Greene nty Bancorp(US:GCBC)2025-09-05 18:47Lending and Loan Portfolio - As of June 30, 2025, the largest aggregate amount loaned by the Company to one borrower was $47.7 million, consisting of seven commercial mortgages and construction loans[58]. - During fiscal 2024, the Company purchased $17.4 million of residential loans outside its primary market area, ensuring full due diligence on each loan[30]. - The Company purchased $53.4 million of commercial real estate loans outside its primary market area during fiscal year 2025, with full due diligence completed[41]. - The Company originates residential mortgage loans with a maximum loan-to-value ratio of 85.0%, and up to 90.0% for first-time homebuyer programs[30]. - The Company has seen an increase in adjustable-rate mortgage loans due to the higher interest rate environment, focusing on first-time homebuyer loans[32]. - The Company requires personal guarantees on all commercial real estate mortgages unless properties are fully stabilized with strong cash flow coverage[42]. - The Company’s consumer loans consist of direct loans on new and used automobiles, personal loans, home equity loans, and other installment loans, generally with terms of one to five years[45]. - The Company’s commercial loan portfolio includes loans collateralized by inventory, business assets, and real estate, with terms of up to 20 years[50]. - The Company’s underwriting procedures for consumer loans include an assessment of the applicant's credit history and ability to meet debt obligations[48]. Investment Strategy and Portfolio - The Company primarily invests in high-quality securities, focusing on U.S. government and government-sponsored enterprise securities[61]. - The Company’s investment strategy emphasizes diversified investing across short-, intermediate-, and long-term securities to manage interest rate risk[62]. - The Company has no private-label mortgage-backed securities in its portfolio, limiting credit risk exposure[69]. - The Company’s investments in state and political subdivision securities are generally exempt from federal income tax, enhancing their attractiveness despite lower yields[66]. - Management believes the credit risk on its state and political subdivision securities portfolio is low, supported by thorough analysis and monitoring[67]. - The Company does not hold any asset-backed securities in its portfolio as of June 30, 2025[73]. Capital and Regulatory Compliance - As of June 30, 2025, the Company had $1.2 billion in deposits at the Commercial Bank[78]. - The Bank of Greene County and Greene County Commercial Bank are required to maintain a Common Equity Tier 1 capital ratio of at least 4.5%, a Tier 1 capital ratio of at least 6.0%, and a total capital ratio of at least 8.0%[98]. - As of June 30, 2025, the Bank of Greene County was considered "well capitalized," exceeding the total risk-based capital ratio of 10.0%, Tier 1 risk-based ratio of 8.0%, common equity Tier 1 ratio of 6.5%, and leverage ratio of 5.0%[107]. - The Bank must maintain at least 65.0% of its portfolio assets in qualified thrift investments to satisfy the qualified thrift lender requirement[110]. - The Bank utilized the IRS Domestic Building and Loan Association test and satisfied the requirements for the years ended June 30, 2025, and 2024[113]. - The Bank has elected not to opt into the community bank leverage ratio framework and will continue to follow Basel capital requirements[104]. - The Company is subject to minimum capital requirements imposed by the FDIC, which may be higher based on specific circumstances[151]. - The Company has issued subordinated notes to raise regulatory capital, with outstanding notes due in September 2030 and 2031[80]. Interest Rate Risk Management - The Company follows strategies to manage interest rate risk by investing in liquid securities and originating adjustable-rate loans[320]. - The Company’s net interest income sensitivity (NII) is relatively low, indicating limited exposure to rising interest rates[321]. - The Economic Value of Equity (EVE) analysis indicates the present value of future cash flows, with specific calculations based on market conditions as of June 30, 2025[324]. - The company's EVE (Economic Value of Equity) sensitivity has increased due to the current higher interest rate environment, with a projected EVE of $343,831 thousand at par[326]. - A 300 basis point increase in interest rates would result in a decrease of EVE by $84,536 thousand, representing a 24.59% decline[326]. - The company's cumulative one-year, two-year, and three-year gap positions are positive at 17.10%, 15.58%, and 13.88%, respectively, indicating a favorable interest rate sensitivity[330]. - As interest rates rise, the company anticipates that the market value of loans and investments will continue to decline, but EVE sensitivity is expected to improve as funds are reinvested at higher rates[328]. - The company is committed to monitoring EVE sensitivity and will take corrective actions as necessary to manage interest rate risks[328]. - The methodology used for measuring interest rate risk has inherent shortcomings, as it relies on assumptions that may not accurately reflect actual market responses[329]. - The interest rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within specific time periods[330]. - A negative gap position during rising interest rates could hinder the company's ability to invest in higher-yielding assets[330]. - The company acknowledges that certain assets and liabilities may react differently to changes in market interest rates, complicating the analysis[332]. - The ability of borrowers to service adjustable-rate loans may decrease if interest rates rise, impacting the company's loan portfolio[332]. Regulatory Environment and Compliance - The Bank is subject to extensive regulation by the OCC and must file reports and undergo periodic examinations[96]. - The Bank is required to hold shares of capital stock in the Federal Home Loan Bank equal to at least 1.0% of the aggregate principal amount of its unpaid residential mortgage loans[134]. - The Federal Reserve Board has reduced reserve requirement ratios to zero, with no current plans to re-impose them[135]. - The Bank must conduct enhanced scrutiny of account relationships to guard against money laundering and report suspicious transactions[122]. - The Bank's authority to extend credit to insiders is governed by specific regulations that require terms to be comparable to those for unaffiliated persons[124]. - The Bank received a "satisfactory" rating under the Community Reinvestment Act in its most recent examination[118]. - Federal regulations require the Bank to maintain a sufficient amount of liquid assets to ensure safe and sound operation[116]. - Institutions with less than $10 billion in assets pay lower assessments under the FDIC's risk-based assessment system, which estimates the probability of failure within three years[129]. - The OCC has the authority to impose civil penalties up to $25,000 per day for violations, which can increase to $1 million per day for reckless disregard[125]. - The Bank must maintain compliance with federal safety and soundness standards, which include internal controls, information systems, and credit underwriting[126].