Greene County Bancorp Inc (GCBC) SEC Filing 10-Q Quarterly Report for the period ending Wednesday, March 31, 2021

Net Income: New high for the nine months ended March 31, 2021

Total assets: Tops $2.0 billion for first time

Return on Average Assets: Continues strong at 1.17% for the nine months ended March 31, 2021

Return on Average Equity: Continues strong at 16.12% for the nine months ended March 31, 2021

Net interest income increased $2.4 million to $13.6 million and $6.4 million to $39.0 million for the three and nine months ended March 31, 2021. The increase in net interest income was primarily the result of the growth in the average balance of interest-earning assets, which increased $477.2 million and $439.5 million when comparing the three and nine months ended March 31, 2021 and 2020, respectively.

Net interest rate spread and margin both decreased when comparing the three and nine months ended March 31, 2021 and 2020. Net interest rate spread decreased 16 basis points to 2.72% for the three months ended March 31, 2021 compared to 2.88% for the three months ended March 31, 2020. Net interest margin decreased 23 basis points to 2.76% for the three months ended March 31, 2021 compared to 2.99% for the three months ended March 31, 2020. Net interest rate spread decreased 22 basis points to 2.78% for the nine months ended March 31, 2021 compared to 3.00% for the nine months ended March 31, 2020. Net interest margin decreased 28 basis points to 2.84% for the nine months ended March 31, 2021 compared to 3.12% for the nine months ended March 31, 2020.  Decreases in net interest rate spread and net interest margin resulted primarily from lower yielding securities and loans offset by lower rates on deposits as well as growth in loan and securities balances.

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 2.91% and 3.16% for the three months ended March 31, 2021 and 2020, respectively, and was 3.00% and 3.29% for the nine months ended March 31, 2021 and 2020, respectively.

Provision for loan losses amounted to $1.4 million for the three months ended March 31, 2021 and 2020, respectively, and $3.9 million and $2.7 million for the nine months ended March 31, 2021 and 2020, respectively. The increase in provision for loan losses for the nine months ended March 31, 2021 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 deferral 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 and extended under the Consolidated Appropriations Act which was signed into law on December 27, 2020.   At March 31, 2021, the Company had $18.8 million, or 30 loans, on payment deferral as a result of the pandemic, which is a decrease from $193.5 million, or 706 loans, at June 30, 2020.  Management continues to monitor these loans, and it remains uncertain whether all of these loans will continue to perform as agreed once they reach the end of the deferral period. Loans classified as substandard or special mention totaled $43.0 million at March 31, 2021 and $32.8 million at June 30, 2020, an increase of $10.2 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 $5.2 million at March 31, 2021 compared to $2.4 million at June 30, 2020, an increase of $2.8 million. No loans were classified as doubtful or loss at March 31, 2021 or June 30, 2020. Allowance for loan losses to total loans receivable was 1.80% at March 31, 2021 compared to 1.62% at June 30, 2020.  Total loans receivable included $90.3 million and $99.8 million of SBA Paycheck Protection Program (PPP) loans at March 31, 2021 and June 30, 2020, respectively.  Excluding these SBA guaranteed loans, the allowance for loan losses to total loans receivable would have been 1.97% and 1.80% at March 31, 2021 and June 30, 2020, respectively.

Net charge-offs for the three months ended March 31, 2021 totaled $37,000 compared to $204,000 for the three months ended March 31, 2020.  Net charge-offs totaled $663,000 and $661,000 for the nine months ended March 31, 2021 and 2020, respectively. The primary change in the net charge off activity was the result of a commercial charge off that occurred in the second quarter of fiscal 2021. There were no other significant net charge off changes in other loan categories as of the three and nine months ended March 31, 2021.

Nonperforming loans amounted to $2.7 million and $4.1 million at March 31, 2021 and June 30, 2020, respectively. The decrease in nonperforming loans during the period was primarily due to $1.4 million in loan repayments, $583,000 in charge-offs, and $293,000 in loans returned to performing status, offset by $907,000 of loans placed into nonperforming status. At March 31, 2021 nonperforming assets were 0.13% of total assets compared to 0.24% at June 30, 2020. Nonperforming loans were 0.25% and 0.41% of net loans at March 31, 2021 and June 30, 2020, respectively. Nonperforming assets to total assets were 0.25% and nonperforming loans to net loans were 0.44% at March 31, 2020.

Noninterest income increased $235,000, or 11.1%, and totaled $2.4 million and $2.1 million for the three months ended March 31, 2021 and 2020, respectively. Noninterest income increased $125,000, or 1.9%, and totaled $6.8 million and $6.7 million for the nine months ended March 31, 2021 and 2020, respectively. The increase was primarily due to an increase in debit card fees resulting from continued growth in the number of checking accounts with debit cards and the income from bank owned life insurance offset by decreases in service charges on deposit accounts, primarily from a lower volume of nonsufficient fund fees.

Noninterest expense increased $1.1 million, or 15.8%, to $8.4 million for the three months ended March 31, 2021 as compared to $7.2 million for the three months ended March 31, 2020. Noninterest expense increased $2.9 million, or 14.1%, to $23.0 million for the nine months ended March 31, 2021, compared to $20.2 million for the nine months ended March 31, 2020. The increase in noninterest expense during the three and nine months ended March 31, 2021 was primarily due to an increase in salaries and employee benefits expense 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 nine months ended March 31, 2021, compared to the three and nine months ended March 31, 2020, when credits were applied to the premiums.

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 14.2% and 13.4% for the three and nine months ended March 31, 2021, compared to 12.2% and 14.5% for the three and nine months ended March 31, 2020, respectively.  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, income received on the bank owned life insurance, 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 $2.1 billion at March 31, 2021 and $1.7 billion at June 30, 2020, an increase of $466.0 million, or 27.8%.

Securities available-for-sale and held-to-maturity increased $237.9 million, or 39.0%, to $848.3 million at March 31, 2021 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 $478.8 million during the nine months ended March 31, 2021 and consisted of $281.2 million of state and political subdivision securities, $153.3 million of mortgage-backed securities, $6.8 million of corporate securities, $13.1 million of US Government Agency securities, $19.7 million of US Treasury securities, and $4.7 million of other securities. Principal pay-downs and maturities during the nine months amounted to $232.8 million, primarily consisting of $55.0 million of mortgage-backed securities, $163.5 million of state and political subdivision securities, $7.4 million of collateralized mortgage obligations, $2.5 million of US Government agency securities, $3.0 million of corporate debt securities and $1.4 million of other securities.

Net loans receivable increased $75.0 million, or 7.5%, to $1.1 billion at March 31, 2021 from $993.5 million at June 30, 2020.  Net loans receivable at March 31, 2021 included $90.3 million in SBA Paycheck Protection Program loans. The loan growth experienced during the nine months consisted primarily of $73.4 million in commercial real estate loans, $25.9 million in residential real estate loans and $12.4 million in multi-family loans. This growth was partially offset by a $3.4 million decrease in residential construction and land loans, $8.0 million decrease in commercial construction loans, $3.1 million decrease in home equity loans, $18.6 million decrease in commercial loans, $3.3 million increase in allowance for loan losses offset by a $33,000 net increase in deferred fees due to the forgiveness of SBA PPP loans.  SBA PPP loans decreased $9.6 million to $90.3 million from $99.8 million at June 30, 2020, due to the receipt of forgiveness proceeds.

Deposits totaled $2.0 billion at March 31, 2021 and $1.5 billion at June 30, 2020, an increase of $459.0 million, or 30.6%. Noninterest-bearing deposits increased $30.5 million, or 22.1%, NOW deposits increased $374.0 million, or 39.3%, money market deposits increased $16.7 million, or 12.5%, and savings deposits increased $38.2 million, or 15.8%, when comparing March 31, 2021 and June 30, 2020.  These increases were offset by a decrease in certificates of deposits of $418,000, or 1.2%, when comparing March 31, 2021 and June 30, 2020. Deposits increased during the nine months ended March 31, 2021 as a result of an increase in new account relationships including new corporate cash management deposit 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, New York State funding for schools and new account relationships.

Borrowings for the Company amounted to $21.6 million at March 31, 2021 compared to $25.5 million at June 30, 2020, a decrease of $3.9 million.  At March 31, 2021, borrowings consisted of $19.6 million of Fixed-to-Floating Rate Subordinated Notes and $2.0 million of short-term borrowings with Atlantic Central Bankers Bank (“ACBB”).  During the nine months ended March 31, 2021, the Company repaid $10.9 million of Paycheck Protection Plan Lending Facility “(PPPLF”), $7.0 million of short-term borrowings with Atlantic Central Bankers Bank and $7.6 million of short-term borrowings with the FHLB.

Shareholders’ equity increased to $139.1 million at March 31, 2021 from $128.8 million at June 30, 2020, resulting primarily from net income of $16.3 million, partially offset by dividends declared and paid of $2.0 million and an increase in other accumulated comprehensive loss of $4.1 million.