Greene County Bancorp Inc (GCBC) SEC Filing 10-Q Quarterly report for the period ending Thursday, December 31, 2020

Net interest income increased $2.7 million to $13.6 million for the three months ended December 31, 2020 from $10.9 million for the three months ended December 31, 2019. Net interest income increased $4.0 million to $25.4 million for the six months ended December 31, 2020 from $21.4 million for the six months ended December 31, 2019. The increase in net interest income was primarily the result of the growth in the average balance of interest-earnings assets, which increased $434.8 million and $421.6 million when comparing the three and six months ended December 31, 2020 and 2019, respectively.

Net interest rate spread and margin both decreased when comparing the three and six months ended December 31, 2020 and 2019. Net interest rate spread decreased eight basis points to 2.91% for the three months ended December 31, 2020 compared to 2.99% for the three months ended December 31, 2019. Net interest rate spread decreased 25 basis points to 2.81% for the six months ended December 31, 2020 compared to 3.06% for the six months ended December 31, 2019. Net interest margin decreased 15 basis points and 30 basis points to 2.96% and 2.88%, respectively, for the three and six months ended December 31, 2020 compared to 3.11% and 3.18%, respectively, for the three and six months ended December 31, 2019.  Decreases in net interest spread and margin resulted primarily from lower yields on loans and securities offset by growth in average loan and securities balances and lower costs of interest-bearing liabilities.

Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. Tax equivalent net interest margin was 3.11% and 3.29% for the three months ended December 31, 2020 and 2019, respectively, and was 3.04% and 3.36% for the six months ended December 31, 2020 and 2019, respectively.  The decreases in net interest margin is impacted by growth in interest earning assets and declines on yields of interest earning assets due to the low interest rate environment brought on by Federal Reserve Board interest rate decreases during fiscal 2020.

Provision for loan losses amounted to $1.3 million and $690,000 for the three months ended December 31, 2020 and 2019, respectively, and amounted to $2.5 million and $1.2 million for the six months ended December 31, 2020 and 2019, respectively. The increase in provision for loan loss was due to the impact of the COVID-19 pandemic as well as growth in gross loans and an increase in loans adversely classified. The Company instituted a loan deferment program in response to the COVID-19 pandemic whereby deferral of principal and/or interest payments have been provided and correspond to the length of the National Emergency as defined under the CARES Act.    At December 31, 2020, the Company had $14.5 million or 66 loans on payment deferral as a result of the pandemic, which is down from $193.5 million or 706 loans at June 30, 2020.  Management continues to monitor these loans, however, it remains uncertain that all of these loans will continue to perform as agreed once they reach the end of the deferral period.  At December 31, 2020, there were four loans totaling $204,000 that were previously on deferment that are now on nonaccrual.  These loans are within the residential and commercial loan portfolios. Loans classified as substandard or special mention totaled $38.2 million at December 31, 2020 and $32.8 million at   June 30, 2020, an increase of $5.4 million.  Loans classified as substandard or special mention increased due to insufficient cash flows and revenues related to the COVID-19 pandemic.  Reserves on loans classified as substandard or special mention totaled $3.4 million at December 31, 2020 compared to $2.4 million at June 30, 2020, an increase of $981,000 which is attributable to the increase in classified loans. No loans were classified as doubtful or loss at December 31, 2020 or June 30, 2020. Allowance for loan losses to total loans receivable was 1.74% at December 31, 2020 compared to 1.62% at June 30, 2020.  Total loans receivable included $62.1 million and $99.8 million of SBA Paycheck Protection Program (PPP) loans at December 31, 2020 and June 30, 2020, respectively.  Excluding these SBA guaranteed loans, the allowance for loan losses to total loans receivable would have been 1.85% and 1.80% at December 31, 2020 and June 30, 2020, respectively.

Net charge-offs for the three months ended December 31, 2020 totaled $588,000 compared to $149,000 for the three months ended December 31, 2019.  Net charge-offs totaled $626,000 and $457,000 for the six months ended December 31, 2020 and 2019, respectively. The increase in charge-off activity for the six months ended December 31, 2020 was primarily within the commercial loan portfolio offset by recoveries on consumer installment loans of $40,000.

Nonperforming loans amounted to $2.8 million and $4.1 million at December 31, 2020 and June 30, 2020, respectively. The decrease in nonperforming loans during the period was primarily due to $1.3 million in loan repayments, $588,000 in charge-offs, $293,000 in loans returned to performing status, offset by $861,000 of loans placed into nonperforming status. At December 31, 2020 nonperforming assets were 0.17% of total assets compared to 0.24% at June 30, 2020. Nonperforming loans were 0.27% and 0.41% of net loans at December 31, 2020 and June 30, 2020, respectively. At December 30, 2019, nonperforming assets to total assets were 0.25% and nonperforming loans to net loans were 0.40%.

Noninterest income increased $78,000, or 3.4%, and totaled $2.4 million and $2.3 million for the three months ended December 31, 2020 and 2019, respectively. Noninterest income decreased $110,000, or 2.4%, and totaled $4.5 million and $4.6 million for the six months ended December 31, 2020 and 2019. The decrease was primarily due to decreases in service charges on deposit accounts, primarily from a lower volume of nonsufficient fund fees, offset by an increase in debit card fees resulting from continued growth in the number of checking accounts with debit cards.

Noninterest expense increased $1.0 million, or 15.4%, to $7.5 million for the three months ended December 31, 2020 as compared to $6.5 million for the three months ended December 31, 2019. Noninterest expense increased $1.7 million, or 13.2%, to $14.7 million for the six months ended December 31, 2020, compared to $13.0 million for the six months ended December 31, 2019. The increase in noninterest expense during the three and six months ended December 31, 2020 were primarily due to an increase in salaries and employee benefits expenses resulting from additional staffing for a new branch located in Albany, New York, which opened in September 2020.  Due to continued growth, staffing was also increased within our lending department, information technology department and branch offices. FDIC insurance premiums also increased for the three and six months December 31, 2020, due to credits received during the three and six months ended December 31, 2019.

Provision for income taxes reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements.  The effective tax rate was 14.0% and 13.0% for the three and six months ended December 31, 2020, compared to 14.8% and 15.4% for the three and six months ended December 31, 2019.  The statutory tax rate is impacted by the benefits derived from tax exempt bond and loan income, the Company’s real estate investment trust subsidiary income, as well as the tax benefits derived from premiums paid to the Company’s pooled captive insurance subsidiary to arrive at the effective tax rate.

Total assets of the Company were $1.9 billion at December 31, 2020 and $1.7 billion at June 30, 2020, an increase of $188.1 million, or 11.2%.

Securities available-for-sale and held-to-maturity increased $130.5 million, or 21.4%, to $740.9 million at December 31, 2020 as compared to $610.4 million at June 30, 2020. This increase was the result of utilizing excess cash on hand due to an increase in deposits. Securities purchases totaled $296.2 million during the six months ended December 31, 2020 and consisted of $189.5 million of state and political subdivision securities and $89.0 million of mortgage-backed securities, $6.0 million of corporate securities, $7.0 million of US Government Agency securities and $4.7 million of other securities. Principal pay-downs and maturities during the six months amounted to $163.8 million, primarily consisting of $35.3 million of mortgage-backed securities, $118.1 million of state and political subdivision securities, and $4.6 million of collateralized mortgage obligations, $2.5 million of US Government agency securities, $2.0 million of corporate debt securities and $1.3 million of other securities.

Net loans receivable increased $38.0 million, or 3.8%, to $1.0 billion at December 31, 2020 from $993.5 million at June 30, 2020.  Of the $1.0 billion in net loans receivable at December 31, 2020, $62.1 million were SBA Paycheck Protection Program loans. The loan growth experienced during the six months consisted primarily of $66.7 million in commercial real estate loans, $20.2 million in residential real estate loans and $2.9 million in multi-family loans. This growth was partially offset by a $4.4 million decrease in residential construction and land loans, $2.7 million decrease in commercial construction loans, $2.2 million decrease in home equity loans, $42.0 million decrease in commercial loans of which $37.7 million consisted of SBA PPP loans, $1.9 million increase in allowance for loan losses offset by a $1.4 million increase in deferred fees due to the forgiveness of SBA PPP loans.  SBA PPP loans decreased $37.7 million to $62.1 million from $99.8 million at June 30, 2020, due to the receipt of forgiveness proceeds.

Deposits totaled $1.7 billion at December 31, 2020 and $1.5 billion at June 30, 2020, an increase of $178.6 million, or 11.9%. Noninterest-bearing deposits increased $19.6 million, or 14.2%, NOW deposits increased $137.2 million, or 14.4%, money market deposits increased $488,000 or 0.4%, and savings deposits increased $21.8 million, or 9.1%, when comparing December 31, 2020 and June 30, 2020.  These increases were offset by a decrease in certificates of deposits of $506,000, or 1.4%, when comparing December 31, 2020 and June 30, 2020. Deposits increased during the six months ended December 31, 2020 as a result of an increase in new account relationships, the opening of a new branch on Wolf Road in Albany County, NY, and an increase in municipal deposits at Greene County Commercial Bank, primarily from tax collection and new account relationships.

Borrowings for the Company amounted to $25.7 million at December 31, 2020 compared to $25.5 million at June 30, 2020, an increase of $217,000.  At December 31, 2020, borrowings consisted of $6.1 million in term advances with the Federal Home Loan Bank of New York (“FHLB”), and $19.6 million of Fixed-to-Floating Rate Subordinated Notes.  During the six months ended December 31, 2020, the Company repaid $10.9 million of Paycheck Protection Plan Lending Facility “(PPPLF”) proceeds, $7.0 million of short-term borrowings with Atlantic Central Bankers Bank and $1.5 million of term borrowings with the FHLB.  The Company entered into Subordinated Note Purchase Agreements on September 17, 2020, issued at 4.75% Fixed-to-Floating Rate due September 15, 2030, in the aggregate principal amount of $20.0 million.  These notes are callable on September 15, 2025.  At December 31, 2020, there were $19.6 million of Subordinated Note Purchases Agreements outstanding, net of issuance costs.

Shareholders’ equity increased to $138.7 million at December 31, 2020 from $128.8 million at June 30, 2020, resulting primarily from net income of $11.1 million, partially offset by dividends declared and paid of $941,000 and an increase in other accumulated comprehensive loss of $198,000.