Greene nty Bancorp(GCBC) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) Unaudited consolidated financial statements for periods ended December 31, 2022, and June 30, 2022, are presented with accompanying notes Consolidated Statements of Financial Condition Total assets increased to $2.62 billion by December 31, 2022, driven by higher net loans receivable, with liabilities and shareholders' equity also rising Consolidated Statements of Financial Condition (in thousands) | Assets & Liabilities | December 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total Assets | $2,616,315 | $2,571,740 | | Total cash and cash equivalents | $60,816 | $69,009 | | Net loans receivable | $1,367,866 | $1,229,355 | | Securities available-for-sale | $335,118 | $408,062 | | Securities held-to-maturity | $742,470 | $761,852 | | Total Liabilities | $2,448,108 | $2,414,026 | | Total deposits | $2,265,394 | $2,212,604 | | Borrowings from FHLB, short-term | $107,600 | $123,700 | | Total Shareholders' Equity | $168,207 | $157,714 | Consolidated Statements of Income Net income for the six months ended December 31, 2022, increased by 16% to $16.2 million, driven by higher net interest income Key Income Statement Data (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $15,923 | $14,453 | $31,757 | $28,852 | | Provision for loan losses | $244 | $1,280 | ($255) | $2,268 | | Total Noninterest Income | $2,895 | $3,238 | $5,993 | $6,167 | | Total Noninterest Expense | $9,951 | $8,337 | $18,748 | $16,298 | | Net Income | $7,198 | $6,877 | $16,234 | $13,991 | | Basic and Diluted EPS | $0.85 | $0.81 | $1.91 | $1.64 | Consolidated Statements of Comprehensive Income Comprehensive income for the six months ended December 31, 2022, was $11.6 million, with net income offset by unrealized losses on available-for-sale securities Comprehensive Income (in thousands) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $7,198 | $6,877 | $16,234 | $13,991 | | Total other comprehensive income (loss), net of taxes | $1,975 | ($1,218) | ($4,643) | ($2,572) | | Comprehensive Income | $9,173 | $5,659 | $11,591 | $11,419 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased to $168.2 million by December 31, 2022, driven by net income, partially offset by dividends and other comprehensive loss Changes in Shareholders' Equity - Six Months Ended Dec 31, 2022 (in thousands) | Component | Amount | | :--- | :--- | | Balance at June 30, 2022 | $157,714 | | Net Income | $16,234 | | Dividends declared | ($1,098) | | Other comprehensive loss, net of taxes | ($4,643) | | Balance at December 31, 2022 | $168,207 | Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $8.2 million for the six months ended December 31, 2022, due to investing activities largely offset by operating and financing cash flows Cash Flow Summary - Six Months Ended (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,042 | $13,358 | | Net cash used in investing activities | ($53,827) | ($233,335) | | Net cash provided by financing activities | $35,592 | $133,730 | | Net decrease in cash and cash equivalents | ($8,193) | ($86,247) | Notes to Consolidated Financial Statements The notes detail accounting policies, the nature of operations, and specifics on financial instruments, including the upcoming CECL model adoption and a legal settlement reserve - The company will adopt the new CECL (Current Expected Credit Loss) standard for the fiscal year beginning July 1, 2023, which is expected to have a significant impact on the methodology for calculating the allowance for credit losses[82][83] - A putative class action lawsuit regarding overdraft fees has been settled in principle, with the company reserving $1.15 million in the quarter ended December 31, 2022, in connection with this matter[103] - On January 18, 2023, the Board of Directors declared a quarterly cash dividend of $0.14 per share, payable on February 27, 2023[104] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis highlights a 16.0% increase in net income for the six months ended December 31, 2022, driven by strong loan growth and higher net interest income, despite increased noninterest expenses Comparison of Financial Condition Total assets grew by $44.6 million (1.7%) to $2.6 billion by December 31, 2022, primarily fueled by an 11.3% increase in net loans, while nonperforming assets decreased - Total assets increased by $44.6 million, or 1.7%, to $2.6 billion at December 31, 2022, compared to June 30, 2022[118] - Net loans receivable increased by $138.5 million (11.3%), driven by growth in commercial real estate loans ($110.0 million) and residential real estate loans ($10.8 million)[118][122] - Securities available-for-sale and held-to-maturity decreased by $92.3 million (7.9%), as maturing investments were used to fund loan growth[118][120] - Nonperforming assets decreased to $5.4 million (0.21% of total assets) at Dec 31, 2022, from $6.4 million (0.25% of total assets) at June 30, 2022[128][129] Comparison of Operating Results Net income increased 16.0% to $16.2 million for the six months ended December 31, 2022, driven by net interest income growth, despite higher interest and noninterest expenses Year-over-Year Operating Results Comparison (Six Months Ended Dec 31) | Metric (in thousands) | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $31,757 | $28,852 | +10.1% | | Provision for Loan Losses | ($255) | $2,268 | -111.2% | | Noninterest Income | $5,993 | $6,167 | -2.8% | | Noninterest Expense | $18,748 | $16,298 | +15.0% | | Net Income | $16,234 | $13,991 | +16.0% | - The increase in noninterest expense was primarily due to a non-recurring litigation reserve expense of $1.2 million and increases in salaries and employee benefits to support growth[165] - The provision for loan losses was a benefit of $255,000 for the six months ended Dec 31, 2022, compared to a charge of $2.3 million in the prior year, due to a decrease in adversely classified loans[161] Liquidity and Capital Resources The company maintains a strong liquidity position with $60.8 million in cash and $280.1 million in unused credit lines, and both the bank and its subsidiary exceed all regulatory capital requirements - At December 31, 2022, the Company had $60.8 million in cash and cash equivalents and $280.1 million available in unused lines of credit[167] The Bank of Greene County Capital Ratios (Actual) - Dec 31, 2022 | Ratio | Actual | To Be Well Capitalized Requirement | | :--- | :--- | :--- | | Total risk-based capital | 15.9% | 10.0% | | Tier 1 risk-based capital | 14.7% | 8.0% | | Common equity tier 1 capital | 14.7% | 6.5% | | Tier 1 leverage ratio | 8.5% | 5.0% | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company, as it qualifies as a smaller reporting company - Not applicable to smaller reporting companies[173] Controls and Procedures The company's disclosure controls and procedures were deemed effective as of the end of the reporting period, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[174] - There were no changes in the Company's internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[175] PART II. OTHER INFORMATION Legal Proceedings The company is party to a putative class action lawsuit concerning overdraft fees, for which an agreement in principle to settle has been reached, and a $1.15 million reserve recorded - The company is involved in a class action complaint alleging improper assessment of overdraft fees, with an agreement in principle to settle reached and a reserve of $1.15 million recorded in Q2 FY2023[103][176] Risk Factors This section is not applicable to the company, as it qualifies as a smaller reporting company - Not applicable to smaller reporting companies[177] Unregistered Sales of Equity Securities and Use of Proceeds The company has a stock repurchase program authorizing up to 200,000 shares, with no repurchases made during the quarter ended December 31, 2022 - The Company has a stock repurchase program authorizing up to 200,000 shares, with no repurchases made during the quarter ended December 31, 2022[178] Exhibits This section lists the exhibits filed with the Form 10-Q, including the amended company charter, CEO/CFO certifications, and financial data in iXBRL format - Filed exhibits include the amended company charter, CEO/CFO certifications, and financial statements in iXBRL format[180]