Greene County Bancorp's Margin Widens to 2.86% as Loans Outrun Deposits
Net interest margin expanded 49 basis points to 2.86% at Greene County Bancorp, powering a third straight quarter of record net income even as deposit growth slowed to 2.8%.
Greene County Bancorp (GCBC), the upstate New York community-bank holding company for Bank of Greene County, closed its fiscal fourth quarter with net interest margin at 2.86%, up 49 basis points from 2.37% a year earlier, and the fully tax-equivalent measure climbing to 3.15% from 2.67%. The expansion was not a one-quarter pop: NIM FTE rose sequentially from 2.83% in the December quarter to 3.03% in March and 3.15% in June, a steady march that reflects both higher loan and securities yields and a deposit book repricing lower as the Federal Reserve's cuts worked through NOW and CD costs, down 38 and 42 basis points YoY respectively.
That spread widening drove net interest income up $4.4 million YoY to $21.1 million for the quarter, and full-year NII rose $17.8 million to $77.9 million from $60.1 million. The net interest rate spread widened 51 basis points YoY to 2.65%, the largest of the quarterly spread gains disclosed across the year, edging out the 50-basis-point NIM improvement reported for the December quarter. Greene County's earning-asset mix did the heavy lifting: net loans grew 7.7% YoY to $1.7 billion, up $124.2 million, led by commercial real estate ($92.3 million), commercial loans ($24.7 million) and home equity ($11.3 million), with loan yields adding another 7 basis points QoQ on top of the volume gain.
Deposits did not keep pace. Total deposits grew just 2.8% YoY to $2.7 billion at June 30, decelerating from the record $2.8 billion reported three months earlier at March 31, which implies deposits actually contracted sequentially into the June quarter. The mix shift within that pool was constructive even as the headline slowed: NOW deposits rose $30.2 million (1.5%) and noninterest-bearing deposits jumped $30.1 million (27.3%), while savings and money-market balances shrank. A bank funding loan growth of nearly 8% with deposits growing at a third of that rate is a gap worth watching, though the funding-cost relief from Fed cuts has so far cushioned the mismatch.
Credit quality showed the ordinary friction of a growing loan book rather than deterioration. The provision for credit losses swung to a $126,000 charge in the June quarter from an $880,000 benefit a year earlier, and the full-year provision rose to $2.0 million from $1.3 million, a move attributed to loan volume growth rather than credit stress. The allowance-to-loans ratio held roughly flat at 1.25% versus 1.24% a year ago. Net charge-offs ticked up modestly to $65,000 in the quarter from $44,000 YoY, though full-year charge-offs actually improved to $338,000 from $349,000; nonperforming assets crept up to 0.12% of total assets from 0.10%, a slight uptick after two straight quarters at 0.10% in March and December.
Expenses grew faster than the margin story alone would suggest comfortable, up 14.7% YoY to $11.9 million in the quarter on $866,000 of higher salaries and benefits, a $250,000 charitable contribution to the bank's foundation, and higher unfunded-commitment reserve expense; full-year expense growth of 11.0% also carried a one-time $905,000 pension-plan termination charge. Revenue growth outran those costs regardless: the efficiency ratio improved to 47.73% for the quarter from 50.77% a year earlier, and to 47.22% for the full fiscal year from 52.25%. Noninterest income was the one soft spot, down 3.7% for the year to $14.7 million as customer interest-rate-swap fee income fell $619,000 and the prior year's $610,000 Employee Retention Tax Credit did not repeat, partly offset by higher BOLI income, service charges and debit card fees.
The bottom line kept compounding. Net income hit a quarterly record of $11.3 million in June, up from $10.5 million in March and $10.3 million in December — three consecutive quarters of record or near-record sequential growth — and full-year net income of $41.0 million was up 31.7% YoY. Return on average equity rose to 16.64% for the quarter from 15.98% a year earlier, extending a sequential climb from 15.45% (six months ended December 2023) to 15.65% (nine months ended March 2024) to 15.91% for the full year. Shareholders' equity built to $277.8 million from $238.8 million a year earlier, capital the company began returning via a new 400,000-share buyback program authorized alongside March quarter results.
A lower effective tax rate added a final tailwind to the quarter, falling to 12.3% from 14.8% YoY, even as the full-year rate ticked up slightly to 12.4% from 10.2% on a smaller proportion of tax-exempt municipal and BOLI income relative to sharply higher pre-tax earnings. With deposit costs still falling and loan growth outrunning deposit growth, Greene County's margin expansion has room to continue, but the widening gap between loan and deposit growth rates is the metric most likely to determine how long that trend holds.