Greene nty Bancorp(GCBC) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited consolidated financial statements present the financial position, operations, and cash flows, reflecting growth in assets, loans, deposits, net income, and EPS Consolidated Statements of Financial Condition Total assets increased to $1.27 billion by March 31, 2019, driven by growth in net loans and cash, alongside increased deposits and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | June 30, 2018 | | :--- | :--- | :--- | | Total Assets | $1,273,788 | $1,151,478 | | Total cash and cash equivalents | $88,422 | $26,504 | | Net loans receivable | $763,285 | $704,431 | | Total securities | $395,464 | $395,356 | | Total Liabilities | $1,165,523 | $1,055,287 | | Total deposits | $1,139,778 | $1,025,234 | | Total Shareholders' Equity | $108,265 | $96,191 | Consolidated Statements of Income Net income for the nine months ended March 31, 2019, rose 23.5% to $13.3 million, driven by increased net interest income and diluted EPS growth Key Income Statement Data (in thousands, except per share data) | Metric | Nine Months Ended Mar 31, 2019 | Nine Months Ended Mar 31, 2018 | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $29,678 | $25,490 | $10,026 | $8,860 | | Provision for loan losses | $1,058 | $1,044 | $350 | $345 | | Noninterest Income | $6,203 | $5,486 | $2,010 | $1,859 | | Noninterest Expense | $18,694 | $15,987 | $6,486 | $5,782 | | Net Income | $13,320 | $10,789 | $4,356 | $3,677 | | Diluted EPS | $1.56 | $1.26 | $0.51 | $0.43 | Consolidated Statements of Comprehensive Income Comprehensive income for the nine months ended March 31, 2019, increased to $13.7 million, primarily from net income and unrealized gains on securities Comprehensive Income (in thousands) | Metric | Nine Months Ended Mar 31, 2019 | Nine Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Net Income | $13,320 | $10,789 | | Other comprehensive income (loss) | $398 | $(648) | | Comprehensive Income | $13,718 | $10,141 | Consolidated Statements of Cash Flows Net cash increased by $61.9 million for the nine months ended March 31, 2019, driven by operating and financing activities, despite investing outflows Cash Flow Summary (in thousands) | Activity | Nine Months Ended Mar 31, 2019 | Nine Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,153 | $14,164 | | Net cash used by investing activities | $(60,635) | $(136,154) | | Net cash provided by financing activities | $107,400 | $180,317 | | Net increase in cash and cash equivalents | $61,918 | $58,327 | Notes to Consolidated Financial Statements The notes detail critical accounting policies, portfolio composition, credit quality, fair value measurements, employee benefits, and new accounting standard adoptions - Critical accounting policies relate to the allowance for loan losses and the evaluation of securities for other-than-temporary impairment, which involve significant management judgment and estimation[24] - The company's primary business is operating the Bank of Greene County, which has 15 offices in the Hudson Valley region of New York, focusing on attracting deposits and making loans and investments[26] - The company adopted new accounting standards for Revenue from Contracts with Customers (ASC 606) and Financial Instruments (ASU 2016-01) on July 1, 2018, with ASU 2016-01 resulting in a $0.1 million cumulative-effect adjustment to retained earnings[91][92] - The company is currently evaluating the impact of the upcoming CECL (Current Expected Credit Loss) standard (ASU 2016-13), which is expected to have a significant impact on the methodology for calculating the allowance for loan losses[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights significant growth in assets, loans, and deposits, with increased net income, expanded net interest margin, and strong capital ratios Comparison of Financial Condition Total assets grew 10.6% to $1.3 billion by March 31, 2019, driven by loan and cash growth, alongside increased deposits and reduced nonperforming assets - Total assets increased by $122.3 million, or 10.6%, to $1.3 billion at March 31, 2019, from $1.2 billion at June 30, 2018, reflecting expansion in retail, commercial, and municipal banking lines[138] - Net loans grew by $58.9 million (8.4%) to $763.3 million, with growth primarily in commercial real estate ($25.3 million), commercial loans ($15.4 million), and residential real estate ($12.4 million)[142] - Total deposits increased by $114.5 million (11.2%), driven by a $151.8 million increase in NOW deposits, reflecting normal fluctuations in municipal deposits and growth in retail/commercial accounts[153] Nonperforming Assets (in thousands) | Category | March 31, 2019 | June 30, 2018 | | :--- | :--- | :--- | | Total nonaccruing loans | $2,988 | $3,517 | | Foreclosed real estate | $54 | $119 | | Total nonperforming assets | $3,042 | $3,698 | | Nonperforming assets as a % of total assets | 0.24% | 0.32% | Comparison of Operating Results Net income rose 23.1% to $13.3 million for the nine months ended March 31, 2019, driven by higher net interest income and an improved net interest margin Key Performance Ratios (Annualized) | Metric | Nine Months Ended Mar 31, 2019 | Nine Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Return on average assets | 1.51% | 1.37% | | Return on average equity | 17.45% | 16.36% | | Net interest margin | 3.41% | 3.29% | - Net interest income for the nine months increased by $4.2 million to $29.7 million, primarily due to a $3.4 million increase in income from volume changes in interest-earning assets[177][170] - Noninterest income for the nine months increased by $0.7 million (13.1%), mainly from higher debit card fees and service charges on deposit accounts due to customer growth[185] - Noninterest expense for the nine months increased by $2.7 million (16.9%), primarily due to a $1.7 million rise in salaries and benefits related to staffing for two new branches and other departments[186] Liquidity and Capital Resources The company maintains strong liquidity and capital, with significant loan commitments and capital ratios well above regulatory 'well capitalized' requirements - At March 31, 2019, the company had total unfunded loan commitments and unused lines of credit of $127.0 million[190][191] Bank of Greene County Capital Ratios (as of March 31, 2019) | Ratio | Actual | Required to be Well Capitalized | | :--- | :--- | :--- | | Total risk-based capital | 16.3% | 10.0% | | Tier 1 risk-based capital | 15.0% | 8.0% | | Common equity tier 1 capital | 15.0% | 6.5% | | Tier 1 leverage ratio | 8.8% | 5.0% | - Shareholders' equity increased to $108.3 million at March 31, 2019 from $96.2 million at June 30, 2018, primarily due to net income of $13.3 million[159] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company - Disclosure is not applicable to smaller reporting companies[195] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[196] - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[198] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company and its subsidiaries are not currently engaged in any material legal proceedings - Greene County Bancorp, Inc. and its subsidiaries are not engaged in any material legal proceedings at the present time[200] Item 1A. Risk Factors This section is not applicable as the company is a smaller reporting company - Disclosure is not applicable to smaller reporting companies[200] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable - This item is not applicable[200] Item 5. Other Information There were no material changes to procedures for security holder recommendations for Board of Directors nominees during the quarter - There were no material changes to the procedures for security holders to recommend nominees to the Board of Directors during the period[200] Item 6. Exhibits The report lists required exhibits, including CEO and CFO certifications and XBRL data files - Exhibits filed with the report include Certifications from the CEO and CFO pursuant to Rule 13a-14(a)/15d-14(a) and U.S.C. Section 1350, as well as XBRL financial data[200]