Selected highlights for the three and six months ended December 31, 2017 are as follows:Net Interest Income and Margin
- Net interest income increased $729,000 to $8.5 million for the three months ended December 31, 2017 from $7.7 million for the three months ended December 31, 2016. Net interest income increased $1.8 million to $16.6 million for the six months ended December 31, 2017 from $14.8 million for the six months ended December 31, 2016. These increases in net interest income were primarily the result of the growth in the average interest-earning asset balances. This was partially offset by a lower yield on securities. The lower yield on securities is the result of a decrease in prepayment penalty income on mortgage-backed securities, included in interest income, of $355,000 when comparing the three months ended December 31, 2017 and 2016 and $256,000 when comparing the six months ended December 31, 2017 and 2016.
- Net interest spread decreased 23 basis points to 3.21% for the three months ended December 31, 2017 compared to 3.44% for the three months ended December 31, 2016. Net interest spread decreased 11 basis points to 3.24% for the six months ended December 31, 2017 compared to 3.35% for the six months ended December 31, 2016.
- Net interest margin decreased 21 basis points to 3.29% for the three months ended December 31, 2017 compared to 3.50% for the three months ended December 31, 2016. Net interest margin decreased 10 basis points to 3.32% for the six months ended December 31, 2017 compared to 3.42% for the six months ended December 31, 2016.
- 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 3.50% and 3.75% for the three months ended December 31, 2017 and 2016, respectively. Tax equivalent net interest margin was 3.53% and 3.67% for the six months ended December 31, 2017 and 2016, respectively. Tax equivalent net interest margin for the three and six months ended December 31, 2017 has been adjusted to reflect the Federal blended statutory tax rate applicable to our fiscal year 2018 of 28.1% resulting from the TCJA. As a result of utilizing this lower statutory tax rate for the periods ended December 31, 2017, the tax equivalent net interest margin decreased six basis points for both the three and six months ended December 31, 2017.
- Provision for loan losses amounted to $352,000 and $586,000 for the three months ended December 31, 2017 and 2016, respectively. The provision for loan losses amounted to $699,000 and $1.1 million for the six months ended December 31, 2017 and 2016, respectively. The decrease in the provision for loan loss for the period is the result of slower growth in average loan balances. Allowance for loan losses to total loans receivable decreased to 1.68% as of December 31, 2017 as compared to 1.74% as of June 30, 2017, and 1.73% as of December 31, 2016.
- Net charge-offs amounted to $98,000 and $141,000 for the three months ended December 31, 2017 and 2016, respectively, and amounted to $369,000 and $193,000 for the six months ended December 31, 2017 and 2016, respectively. The increase in net charges-offs for the six months is due to the charge-off of two commercial loans during the period. There were no commercial loan charge-offs during the six months ended December 31, 2016.
- Nonperforming loans amounted to $3.7 million and $3.6 million at December 31, 2017 and June 30, 2017, respectively. At December 31, 2017 and June 30, 2017, respectively, nonperforming assets to total assets were 0.43% and 0.45% and nonperforming loans to net loans were 0.55% and 0.58%. At December 31, 2016, nonperforming assets to total assets were 0.45% and nonperforming loans to net loans were 0.65%.
- Noninterest income increased $275,000, or 17.1%, to $1.9 million for the three months ended December 31, 2017 as compared to $1.6 million for the three months ended December 31, 2016. Noninterest income increased $466,000, or 14.7%, to $3.6 million for the six months ended December 31, 2017 as compared to $3.2 million for the six months ended December 31, 2016. These increases are primarily due to increases in debit card fees and service charges on deposit accounts resulting from continued growth in the number of checking accounts with debit cards, as well as increased monthly or transactional service charges on deposit accounts.
- Noninterest expense increased $524,000, or 10.9%, to $5.3 million for the three months ended December 31, 2017 as compared to $4.8 million for the three months ended December 31, 2016. Noninterest expense increased $663,000, or 7.0%, to $10.2 million for the six months ended December 31, 2017 as compared to $9.5 million for the six months ended December 31, 2016. These increases in noninterest expense are primarily the result of an increase in salaries and employee benefits expenses, resulting from additional staffing to support the Bank's growth. New positions were added within the Bank's lending department, customer service center, investment center and for the Bank's new branch in Copake, New York. The increase is also due to higher service and data processing fees resulting from costs associated with offering more services to customers through online banking.
- Provision for income taxes directly reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements. The effective tax rate was 22.3% and 24.0% for the three and six months ended December 31, 2017, respectively compared to 26.3% and 25.7% for the three and six months ended December 31, 2016. The decrease in the effective tax rate for the three and six months ended December 31, 2017 is primarily the result of a net tax benefit of $251,000 recognized at December 31, 2017 as a result of the enactment of the Tax Cuts and Jobs Act ("TCJA") in December 2017. The effective tax rate decreased from 27.6% to 22.3% for the three months ended December 31, 2017 and decreased from 26.6% to 24.0% for the six months ended December 31, 2017 as a result of this adjustment.TCJA permanently reduces the maximum corporate income tax rate from 35% to 21% effective January 1, 2018. The lower corporate income tax rate means that deferred tax assets and liabilities that will be deductible or taxable in the future would need to be computed at the new tax rate. Additionally, fiscal year-end taxpayers such as Greene County Bancorp, Inc. are required to utilize a "blended rate" in calculating the effective tax rate for the fiscal year based on a ratio utilizing the number of days at the 35% tax rate and the number of days at the 21% tax rate. Greene County Bancorp, Inc.'s statutory blended rate for fiscal 2018 is approximately 28%. This statutory 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 benefit 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 $1.1 billion at December 31, 2017 as compared to $982.3 million at June 30, 2017, an increase of $78.5 million, or 8.0%. This growth is the result of the continued expansion within our existing markets, across all three of our primary banking lines - retail, commercial, and municipal.
- Securities available-for-sale and held-to-maturity increased $26.8 million, or 8.5%, to $342.1 million at December 31, 2017 as compared to $315.3 million at June 30, 2017. Securities purchases totaled $74.8 million during the six months ended December 31, 2017 and consisted of $62.1 million of state and political subdivision securities, $10.4 million of mortgage backed securities, and $2.3 million of U.S. government sponsored enterprises securities. Principal pay-downs and maturities during the six months amounted to $47.1 million, of which $9.2 million were mortgage-backed securities, $36.4 million were state and political subdivision securities, and $1.5 million were corporate debt securities.
- Net loans receivable increased $39.7 million, or 6.4%, to $663.9 million at December 31, 2017 from $624.2 million at June 30, 2017. The loan growth experienced during the six month period consisted primarily of $10.8 million in commercial real estate loans (including commercial construction loans), $17.8 million in commercial loans, $4.5 million in multi-family real estate loans, and $6.7 million in residential real estate loans.
- Total deposits increased to $920.8 million at December 31, 2017 from $859.5 million at June 30, 2017, an increase of $61.3 million, or 7.1%. NOW deposits increased $59.5 million, or 15.2%, money market deposits increased $2.0 million, or 1.7%, savings deposits increased $8.1 million, or 4.1% and noninterest-bearing deposits increased $3.4 million, or 3.6% when comparing December 31, 2017 and June 30, 2017. These increases were partially offset by a decrease in certificates of deposit of $11.9 million, or 22.2%, when comparing December 31, 2017 and June 30, 2017. These increases were the result of a $39.9 million increase in municipal deposits at Greene County Commercial Bank, primarily from continued growth in new account relationships as well as tax collection. Included within certificates of deposits at December 31, 2017 and June 30, 2017 were $3.9 million and $15.0 million, respectively, in brokered certificates of deposit.
- Borrowings amounted to $20.3 million of overnight and $20.2 million of long-term borrowings, with the Federal Home Loan Bank of New York at December 31, 2017, compared to $6.9 million of overnight borrowings and $22.7 million of term borrowings at June 30, 2017.
- Shareholders' equity increased to $89.6 million at December 31, 2017 from $83.5 million at June 30, 2017, as net income of $7.1 million was partially offset by a $322,000 increase in accumulated other comprehensive loss and dividends declared and paid of $763,000. Other changes in equity, an increase of $25,000, were the result of options exercised with the Company's 2008 Stock Option Plan. Included in accumulated other comprehensive income is $259,000 which represents the stranded credit resulting from the change in Federal tax rates upon the enactment of the TCJA and its impact on deferred taxes associated with items reported in accumulated other comprehensive income.
In addition to presenting information in conformity with accounting principles generally accepted in the United States of America (GAAP), this news release contains financial information determined by methods other than GAAP (non-GAAP). The following measures used in this release, which are commonly utilized by financial institutions, have not been specifically exempted by the Securities and Exchange Commission ("SEC") and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules. The Company has provided in this news release supplemental disclosures for the calculation of net interest margin utilizing a fully taxable-equivalent adjustment. Management believes that the non-GAAP financial measures disclosed by the Company from time to time are useful in evaluating the Company's performance and that such information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Our non-GAAP financial measures may differ from similar measures presented by other companies. See the reconciliation of GAAP to non-GAAP measures in the section "Select Financial Ratios."
|Greene County Bancorp, Inc.|
|Consolidated Statements of Income (Unaudited)|
|At or for the Three Months||At or for the Six Months|
|Ended December 31,||Ended December 31,|
|Dollars in thousands, except share and per share data||2017||2016||2017||2016|
|Net interest income||8,460||7,731||16,630||14,818|
|Provision for loan losses||352||586||699||1,129|
|Income before taxes||4,683||3,969||9,353||7,308|
|Weighted average shares outstanding||8,504,168||8,491,929||8,503,451||8,487,554|
|Weighted average diluted shares outstanding||8,533,126||8,509,316||8,532,274||8,503,913|
|Dividends declared per share 4||$||0.0975||$||0.0950||$||0.1950||$||0.1900|
|Selected Financial Ratios|
|Return on average assets 1||1.39||%||1.30||%||1.40||%||1.23||%|
|Return on average equity 1||16.55||%||15.15||%||16.45||%||14.25||%|
|Net interest rate spread 1||3.21||%||3.44||%||3.24||%||3.35||%|
|Net interest margin 1||3.29||%||3.50||%||3.32||%||3.42||%|
|Fully taxable-equivalent net interest margin 2||3.50||%||3.75||%||3.53||%||3.67||%|
|Efficiency ratio 3||51.34||%||51.25||%||50.38||%||53.07||%|
|Non-performing assets to total assets||0.43||%||0.45||%|
|Non-performing loans to net loans||0.55||%||0.65||%|
|Allowance for loan losses to non-performing loans||309.91||%||272.30||%|
|Allowance for loan losses to total loans||1.68||%||1.73||%|
|Shareholders' equity to total assets||8.44||%||8.41||%|
|Dividend payout ratio 4||23.21||%||29.69||%|
|Actual dividends paid to net income 5||10.73||%||13.66||%|
|Book value per share||$||10.53||$||9.22|
|Non-GAAP reconciliation - Fully taxable equivalent net interest margin|
|For the three months ended||For the six months ended|
|(Dollars in thousands)||12/31/2017||12/31/2016||12/31/2017||12/31/2016|
|Net interest income (GAAP)||$||8,460||$||7,731||$||16,630||$||14,818|
|Net interest income (fully taxable-equivalent basis)||$||8,992||$||8,268||$||17,667||$||15,875|
|Average interest-earning assets||$||1,028,241||$||882,482||$||1,001,639||$||865,510|
|Net interest margin (fully taxable-equivalent basis)||3.50||%||3.75||%||3.53||%||3.67||%|
|Greene County Bancorp, Inc.|
|Consolidated Statements of Financial Condition (Unaudited)|
|As ofDecember 31, 2017||As ofJune 30, 2017|
|(Dollars In thousands)|
|Total cash and cash equivalents||$||27,714||$||16,277|
|Long term certificate of deposit||1,895||2,145|
|Securities- available for sale, at fair value||102,969||91,483|
|Securities- held to maturity, at amortized cost||239,140||223,830|
|Federal Home Loan Bank stock, at cost||2,488||2,131|
|Gross loans receivable||674,435||634,331|
|Less: Allowance for loan losses||(11,352||)||(11,022||)|
|Unearned origination fees and costs, net||790||878|
|Net loans receivable||663,873||624,187|
|Premises and equipment||13,499||13,615|
|Accrued interest receivable||4,610||4,033|
|Foreclosed real estate||905||799|
|Prepaid expenses and other assets||3,717||3,791|
|Liabilities and shareholders' equity|
|Noninterest bearing deposits||$||99,388||$||95,929|
|Interest bearing deposits||821,363||763,606|
|Borrowings from FHLB, short term||20,300||6,900|
|Borrowings from FHLB, long term||20,150||22,650|
|Accrued expenses and other liabilities||10,036||9,685|
|Total shareholders' equity||89,573||83,521|
|Total liabilities and shareholders' equity||$||1,060,810||$||982,291|
|Common shares outstanding||8,506,614||8,502,614|