Overview of Financial Performance

GreenWay Bank, formerly known as Van Wert Federal Savings Bank, is a community bank that primarily takes deposits and invests them in residential real estate loans, commercial real estate loans, agricultural loans, construction loans, commercial and industrial loans, home equity lines of credit, and consumer loans. The bank also invests in securities, primarily mortgage-backed securities and government-sponsored enterprise obligations.

The bank’s results of operations depend largely on its net interest income, which is the difference between the interest earned on its interest-earning assets and the interest paid on its interest-bearing liabilities. The bank’s profitability is also affected by its provisions for loan losses, non-interest income, and non-interest expenses.

Business Strategy and Key Initiatives

GreenWay Bank’s business strategy focuses on embracing a relationship-oriented community bank model targeting small to mid-sized businesses and professionals in its market areas, while continuing to serve its traditional customer base. Key elements of the strategy include:

• Growing the loan portfolio with greater diversification, particularly in commercial lending
• Organic growth through enhanced banking products and services, technology upgrades, and personnel additions
• Recruiting and retaining top talent to guide the implementation of the business strategy
• Maintaining strong asset quality through conservative loan underwriting
• Potential expansion through acquisitions or de novo branching
• Rebranding the banking franchise to GreenWay Bank

Financial Condition Comparison: June 2024 vs. June 2023

Total assets increased 87.6% to $311.3 million as of June 30, 2024, driven by growth in available-for-sale securities and commercial loans. This growth was funded primarily through borrowings and brokered deposits.

Key balance sheet changes include:

• Cash and due from banks increased 473.5% to $31.6 million
• Investment securities increased 97.4% to $139.3 million
• Net loans increased 55.6% to $126.4 million, with growth in commercial real estate, commercial/industrial, and construction loans
• Deposits increased 74.4% to $209.3 million, with brokered deposits growing 735.0%
• Borrowings increased 900% to $62.0 million, including FHLB advances and FRB funding

Total equity decreased 5.1% to $36.5 million, primarily due to the net loss during the fiscal year.

Operating Results Comparison: FY 2024 vs. FY 2023

GreenWay Bank reported a net loss of $2.0 million for the year ended June 30, 2024, compared to a net loss of $545,000 in the prior year. The increased loss was driven by:

• A $7.0 million (137.9%) increase in interest income, primarily from higher-yielding loans and securities
• A $5.9 million (762.6%) increase in interest expense, primarily from higher deposit and borrowing costs
• A $2.3 million (44.6%) increase in non-interest expenses, including one-time costs related to the bank’s conversion and rebranding efforts

The bank recorded a provision for credit losses of $578,000 in fiscal 2024, compared to $41,000 in the prior year, reflecting the adoption of the CECL accounting standard.

Non-interest income increased 10.6% to $230,000, while the bank recognized a $367,000 (201.0%) increase in the income tax benefit.

Asset Quality and Capital

GreenWay Bank’s asset quality metrics remained relatively stable, with non-performing loans at 0.43% of total loans as of June 30, 2024, up slightly from 0.34% a year earlier. The allowance for credit losses increased to 0.60% of total loans from 0.29% a year ago.

The bank’s Tier 1 leverage capital ratio was 12.1% as of June 30, 2024, well above the 9.0% threshold to be considered well-capitalized under the community bank leverage ratio framework.

Interest Rate Risk Management

GreenWay Bank manages its significant interest rate risk exposure through various strategies, including:

• Maintaining capital levels above regulatory well-capitalized thresholds
• Maintaining high liquidity levels
• Growing core deposit accounts
• Managing the investment securities portfolio to reduce the average maturity
• Diversifying the loan portfolio with more commercial-related loans

The bank’s economic value of equity (EVE) analysis indicates that a 200 basis point increase in interest rates would result in an 18.3% decrease in EVE, while a 200 basis point decrease would lead to a 24.7% increase.

The bank’s net interest income forecast shows a 1.12% increase in the event of a 200 basis point rate hike, and a 0.85% increase with a 200 basis point rate cut.

Liquidity and Capital Resources

GreenWay Bank’s primary sources of liquidity are deposits, loan/securities payments and maturities, and borrowing capacity from the FHLB and FRB. As of June 30, 2024, the bank had $62.0 million in outstanding borrowings and an additional $3.9 million in FHLB borrowing capacity.

The bank’s Tier 1 leverage capital ratio of 12.1% as of June 30, 2024 exceeded the 9.0% threshold to be considered well-capitalized under the community bank leverage ratio framework.

Outlook and Conclusion

GreenWay Bank faces several key challenges in the current operating environment, including margin compression from rising funding costs, the need to continue diversifying its loan portfolio, and the one-time expenses associated with its conversion and rebranding efforts. However, the bank’s strategic initiatives to grow commercial lending, enhance technology and services, and recruit top talent position it for potential long-term success as a relationship-focused community bank.

The bank’s strong capital position and liquidity provide a solid foundation, though its profitability will likely remain under pressure in the near-term as it works to implement its business transformation. Careful management of interest rate risk and credit quality will be critical as the bank navigates the current economic environment. Overall, GreenWay Bank appears to be taking the necessary steps to position itself for future growth and sustainability, though the path forward may involve some short-term challenges.