; the company reported no material legal proceedings and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the larger commercial real estate and commercial loan exposures, including loans newly rated special mention or substandard, remain current and adequately reserved.
- How deferrals, pandemic relief expiration and PPP forgiveness affect future delinquencies, provisions and net interest income.
- Whether deposit growth persists and how the concentration in NOW and municipal deposits affects funding stability and liquidity.
- The effect of interest-rate movements on securities valuations, accumulated other comprehensive loss, net interest margin and capital.
- The terms, future cost and capital treatment of the subordinated notes, and the company’s regulatory capital and liquidity headroom.