UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT

Commission File Number:  0-25165

graphic

GREENE COUNTY BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)

United States
  
14-1809721
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification Number)

302 Main Street, Catskill, New York
  
12414
(Address of principal executive office)
  
(Zip code)

Registrant’s telephone number, including area code: (518) 943-2600

Securities registered pursuant to Section 12(b) of the Act:

Title of class
Trading symbol
Name of exchange on which registered
Common Stock, $0.10 par value
GCBC
The Nasdaq Stock Market

Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)

Check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    YES ☒          NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES ☒          NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☐
Accelerated filer   ☐
Emerging Growth Company   ☐
Non-accelerated filer   ☒
Smaller reporting company   ☒
  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES ☐ NO ☒

As of February 9, 2023, the registrant had 8,513,414 shares of common stock outstanding at $0.10 par value per share.

GREENE COUNTY BANCORP, INC.

INDEX

PART I.
FINANCIAL INFORMATION
  
   
Page
Item 1.
Financial Statements (unaudited)
  
 
3
 
4
 
5
 
6
 
7
 
8-30
     
Item 2.
31-45
     
Item 3.
46
     
Item 4.
46
     
PART II.
 46
     
Item 1.
46
     
Item 1A.
46
     
Item 2.
46
     
Item 3.
46
     
Item 4.
46
     
Item 5.
46
     
Item 6.
47
     
 
48

2
Index
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
At December 31, 2022 and June 30, 2022
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
  
December 31, 2022
    
June 30, 2022
  
Total cash and cash equivalents
    
60,816
      
69,009
  
                 
Long-term certificates of deposit
    
4,096
      
4,107
  
Securities available-for-sale, at fair value
    
335,118
      
408,062
  
Securities held-to-maturity, at amortized cost (fair value $682,210 at December 31, 2022; $710,453 at June 30, 2022)
    
742,470
      
761,852
  
Equity securities, at fair value
    
281
      
273
  
Federal Home Loan Bank stock, at cost
    
6,159
      
6,803
  
                 
Loans
    
1,390,055
      
1,251,987
  
Allowance for loan losses
    
(22,289
)
    
(22,761
)
Unearned origination fees and costs, net
    
100
   
129
Net loans receivable
    
1,367,866
      
1,229,355
  
                 
Premises and equipment, net
    
14,450
      
14,362
  
Bank-owned life insurance
    
54,375
      
53,695
  
Accrued interest receivable
    
12,068
      
8,917
  
Foreclosed real estate
    
-
      
68
  
Prepaid expenses and other assets
    
18,616
      
15,237
  
Total assets
  
$
2,616,315
    
$
2,571,740
  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Noninterest-bearing deposits
  
$
166,295
    
$
187,697
  
Interest-bearing deposits
    
2,099,099
      
2,024,907
  
Total deposits
    
2,265,394
      
2,212,604
  
                 
Borrowings from Federal Home Loan Bank, short-term    
107,600
      
123,700
  
Subordinated notes payable, net
    
49,403
      
49,310
  
Accrued expenses and other liabilities
    
25,711
      
28,412
  
Total liabilities
    
2,448,108
      
2,414,026
  
                 
SHAREHOLDERS’ EQUITY
                
Preferred stock, Authorized - 1,000,000 shares; Issued - None
    
-
      
-
  
Common stock, par value $0.10 per share; Authorized - 12,000,000 shares; Issued – 8,611,340; Outstanding – 8,513,414 shares at December 31, 2022, and June 30, 2022
    
861
      
861
  
Additional paid-in capital
    
11,017
      
11,017
  
Retained earnings
    
180,263
      
165,127
  
Accumulated other comprehensive loss
    
(23,026
)
    
(18,383
)
Treasury stock, at cost 97,926 shares at December 31, 2022, and June 30, 2022
    
(908
)
    
(908
)
Total shareholders’ equity
    
168,207
      
157,714
  
Total liabilities and shareholders’ equity
  
$
2,616,315
    
$
2,571,740
  

See notes to consolidated financial statements

3

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three and Six Months Ended December 31, 2022 and 2021
(Unaudited)
(In thousands, except share and per share amounts)

   
For the three months ended
December 31,
    
For the six months ended
December 31,
  
   
2022
    
2021
    
2022
    
2021
  
Interest income:
                        
Loans
  
$
14,801
    
$
11,990
    
$
28,183
    
$
24,057
  
Investment securities - taxable
    
690
      
330
      
1,354
      
673
  
Mortgage-backed securities
    
1,364
      
1,199
      
2,854
      
2,269
  
Investment securities - tax exempt
    
3,504
      
2,253
      
6,581
      
4,344
  
Interest-bearing deposits and federal funds sold
    
169
      
39
      
196
      
81
  
Total interest income
    
20,528
      
15,811
      
39,168
      
31,424
  
                                 
Interest expense:
                                
Interest on deposits
    
3,738
      
849
      
5,748
      
1,697
  
Interest on borrowings
    
867
      
509
      
1,663
      
875
  
Total interest expense
    
4,605
      
1,358
      
7,411
      
2,572
  
                                 
Net interest income
    
15,923
      
14,453
      
31,757
      
28,852
  
Provision for loan losses
    
244
      
1,280
      
(255
)
    
2,268
  
Net interest income after provision for loan losses
    
15,679
      
13,173
      
32,012
      
26,584
  
                                 
Noninterest income:
                                
Service charges on deposit accounts
    
1,234
      
1,158
      
2,451
      
2,227
  
Debit card fees
    
1,138
      
1,107
      
2,280
      
2,190
  
Investment services
    
198
      
278
      
378
      
491
  
E-commerce fees
    
29
      
27
      
55
      
60
  
Bank-owned life insurance
    
340
      
315
      
680
      
616
  
Net loss on sale of available-for-sale securities
     (251 )     -
       (251 )     -  
Other operating income
    
207
      
353
      
400
      
583
  
Total noninterest income
    
2,895
      
3,238
      
5,993
      
6,167
  
                                 
Noninterest expense:
                                
Salaries and employee benefits
    
5,449
      
5,034
      
10,877
      
9,771
  
Occupancy expense
    
513
      
573
      
1,037
      
1,078
  
Equipment and furniture expense
    
221
      
231
      
379
      
387
  
Service and data processing fees
    
664
      
650
      
1,366
      
1,288
  
Computer software, supplies and support
    
369
      
394
      
750
      
772
  
Advertising and promotion
    
145
      
98
      
221
      
199
  
FDIC insurance premiums
    
205
      
201
      
447
      
421
  
Legal and professional fees
    
1,697
      
421
      
2,148
      
817
  
Other
    
688
      
735
      
1,523
      
1,565
  
Total noninterest expense
    
9,951
      
8,337
      
18,748
      
16,298
  
                                 
Income before provision for income taxes
    
8,623
      
8,074
      
19,257
      
16,453
  
Provision for income taxes
    
1,425
      
1,197
      
3,023
      
2,462
  
Net income
  
$
7,198
    
$
6,877
    
$
16,234
    
$
13,991
  
                                 
Basic and diluted earnings per share
  
$
0.85
    
$
0.81
     $ 1.91     $ 1.64  
Basic and diluted average shares outstanding
    
8,513,414
      
8,513,414
      
8,513,414
      
8,513,414
  
Dividends per share
  
$
0.14
     $ 0.13     $ 0.28    
$
0.26
  

See notes to consolidated financial statements

4
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three and Six Months Ended December 31, 2022 and 2021
(Unaudited)
(In thousands)

   
For the three months ended
December 31,
    
For the six months ended
December 31,
  
   
2022
    
2021
    
2022
    
2021
  
Net Income
  
$
7,198
    
$
6,877
    
$
16,234
    
$
13,991
  
Other comprehensive income (loss):
                                
Unrealized holding gains (losses) on available-for-sale securities, gross
    
2,445
      
(1,662
)
    
(6,587
)
    
(3,510
)
Tax effect
    
654
      
(444
)
    
(1,760
)
    
(938
)
Unrealized holding gains (losses) on available-for-sale securities, net
     1,791       (1,218 )     (4,827 )     (2,572 )
                                 
Reclassification adjustment for loss on sale of available-for-sale securities realized in net income, gross
     251       -       251       -  
Tax effect
     67       -       67       -  
Reclassification adjustment for loss on sale of available-for-sale securities realized in net income, net
     184       -       184       -  
                                 
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
  

See notes to consolidated financial statements.

5
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Three Months Ended December 31, 2022 and 2021
(Unaudited)
(In thousands)

   
Common
Stock
    
Additional
Paid-In
Capital
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss
    
Treasury
Stock
    
Total
Shareholders’
Equity
  
Balance at September 30, 2021
  
$
861
    
$
11,017
    
$
146,381
     $ (2,515 )  
$
(908
)
  
$
154,836
  
Dividends declared
    
     
     
(512
)
    
     
     
(512
)
Net income
    
     
     
6,877
      
     
     
6,877
  
Other comprehensive loss, net of taxes
    
     
     
     
(1,218
)
    
      (1,218 )
Balance at December 31, 2021
  
$
861
    
$
11,017
    
$
152,746
    
$
(3,733
)
  
$
(908
)
  
$
159,983
  

   
Common
Stock
    
Additional
Paid-In
Capital
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss
    
Treasury
Stock
    
Total
Shareholders’
Equity
  
Balance at September 30, 2022
  
$
861
    
$
11,017
    
$
173,617
    
$
(25,001
)
  
$
(908
)
  
$
159,586
  
Dividends declared
                    
(552
)
                    
(552
)
Net income
                    
7,198
                      
7,198
  
Other comprehensive income, net of taxes
                             1,975            
1,975
Balance at December 31, 2022
  
$
861
    
$
11,017
    
$
180,263
    
$
(23,026
)
  
$
(908
)
  
$
168,207
  

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Six Months Ended December 31, 2022 and 2021
(Unaudited)
(In thousands)

   
Common
Stock
    
Additional
Paid-In
Capital
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss
    
Treasury
Stock
    
Total
Shareholders’
Equity
  
Balance at June 30, 2021
  
$
861
    
$
11,017
     $ 139,775    
$
(1,161
)
  
$
(908
)
  
$
149,584
  
Dividends declared
    
     
     
(1,020
)
    
     
     
(1,020
)
Net income
    
     
     
13,991
      
     
     
13,991
  
Other comprehensive loss, net of taxes
    
     
     
     
(2,572
)
    
     
(2,572
)
Balance at December 31, 2021
  
$
861
    
$
11,017
    
$
152,746
    
$
(3,733
)
  
$
(908
)
  
$
159,983
  

   
Common
Stock
    
Additional
Paid-In
Capital
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss
    
Treasury
Stock
    
Total
Shareholders’
Equity
  
Balance at June 30, 2022
  
$
861
    
$
11,017
    
$
165,127
    
$
(18,383
)
  
$
(908
)
  
$
157,714
  
Dividends declared
    
     
     
(1,098
)
    
     
     
(1,098
)
Net income
    
     
     
16,234
      
     
     
16,234
  
Other comprehensive loss, net of taxes
    
     
     
     
(4,643
)
    
     
(4,643
)
Balance at December 31, 2022
  
$
861
    
$
11,017
    
$
180,263
    
$
(23,026
)
  
$
(908
)
  
$
168,207
  

See notes to consolidated financial statements.

6
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2022 and 2021
(Unaudited)
(In thousands)
    2022
     2021
  
Cash flows from operating activities:
            
Net Income
  
$
16,234
    
$
13,991
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation
    
429
      
414
  
Deferred income tax benefit
    
671
      
378
  
Net amortization of investment premiums and discounts
    
1,410
      
1,720
  
Net amortization (accretion) of deferred loan costs and fees
    
101
      
(2,591
)
Amortization of subordinated debt issuance costs
    
93
      
72
  
Provision for loan losses
    
(255
)
    
2,268
  
Bank-owned life insurance income
    
(680
)
    
(616
)
Net loss on sale of available-for-sale securities
     251       -  
Net (gain) loss on equity securities
    
(8
)
    
15
  
Net loss (gain) on sale of foreclosed real estate
     5       (11 )
Net decrease in accrued income taxes
    
(2,119
)
    
(354
)
Net increase in accrued interest receivable
    
(3,151
)
    
(611
)
Net increase in prepaid expenses and other assets
    
(238
)
    
(848
)
Net decrease in accrued expense and other liabilities
    
(2,701
)
    
(469
)
Net cash provided by operating activities
    
10,042
      
13,358
  
                 
Cash flows from investing activities:
                
Securities available-for-sale:
                
Proceeds from maturities
    
129,742
      
131,136
  
Proceeds from sale of securities
     1,675
       -
  
Purchases of securities
    
(75,377
)
    
(157,113
)
Proceeds from principal payments on securities
    
9,764
      
10,835
  
Securities held-to-maturity:
                
Proceeds from maturities
    
36,451
      
22,288
  
Purchases of securities
    
(32,162
)
    
(202,218
)
Proceeds from principal payments on securities
    
14,247
      
9,739
  
Net redemption (purchase) of Federal Home Loan Bank Stock
    
644
      
(1,800
)
Purchase of long-term certificates of deposit
     (245 )     -
  
Maturity of long-term certificates of deposit
    
245
      
180
  
Purchase of bank-owned life insurance
    
-
      
(9,500
)
Net increase in loans receivable
    
(138,357
)
    
(36,695
)
Proceeds from sale of foreclosed real estate
     63       75  
Purchases of premises and equipment
    
(517
)
    
(262
)
Net cash used in investing activities
    
(53,827
)
    
(233,335
)
                 
Cash flows from financing activities
                
Net (decrease) increase in short-term FHLB advances
     (16,100 )     40,000  
Net decrease in short-term advances other banks
    
-
      
(3,000
)
Net proceeds from subordinated notes payable
    
-
      
29,501
  
Payment of cash dividends
    
(1,098
)
    
(1,020
)
Net increase in deposits
    
52,790
      
68,249
  
Net cash provided by financing activities
    
35,592
      
133,730
  
                 
Net decrease in cash and cash equivalents
    
(8,193
)
    
(86,247
)
Cash and cash equivalents at beginning of period
    
69,009
      
149,775
  
Cash and cash equivalents at end of period
  
$
60,816
    
$
63,528
  
                 
Cash paid during period for:
                
Interest
  
$
7,198
    
$
2,283
  
Income taxes
  
$
4,471
    
$
2,438
  

See notes to consolidated financial statements

7
Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
At and for the Three and Six Months Ended December 31, 2022 and 2021

(1)          Basis of Presentation

Within the accompanying unaudited consolidated statements of financial condition, and related notes to the consolidated financial statements, June 30, 2022 data were derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, The Bank of Greene County (the “Bank”) and Greene Risk Management, Inc., and the Bank’s wholly owned subsidiaries, Greene County Commercial Bank (the “Commercial Bank”) and Greene Property Holdings, Ltd. The consolidated financial statements at and for the three and six months ended December 31, 2022 and 2021 are unaudited.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.  To the extent that information and notes required by GAAP for complete financial statements are contained in or are consistent with the audited financial statements incorporated by reference to Greene County Bancorp, Inc.’s Annual Report on Form 10-K for the year ended June 30, 2022, such information and notes have not been duplicated herein. In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included. The Company had no material reclassifications from amounts in the prior year’s consolidated financial statements to conform to the current year’s presentation.  All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three and six months ended December 31, 2022 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2023. These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued and should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K.

(2)          Nature of Operations

The Company’s primary business is the ownership and operation of its subsidiaries. At December 31, 2022, the Bank has 17 full-service banking offices, an operations center, customer call center and lending center located in its market area consisting of the Hudson Valley and Capital District Regions of New York State.  The Bank is primarily engaged in the business of attracting deposits from the general public in the Bank’s market area, and investing such deposits, together with other sources of funds, in loans and investment securities. The Commercial Bank’s primary business is to attract deposits from, and provide banking services to, local municipalities. Greene Property Holdings, Ltd. was formed as a New York corporation that has elected under the Internal Revenue Code to be a real estate investment trust.  Currently, certain mortgages and loan notes held by the Bank are transferred and beneficially owned by Greene Property Holdings, Ltd.  The Bank continues to service these loans.  Greene Risk Management, Inc. was formed in December 2014 as a pooled captive insurance company subsidiary of the Company, incorporated in the State of Nevada.  The purpose of this company is to provide additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.

(3)          Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could materially differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the assessment of other-than-temporary security impairment.

While management uses available information to recognize losses on loans, future additions to the allowance for loan losses (the “Allowance”) may be necessary, based on changes in economic conditions, asset quality or other factors.  In addition, various regulatory authorities, as an integral part of their examination process, periodically review the Allowance.  Such authorities may require the Company to recognize additions to the Allowance based on their judgments of information available to them at the time of their examination.

The Company makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis.  The Company considers many factors including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, intent to sell the security, whether it is more likely than not we will be required to sell the security before recovery, whether loss is expected, external credit ratings and recent downgrades.  Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value through earnings.

8
(4)          Securities

Securities at December 31, 2022 consisted of the following:

(In thousands)
  
Amortized Cost
    
Gross Unrealized
Gains
    
Gross Unrealized
Losses
    
Estimated
Fair Value
  
Securities available-for-sale:
                        
U.S. government sponsored enterprises
  
$
13,061
    
$
-
    
$
2,332
    
$
10,729
  
U.S. treasury securities
    
18,176
      
-
      
2,070
      
16,106
  
State and political subdivisions
    
193,612
      
546
      
261
      
193,897
  
Mortgage-backed securities-residential
    
31,025
      
-
      
4,329
      
26,696
  
Mortgage-backed securities-multi-family
    
91,243
      
-
      
19,612
      
71,631
  
Corporate debt securities
    
17,899
      
-
      
1,840
      
16,059
  
Total securities available-for-sale
    
365,016
      
546
      
30,444
      
335,118
  
Securities held-to-maturity:
                                
U.S. treasury securities
     33,664       -       2,566       31,098  
State and political subdivisions
    
487,495
      
3,479
      
35,181
      
455,793
  
Mortgage-backed securities-residential
    
39,530
      
-
      
3,721
      
35,809
  
Mortgage-backed securities-multi-family
    
160,100
      
-
      
20,795
      
139,305
  
Corporate debt securities
    
21,641
      
2
      
1,478
      
20,165
  
Other securities
    
40
      
-
      
-
      
40
  
Total securities held-to-maturity
    
742,470
      
3,481
      
63,741
      
682,210
  
Total securities
  
$
1,107,486
    
$
4,027
    
$
94,185
    
$
1,017,328
  

Securities at June 30, 2022 consisted of the following:

(In thousands)
  
Amortized Cost
    
Gross Unrealized
Gains
    
Gross Unrealized
Losses
    
Estimated
Fair Value
  
Securities available-for-sale:
                        
U.S. government sponsored enterprises
  
$
13,066
    
$
-
    
$
1,747
    
$
11,319
  
U.S. treasury securities     20,158       -       1,731       18,427  
State and political subdivisions
    
247,978
      
374
      
276
      
248,076
  
Mortgage-backed securities-residential
    
33,186
      
-
      
3,289
      
29,897
  
Mortgage-backed securities-multi-family
    
99,353
      
-
      
15,644
      
83,709
  
Corporate debt securities
    
17,884
      
-
      
1,250
      
16,634
  
Total securities available-for-sale
    
431,625
      
374
      
23,937
      
408,062
  
Securities held-to-maturity:
                                
U.S. treasury securities
    
33,623
      
-
      
1,643
      
31,980
  
State and political subdivisions
    
493,897
      
2,760
      
35,747
      
460,910
  
Mortgage-backed securities-residential
    
42,461
      
1
      
2,242
      
40,220
  
Mortgage-backed securities-multi-family
    
171,921
      
2
      
13,895
      
158,028
  
Corporate debt securities
    
19,900
      
16
      
651
      
19,265
  
Other securities
    
50
      
-
      
-
      
50
  
Total securities held-to-maturity
    
761,852
      
2,779
      
54,178
      
710,453
  
Total securities
  
$
1,193,477
    
$
3,153
    
$
78,115
    
$
1,118,515
  

The Company’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations, subordinated debt of banks and certain mutual funds.  In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations issued by these entities.  As of December 31, 2022, all mortgage-backed securities including collateralized mortgage obligations were securities of government sponsored enterprises, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio. The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured.  The obligations issued by school districts are supported by state aid.  Primarily, these investments are issued by municipalities within New York State.

9
The Company’s current securities investment strategy utilizes a risk management approach of diversified investing among three categories: short-, intermediate- and long-term. The emphasis of this approach is to increase overall investment securities yields while managing interest rate risk.  The Company will only invest in high quality securities as determined by management’s analysis at the time of purchase.  The Company generally does not engage in any derivative or hedging transactions, such as interest rate swaps or caps.

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2022.

   
Less Than 12 Months
    
More Than 12 Months
    
Total
  
(In thousands, except number of securities)
  
Fair
Value
    
Unrealized
Losses
    
Number
of
Securities
    
Fair
Value
    
Unrealized
Losses
    
Number
of
Securities
    
Fair
Value
    
Unrealized
Losses
    
Number
of
Securities
  
Securities available-for-sale:
                                                      
U.S. government sponsored enterprises
  
$
-
    
$
-
      
-
    
$
10,729
    
$
2,332
      
5
    
$
10,729
    
$
2,332
      
5
  
U.S. treasury securities
    
535
      
53
      
1
      
15,571
      
2,017
      
6
      
16,106
      
2,070
      
7
  
State and political subdivisions
     110,058       261       69       -       -       -       110,058       261       69  
Mortgage-backed securities-residential
    
7,537
      
687
      
21
      
19,159
      
3,642
      
9
      
26,696
      
4,329
      
30
  
Mortgage-backed securities-multi-family
    
7,920
      
1,118
      
4
      
63,711
      
18,494
      
27
      
71,631
      
19,612
      
31
  
Corporate debt securities
     14,903       1,497       13       1,157       343       2       16,060       1,840       15  
Total securities available-for-sale
    
140,953
      
3,616
      
108
      
110,327
      
26,828
      
49
      
251,280
      
30,444
      
157
  
Securities held-to-maturity:
                                                                        
U.S. treasury securities
     21,508       1,202       5       9,590       1,364       4       31,098       2,566       9  
State and political subdivisions
    
255,862
      
12,094
      
3,457
      
105,314
      
23,087
      
604
      
361,176
      
35,181
      
4,061
  
Mortgage-backed securities-residential
    
24,620
      
1,808
      
30
      
11,189
      
1,913
      
3
      
35,809
      
3,721
      
33
  
Mortgage-backed securities-multi-family
    
75,500
      
6,316
      
40
      
63,806
      
14,479
      
22
      
139,306
      
20,795
      
62
  
Corporate debt securities
    
5,998
      
602
      
5
      
6,417
      
876
      
8
      
12,415
      
1,478
      
13
  
Total securities held-to-maturity
    
383,488
      
22,022
      
3,537
      
196,316
      
41,719
      
641
      
579,804
      
63,741
      
4,178
  
Total securities
  
$
524,441
    
$
25,638
      
3,645
    
$
306,643
    
$
68,547
      
690
    
$
831,084
    
$
94,185
      
4,335
  

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2022.

   
Less Than 12 Months
    
More Than 12 Months
    
Total
  
(In thousands, except number of securities)
  
Fair
Value
    
Unrealized
Losses
    
Number
of
Securities
    
Fair
Value
    
Unrealized
Losses
    
Number
of
Securities
    
Fair
Value
    
Unrealized
Losses
    
Number
of
Securities
  
Securities available-for-sale:
                                                      
U.S. government sponsored enterprises
   $ 11,319     $ 1,747       5
     $ -     $ -       -
     $ 11,319     $ 1,747       5
  
U.S. treasury securities
     18,427       1,731       8       -       -       -       18,427       1,731       8  
State and political subdivisions
     140,324       276       148       -       -       -       140,324       276       148  
Mortgage-backed securities-residential
     29,872       3,289       27       -       -       -       29,872       3,289       27  
Mortgage-backed securities-multi-family
     71,631      
12,868
      
29
      
12,078
      
2,776
      
5
      
83,709
      
15,644
      
34
  
Corporate debt securities
     16,634      
1,250
      
16
      
-
      
-
      
-
      
16,634
      
1,250
      
16
  
Total securities available-for-sale
     288,207      
21,161
      
233
      
12,078
      
2,776
      
5
      
300,285
      
23,937
      
238
  
Securities held-to-maturity:
                                                                        
U.S. treasury securities
     31,980      
1,643
      
9
      
-
      
-
      
-
      
31,980
      
1,643
      
9
  
State and political subdivisions
     353,837       35,564       2,362       735       183       5       354,572       35,747       2,367  
Mortgage-backed securities-residential
     39,865      
2,242
      
27
      
-
      
-
      
-
      
39,865
      
2,242
      
27
  
Mortgage-backed securities-multi-family
     155,726      
13,895
      
68
      
-
      
-
      
-
      
155,726
      
13,895
      
68
  
Corporate debt securities
     10,751      
651
      
11
      
-
      
-
      
-
      
10,751
      
651
      
11
  
Total securities held-to-maturity
     592,159      
53,995
      
2,477
      
735
      
183
      
5
      
592,894
      
54,178
      
2,482
  
Total securities
   $ 880,366    
$
75,156
    

2,710
    
$
12,813
    
$
2,959
    

10
    
$
893,179
    
$
78,115
    

2,720
  

10
When the fair value of a held-to-maturity or available-for-sale security is less than its amortized cost basis, an assessment is made as to whether other-than-temporary impairment (“OTTI”) is present.  The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover.  The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issuer (and guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a rating agency, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

OTTI is considered to have occurred if (1) the Company intends to sell the security before recovery of its amortized cost basis, (2) it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, or (3) if the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.  In determining the present value of expected cash flows, the Company discounts the expected cash flows at the effective interest rate implicit in the security at the date of acquisition.  In estimating cash flows expected to be collected, the Company uses available information with respect to security prepayment speeds, default rates and severity.

Credit-related OTTI is recognized in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“OCI”).  Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis.  Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized.  For securities classified as held-to-maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods.  During the six months ended  December 31, 2022, interest rates have increased, causing the unrealized loss on debt securities to increase, which does not indicate OTTI. Management has evaluated securities considering the other factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2022.

There were no transfers of securities available-for-sale to held-to-maturity during the three and six months ended December 31, 2022 or 2021. During the three and six months ended December 31, 2022, a loss of $251,000 was recognized from one sale of an available-for-sale security. The proceeds were used to fund higher yielding loans. During the three and six months ended December 31, 2021, there were no sales of securities and no gains or losses were recognized. There was no other-than-temporary impairment loss recognized during the three and six months ended December 31, 2022 and 2021.

The estimated fair values of debt securities at  December 31, 2022, by contractual maturity are shown below. Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)

Available-for-sale debt securities
  
Amortized Cost
    
Fair Value
  
Within one year
  
$
193,528
    
$
193,814
  
After one year through five years
    
27,017
      
24,345
  
After five years through ten years
    
20,703
      
17,475
  
After ten years
    
1,500
      
1,157
  
Total
   
242,748
      
236,791
  
Mortgage-backed securities
    
122,268
      
98,327
  
Total available-for-sale securities
    
365,016
      
335,118
  
                 
Held-to-maturity debt securities
                
Within one year
    
59,578
      
59,044
  
After one year through five years
    
167,831
      
163,465
  
After five years through ten years
    
141,455
      
133,712
  
After ten years
    
173,976
      
150,875
  
Total
   
542,840
      
507,096
  
Mortgage-backed securities
    
199,630
      
175,114
  
Total held-to-maturity securities
    
742,470
      
682,210
  
Total debt securities
  
$
1,107,486
    
$
1,017,328
  

At  December 31, 2022 and June 30, 2022, securities with an aggregate fair value of $843.3 million and $892.9 million, respectively, were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with the Commercial Bank.  At  December 31, 2022 and June 30, 2022, securities with an aggregate fair value of $16.8 million and $17.4 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. The Company did not participate in any securities lending programs during the three and six months ended  December 31, 2022 or 2021.

11
Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is carried at cost. FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value.  Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position. After evaluating these considerations, the Company concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no impairment charge was recorded during the three and six months ended December 31, 2022 or 2021.

(5)          Loans and Allowance for Loan Losses

Loan segments and classes at December 31, 2022 and June 30, 2022 are summarized as follows:

(In thousands)
  
December 31, 2022
    
June 30, 2022
  
Residential real estate:
            
Residential real estate
  
$
371,646
    
$
360,824
  
Residential construction and land
    
20,334
      
15,298
  
Multi-family
    
67,733
      
63,822
  
Commercial real estate:
                
Commercial real estate
    
705,649
      
595,635
  
Commercial construction
    
87,267
      
83,748
  
Consumer loan:
                
Home equity
    
20,669
      
17,877
  
Consumer installment
    
4,588
      
4,512
  
Commercial loans
    
112,169
      
110,271
  
Total gross loans
    
1,390,055
      
1,251,987
  
Allowance for loan losses
    
(22,289
)
    
(22,761
)
Deferred fees and cost, net
    
100
   
129
Loans receivable, net
  
$
1,367,866
    
$
1,229,355
  

Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality and profitability of the Company’s loan portfolio.  The credit quality grade helps management make a consistent assessment of each loan relationship’s credit risk. Consistent with regulatory guidelines, the Company provides for the classification of loans considered being of lesser quality.  Such ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. Substandard assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in assets classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as Loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a full loss reserve and/or charge-off is not warranted. Assets that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.”

12
When the Company classifies problem assets as either Substandard or Doubtful, it generally establishes a specific valuation allowance or “loss reserve” in an amount deemed prudent by management.  General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular loans.  When the Company identifies problem loans as being impaired, it is required to evaluate whether the Company will be able to collect all amounts due either through repayments or the liquidation of the underlying collateral.  If it is determined that impairment exists, the Company is required either to establish a specific allowance for losses equal to the amount of impairment of the assets, or to charge-off such amount.  The Company’s determination as to the classification of its loans and the amount of its valuation allowance is subject to review by its regulatory agencies, which can order the establishment of additional general or specific loss allowances.  The Company reviews its portfolio quarterly to determine whether any assets require classification in accordance with applicable regulations.

The Company primarily has four segments within its loan portfolio that it considers when measuring credit quality: residential real estate loans, commercial real estate loans, consumer loans and commercial loans. The residential real estate portfolio consists of residential, construction, and multi-family loan classes. Commercial real estate loans consist of commercial real estate and commercial construction loan classes. Consumer loans consist of home equity loan and consumer installment loan classes. The inherent risk within the loan portfolio varies depending upon each of these loan types.

Residential mortgage loans, including home equity loans, which are collateralized by residences are generally made in amounts up to 85.0% of the appraised value of the property.  In the event of default by the borrower the Company will acquire and liquidate the underlying collateral.  By originating the loan at a loan-to-value ratio of 85.0% or less, the Company limits its risk of loss in the event of default.  However, the market values of the collateral may be adversely impacted by declines in the economy.  Home equity loans may have an additional inherent risk if the Company does not hold the first mortgage.  The Company may stand in a secondary position in the event of collateral liquidation resulting in a greater chance of insufficiency to meet all obligations.

Construction lending generally involves a greater degree of risk than other residential mortgage lending.  The repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of the construction of the subject property within specified cost limits.  The Company completes inspections during the construction phase prior to any disbursements.  The Company limits its risk during the construction as disbursements are not made until the required work for each advance has been completed.  Construction delays may further impair the borrower’s ability to repay the loan.

Loans collateralized by commercial real estate, and multi-family dwellings, such as apartment buildings generally are larger than residential loans and involve a greater degree of risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on the results of operations and management of the properties or underlying businesses, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of commercial real estate loans makes them more difficult for management to monitor and evaluate.

Consumer loans generally have shorter terms and higher interest rates than residential mortgage loans. In addition, consumer loans expand the products and services offered by the Company to better meet the financial services needs of its customers. Consumer loans generally involve greater credit risk than residential mortgage loans because of the difference in the nature of the underlying collateral. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation in the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections depend on the borrower’s personal financial stability.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate mortgage lending. Real estate lending is generally considered to be collateral-based, with loan amounts based on fixed loan-to-collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment. The Company has formed relationships with other community banks within our region to participate in larger commercial loan relationships.  These types of loans are generally considered to be riskier due to the size and complexity of the loan relationship. By entering into a participation agreement with the other bank, the Company can obtain the loan relationship while limiting its exposure to credit loss. Management completes its due diligence in underwriting these loans and monitors the servicing of these loans.

13
Loan balances by internal credit quality indicator at December 31, 2022 are shown below.

(In thousands)
  
Performing
    
Special
Mention
    
Substandard
    
Total
  
Residential real estate
  
$
366,020
    
$
172
    
$
5,454
    
$
371,646
  
Residential construction and land
    
20,334
      
-
      
-
      
20,334
  
Multi-family
    
67,644
      
89
      
-
      
67,733
  
Commercial real estate
    
673,200
      
7,055
      
25,394
      
705,649
  
Commercial construction
    
87,267
      
-
      
-
      
87,267
  
Home equity
    
20,484
      
-
      
185
      
20,669
  
Consumer installment
    
4,574
      
-
      
14
      
4,588
  
Commercial loans
    
105,613
      
3,232
      
3,324
      
112,169
  
Total gross loans
  
$
1,345,136
    
$
10,548
    
$
34,371
    
$
1,390,055
  

Loan balances by internal credit quality indicator at June 30, 2022 are shown below.

(In thousands)
  
Performing
    
Special
Mention
    
Substandard
    
Total
  
Residential real estate
  
$
355,474
    
$
28
    
$
5,322
    
$
360,824
  
Residential construction and land
    
15,297
      
-
      
1
      
15,298
  
Multi-family
    
63,730
      
92
      
-
      
63,822
  
Commercial real estate
    
555,451
      
13,777
      
26,407
      
595,635
  
Commercial construction
    
83,748
      
-
      
-
      
83,748
  
Home equity
    
17,369
      
-
      
508
      
17,877
  
Consumer installment
    
4,500
      
-
      
12
      
4,512
  
Commercial loans
    
104,364
      
996
      
4,911
      
110,271
  
Total gross loans
  
$
1,199,933
    
$
14,893
    
$
37,161
    
$
1,251,987
  

The Company had no loans classified doubtful or loss at December 31, 2022 or June 30, 2022.  During the quarter ended December 31, 2022, the Company upgraded one commercial loan relationship from special mention to pass, and one from substandard to special mention, due to improvements in borrower cash flows and improving financial performance. There were also loan payoffs during the quarter ended December 31, 2022, comprised of one commercial real estate loan and one commercial loan that were classified as substandard. This was offset by one commercial real estate loan relationship and one commercial loan relationship downgraded to substandard, and one commercial real estate loan relationship downgraded to special mention during the current quarter. At December 31, 2022, these loans were all performing. Management continues to monitor these loan relationships closely.

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent. A nonaccrual loan is defined as a loan in which collectability is questionable and therefore interest on the loan will no longer be recognized on an accrual basis. A loan is not placed back on accrual status until the borrower has demonstrated the ability and willingness to make timely payments on the loan.  A loan does not have to be 90 days delinquent in order to be classified as nonaccrual. Loans on nonaccrual status totaled $5.4 million at December 31, 2022 of which $669,000 were in process of foreclosure. At December 31, 2022, there were five residential loans totaling $567,000 and one commercial real estate loan for $102,000 in the process of foreclosure. Included in nonaccrual loans were $3.1 million of loans which were less than 90 days past due at December 31, 2022, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Loans on nonaccrual status totaled $6.3 million at June 30, 2022 of which $528,000 were in the process of foreclosure. At June 30, 2022, there were three residential loans in the process of foreclosure totaling $426,000 and one commercial real estate loan for $102,000 in the process of foreclosure. Included in nonaccrual loans were $4.4 million of loans which were less than 90 days past due at June 30, 2022, but have a recent history of delinquency greater than 90 days past due. The decrease in nonperforming loans during the period was primarily due to $1.1 million in loan repayments, $134,000 in loans returning to performing status, and $7,000 in charge-offs, partially offset by $277,000 of loans placed into nonperforming status.

14
The following table sets forth information regarding delinquent and/or nonaccrual loans at December 31, 2022:

(In thousands)
  
30-59
days
past due
    
60-89
days
past due
    
90 days
or more
past due
    
Total
past due
    
Current
    
Total Loans
    
Loans on
Non-
accrual
  
Residential real estate
  
$
2,410
    
$
1,009
    
$
1,542
    
$
4,961
    
$
366,685
    
$
371,646
    
$
2,685
  
Residential construction and land
    
-
      
-
      
-
      
-
      
20,334
      
20,334
      
-
  
Multi-family
    
-
      
-
      
-
      
-
      
67,733
      
67,733
      
-
  
Commercial real estate
    
1,816
      
225
      
178
      
2,219
      
703,430
      
705,649
      
828
  
Commercial construction
    
-
      
-
      
-
      
-
      
87,267
      
87,267
      
-
  
Home equity
    
46
      
38
      
140
      
224
      
20,445
      
20,669
      
185
  
Consumer installment
    
35
      
19
      
-
      
54
      
4,534
      
4,588
      
-
  
Commercial loans
    
1,603
      
91
      
398
      
2,092
      
110,077
      
112,169
      
1,679
  
Total gross loans
  
$
5,910
    
$
1,382
    
$
2,258
    
$
9,550
    
$
1,380,505
    
$
1,390,055
    
$
5,377
  

The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2022:

(In thousands)
  
30-59
days
past due
    
60-89
days
past due
    
90 days
or more
past due
    
Total
past due
    
Current
    
Total Loans
    
Loans on
Non-
accrual
  
Residential real estate
  
$
66
    
$
1,676
    
$
592
    
$
2,334
    
$
358,490
    
$
360,824
    
$
2,948
  
Residential construction and land
    
-
      
1
      
-
      
1
      
15,297
      
15,298
      
1
  
Multi-family
    
-
      
-
      
-
      
-
      
63,822
      
63,822
      
-
  
Commercial real estate
    
-
      
385
      
1,147
      
1,532
      
594,103
      
595,635
      
1,269
  
Commercial construction
    
-
      
-
      
-
      
-
      
83,748
      
83,748
      
-
  
Home equity
    
3
      
-
      
179
      
182
      
17,695
      
17,877
      
188
  
Consumer installment
    
22
      
17
      
-
      
39
      
4,473
      
4,512
      
7
  
Commercial loans
    
-
      
28
      
19
      
47
      
110,224
      
110,271
      
1,904
  
Total gross loans
  
$
91
    
$
2,107
    
$
1,937
    
$
4,135
    
$
1,247,852
    
$
1,251,987
    
$
6,317
  

The Company had no accruing loans delinquent 90 days or more at December 31, 2022 and June 30, 2022.  The borrowers have made arrangements with the Bank to bring the loans current within a specified time period and have made a series of payments as agreed.

Impaired Loan Analysis

The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment.”  Management may consider a loan impaired once it is classified as nonaccrual and when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring.  It should be noted that management does not evaluate all loans individually for impairment.  Generally, the Company considers residential mortgages, home equity loans and installment loans as small, homogeneous loans, which are evaluated for impairment collectively based on historical loan experience and other factors.  In contrast, large commercial mortgage, construction, multi-family, business loans and select larger balance residential mortgage loans or nonaccrual loans that are over $250 thousand and all trouble debt restructured loans are reviewed individually and considered impaired if it is probable that the Company will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreement.  The measurement of impaired loans is generally based on the fair value of the underlying collateral.  The majority of the Company’s loans, including most nonaccrual loans, are small homogeneous loan types adequately supported by collateral.  Management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors.  Based on this evaluation, a delinquent loan’s risk rating may be downgraded to either pass-watch, special mention, or substandard, and the allocation of the allowance for loan loss is based upon the risk associated with such designation.

15
The tables below detail additional information on impaired loans at the date or periods indicated:


  
At December 31, 2022
    
For the three months ended
December 31, 2022
    
For the six months ended
December 31, 2022
  
(In thousands)
  
Recorded
Investment
    
Unpaid
Principal
    
Related
Allowance
    
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance recorded:
                                
Residential real estate
  
$
785
    
$
785
    
$
-
    
$
923
    
$
2
    
$
954
    
$
2
  
Commercial real estate
    
371
      
371
      
-
      
372
      
6
      
218
      
8
  
Home equity
    
128
      
128
      
-
      
128
      
-
      
128
      
-
  
Consumer installment
     4       4       -       4       -       5       1  
Commercial loans
    
340
      
340
      
-
      
341
      
4
      
343
      
8
  
Impaired loans with no allowance
    
1,628
      
1,628
      
-
      
1,768
      
12
      
1,648
      
19
  
                                                         
With an allowance recorded:
                                                        
Residential real estate
    
2,428
      
2,428
      
587
      
2,301
      
5
      
2,120
      
7
  
Commercial real estate
    
4,100
      
4,100
      
1,090
      
3,805
      
41
      
3,517
      
73
  
Commercial construction
    
102
      
102
      
1
      
102
      
-
      
102
      
-
  
Home equity
    
-
      
-
      
-
      
-
      
-
      
160
      
4
  
Commercial loans
    
1,984
      
1,984
      
939
      
2,591
      
11
      
2,799
      
27
  
Impaired loans with allowance
    
8,614
      
8,614
      
2,617
      
8,799
      
57
      
8,698
      
111
  
                                                         
Total impaired:
                                                        
Residential real estate
    
3,213
      
3,213
      
587
      
3,224
      
7
      
3,074
      
9
  
Commercial real estate
    
4,471
      
4,471
      
1,090
      
4,177
      
47
      
3,735
      
81
  
Commercial construction
    
102
      
102
      
1
      
102
      
-
      
102
      
-
  
Home equity
    
128
      
128
      
-
      
128
      
-
      
288
      
4
  
Consumer installment
     4       4       -       4       -       5       1  
Commercial loans
    
2,324
      
2,324
      
939
      
2,932
      
15
      
3,142
      
35
  
Total impaired loans
  
$
10,242
    
$
10,242
    
$
2,617
    
$
10,567
    
$
69
    
$
10,346
    
$
130
  

16

  
At June 30, 2022
    
For the three months ended
December 31, 2021
    
For the six months ended
December 31, 2021
  
(In thousands)
  
Recorded
Investment
    
Unpaid
Principal
    
Related
Allowance
    
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance recorded:
  
Residential real estate
  
$
990
    
$
990
    
$
-
    
$
664
    
$
10
    
$
442
    
$
10
  
Commercial real estate
    
67
      
67
      
-
      
539
      
5
      
492
      
8
  
Home equity
    
128
      
128
      
-
      
128
      
-
      
128
      
-
  
Consumer Installment
     5       5       -       -       -       -       -  
Commercial loans
    
346
      
346
      
-
      
180
      
2
      
139
      
2
  
Impaired loans with no allowance
    
1,536
      
1,536
      
-
      
1,511
      
17
      
1,201
      
20
  
                                                         
With an allowance recorded:
                                                        
Residential real estate
    
1,953
      
1,953
      
588
      
1,958
      
28
      
1,338
      
33
  
Commercial real estate
    
3,698
      
3,698
      
1,118
      
612
      
8
      
696
      
18
  
Commercial construction
    
102
      
102
      
1
      
102
      
-
      
102
      
-
  
Home equity
    
320
      
320
      
44
      
321
      
3
      
321
      
6
  
Commercial loans
    
3,162
      
3,162
      
596
      
3,484
      
47
      
3,356
      
87
  
Impaired loans with allowance
    
9,235
      
9,235
      
2,347
      
6,477
      
86
      
5,813
      
144
  
                                                         
Total impaired:
                                                        
Residential real estate
    
2,943
      
2,943
      
588
      
2,622
      
38
      
1,780
      
43
  
Commercial real estate
    
3,765
      
3,765
      
1,118
      
1,151
      
13
      
1,188
      
26
  
Commercial construction
    
102
      
102
      
1
      
102
      
-
      
102
      
-
  
Home equity
    
448
      
448
      
44
      
449
      
3
      
449
      
6
  
Consumer Installment     5       5       -       -       -       -       -  
Commercial loans
    
3,508
      
3,508
      
596
      
3,664
      
49
      
3,495
      
89
  
Total impaired loans
  
$
10,771
    
$
10,771
    
$
2,347
    
$
7,988
    
$
103
    
$
7,014
    
$
164
  

The table below details loans that have been modified as a troubled debt restructuring during the periods indicated.

(Dollars in thousands)
  
Number of
Contracts
    
Pre-Modification
Outstanding
Recorded
Investment
    
Post-
Modification
Outstanding
Recorded
Investment
    
Current
outstanding
Recorded
Investment
  
For the six months ended December 31, 2022
                        
Residential real estate
    
2
    
$
778
    
$
778
     $ 778  
Commercial real estate
    
2
     $
1,228
     $
1,233
     $ 1,233  
Commercial loans
   
1
     $
379
     $
379
     $ 379  
                                 
For the year ended June 30, 2022                                
Consumer Installment     1     $ 5     $
 5     $
 5  

There were no loans that had been modified as a troubled debt restructuring during the six months ended December 31, 2021. There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to June 30, 2022 or 2021, which have subsequently defaulted during the six months ended December 31, 2022 or 2021.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions.  Such evaluation, which includes a review of certain identified loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for the loan loss allowance.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The Company disaggregates its loan portfolio as noted in the below allowance for loan losses tables to evaluate for impairment collectively based on historical loss experience. The Company evaluates nonaccrual loans that are over $250 thousand and all trouble debt restructured loans individually for impairment, if it is probable that the Company will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements. Loans that are guaranteed, such as SBA loans, are excluded from the homogeneous pool of loans and no allowance is allocated to this segment of the portfolio.  The measurement of impaired loans is generally based on the fair value of the underlying collateral. The Company charges loans off against the allowance for credit losses when it becomes evident that a loan cannot be collected within a reasonable amount of time or that it will cost the Company more than it will receive, and all possible avenues of repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers.  Generally, consumer loans and smaller business loans (not secured by real estate) in excess of 90 days are charged-off against the allowance for loan losses, unless equitable arrangements are made. Included within consumer installment loan charge-offs and recoveries are deposit accounts that have been overdrawn in excess of 60 days. With continued growth in the number of deposit accounts, charge-off activity within this category has also grown, as can be seen from the tables below. For loans secured by real estate, a charge-off is recorded when it is determined that the collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries of loans previously charged off and is reduced by charge-offs.

17
The following tables set forth the activity and allocation of the allowance for loan losses by loan class during and at the periods indicated.  The allowance is allocated to each loan class based on historical loss experience, current economic conditions, and other considerations.

   
Activity for the three months ended December 31, 2022
  
(In thousands)
  
Balance at
September 30, 2022
    
Charge-offs
    
Recoveries
    
Provision
    
Balance at
December 31, 2022
  
Residential real estate
  
$
2,471
    
$
-
    
$
2
    
$
19
    
$
2,492
  
Residential construction and land
    
177
      
-
      
-
      
16
      
193
  
Multi-family
    
159
      
-
      
-
      
8
      
167
  
Commercial real estate
    
15,392
      
-
      
-
      
58
      
15,450
  
Commercial construction
    
1,044
      
-
      
-
      
56
   
1,100
  
Home equity
    
44
      
-
      
-
      
(6
)
    
38
  
Consumer installment
    
274
      
137
      
29
      
118
      
284
  
Commercial loans
    
2,586
      
7
      
11
      
(25
)
    
2,565
  
Total
  
$
22,147
    
$
144
    
$
42
    
$
244
    
$
22,289
  


 
Activity for the six months ended December 31, 2022
  
(In thousands)
  
Balance at
June 30, 2022
    
Charge-offs
    
Recoveries
    
Provision
    
Balance at
December 31, 2022
  
Residential real estate
  
$
2,373
    
$
-
    
$
5
    
$
114
    
$
2,492
  
Residential construction and land
    
141
      
-
      
-
      
52
      
193
  
Multi-family
    
119
      
-
      
-
      
48
      
167
  
Commercial real estate
    
16,221
      
-
      
-
      
(771
)
    
15,450
  
Commercial construction
    
1,114
      
-
      
-
      
(14
)
    
1,100
  
Home equity
    
89
      
-
      
-
      
(51
)
    
38
  
Consumer installment
    
349
      
304
      
75
      
164
      
284
  
Commercial loans
    
2,355
      
11
      
18
      
203
      
2,565
  
Total
  
$
22,761
    
$
315
    
$
98
    
$
(255
)
  
$
22,289
  

18
   
Allowance for Loan Losses
    
Loans Receivable
  
   
Ending Balance At December 31, 2022
Impairment Analysis
    
Ending Balance At December 31, 2022
Impairment Analysis
  
(In thousands)
  
Individually
Evaluated
    
Collectively
Evaluated
    
Individually
Evaluated
    
Collectively
Evaluated
  
Residential real estate
  
$
587
    
$
1,905
    
$
3,213
    
$
368,433
  
Residential construction and land
    
-
      
193
      
-
      
20,334
  
Multi-family
    
-
      
167
      
-
      
67,733
  
Commercial real estate
    
1,090
      
14,360
      
4,471
      
701,178
  
Commercial construction
    
1
      
1,099
      
102
      
87,165
  
Home equity
    
-
      
38
      
128
      
20,541
  
Consumer installment
    
-
      
284
      
4
      
4,584
  
Commercial loans
    
939
      
1,626
      
2,324
      
109,845
  
Total
  
$
2,617
    
$
19,672
    
$
10,242
    
$
1,379,813
  


   
Activity for the three months ended December 31, 2021
  
(In thousands)
  
Balance at 
September 30, 2021
    
Charge-offs
    
Recoveries
    
Provision
    
Balance at
December 31, 2021
  
Residential real estate
  
$
1,997
    
$
-
    
$
7
    
$
(23
)
  
$
1,981
  
Residential construction and land
    
120
      
-
      
-
      
(5
)
    
115
  
Multi-family
    
100
      
-
      
-
      
(24
)
    
76
  
Commercial real estate
    
14,298
      
-
      
-
      
1,318
      
15,616
  
Commercial construction
    
1,198
      
-
      
-
      
52
      
1,250
  
Home equity
    
140
      
-
      
-
      
(51
)
    
89
  
Consumer installment
    
290
      
107
      
20
      
77
      
280
  
Commercial loans
    
2,350
      
10
      
1
      
(64
)
    
2,277
  
Total
  
$
20,493
    
$
117
    
$
28
    
$
1,280
    
$
21,684
  

   
Activity for the six months ended December 31, 2021
  
(In thousands)
  
Balance at
June 30, 2021
    
Charge-offs
    
Recoveries
    
Provision
    
Balance at
December 31, 2021
  
Residential real estate
  
$
2,012
    
$
-
    
$
7
    
$
(38
)
  
$
1,981
  
Residential construction and land
    
106
      
-
      
-
      
9
      
115
  
Multi-family
    
186
      
-
      
-
      
(110
)
    
76
  
Commercial real estate
    
13,049
      
-
      
-
      
2,567
      
15,616
  
Commercial construction
    
1,535
      
-
      
-
      
(285
)
    
1,250
  
Home equity
    
165
      
-
      
-
      
(76
)
    
89
  
Consumer installment
    
267
      
211
      
57
      
167
      
280
  
Commercial loans
    
2,348
      
107
      
2
      
34
      
2,277
  
Total
  
$
19,668
    
$
318
    
$
66
    
$
2,268
    
$
21,684
  
19

   
Allowance for Loan Losses
    
Loans Receivable
  
   
Ending Balance June 30, 2022
Impairment Analysis
    
Ending Balance June 30, 2022
Impairment Analysis
  
(In thousands)
  
Individually
Evaluated
    
Collectively
Evaluated
    
Individually
Evaluated
    
Collectively
Evaluated
  
Residential real estate
  
$
588
    
$
1,785
    
$
2,943
    
$
357,881
  
Residential construction and land
    
-
      
141
      
-
      
15,298
  
Multi-family
    
-
      
119
      
-
      
63,822
  
Commercial real estate
    
1,118
      
15,103
      
3,765
      
591,870
  
Commercial construction
    
1
      
1,113
      
102
      
83,646
  
Home equity
    
44
      
45
      
448
      
17,429
  
Consumer installment
    
-
      
349
      
5
      
4,507
  
Commercial loans
    
596
      
1,759
      
3,508
      
106,763
  
Total
  
$
2,347
    
$
20,414
    
$
10,771
    
$
1,241,216
  

Foreclosed real estate (FRE)

FRE consists of properties acquired through mortgage loan foreclosure proceedings or in full or partial satisfaction of loans. The following table sets forth information regarding FRE at:

(in thousands)
  
December 31, 2022
    
June 30, 2022
  
Residential real estate
  
$
-
    
$
68
  
Total foreclosed real estate
  
$
-
    
$
68
  

(6)          Fair Value Measurements and Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated.  The estimated fair value amounts have been measured as of December 31, 2022 and June 30, 2022 and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The FASB ASC Topic on “Fair Value Measurement” established a fair value hierarchy that prioritized the inputs to valuation techniques used to measure fair value. The fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements are not adjusted for transaction costs. A fair value hierarchy exists within GAAP that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

20
For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used are as follows:

         
Fair Value Measurements Using
  
         
Quoted Prices
In Active
Markets For
Identical
Assets
    
Significant
Other
Observable
Inputs
    
Significant
Unobservable
Inputs
  
(In thousands)
  
December 31, 2022
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets:
                        
U.S. Government sponsored enterprises
  
$
10,729
    
$
-
    
$
10,729
    
$
-
  
U.S. Treasury securities
    
16,106
      
-
      
16,106
      
-
  
State and political subdivisions
    
193,897
      
-
      
193,897
      
-
  
Mortgage-backed securities-residential
    
26,696
      
-
      
26,696
      
-
  
Mortgage-backed securities-multi-family
    
71,631
      
-
      
71,631
      
-
  
Corporate debt securities
    
16,059
      
-
      
16,059
      
-
  
Securities available-for-sale
  

335,118
    
$
-
    

335,118
    

-
  
Equity securities
    
281
      
281
      
-
      
-
  
Total securities measured at fair value
  
$
335,399
    
$
281
    
$
335,118
    
$
-
  

         
Fair Value Measurements Using
  
         
Quoted Prices
In Active
Markets For
Identical
Assets
    
Significant
Other Observable
Inputs
    
Significant
Unobservable
Inputs
  
(In thousands)
  
June 30, 2022
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets:
                        
U.S. Government sponsored enterprises
  
$
11,319
    
$
-
    
$
11,319
    
$
-
  
U.S. Treasury securities     18,427       -       18,427       -  
State and political subdivisions
    
248,076
      
-
      
248,076
      
-
  
Mortgage-backed securities-residential
    
29,897
      
-
      
29,897
      
-
  
Mortgage-backed securities-multi-family
    
83,709
      
-
      
83,709
      
-
  
Corporate debt securities
    
16,634
      
-
      
16,634
      
-
  
Securities available-for-sale
    
408,062
      
-
      
408,062
      
-
  
Equity securities
    
273
      
273
      
-
      
-
  
Total securities measured at fair value
  
$
408,335
    
$
273
    
$
408,062
    
$
-
  

Certain investments that are actively traded and have quoted market prices have been classified as Level 1 valuations.  Other available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.

In addition to disclosures of the fair value of assets on a recurring basis, FASB ASC Topic on “Fair Value Measurement” requires disclosures for assets and liabilities measured at fair value on a nonrecurring basis, such as impaired assets, in the period in which a re-measurement at fair value is performed. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated as required by the “Receivables –Loan Impairment” subtopic of the FASB ASC when establishing the allowance for credit losses. Impaired loans are those loans in which the Company has measured impairment based on the fair value of the loan’s collateral or the discounted value of expected future cash flows. Fair value is generally determined based upon market value evaluations by third parties of the properties and/or estimates by management of working capital collateral or discounted cash flows based upon expected proceeds. These appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property), and the cost approach. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as, changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.

21
Fair values for foreclosed real estate are initially recorded based on market value evaluations by third parties, less costs to sell (“initial cost basis”). Any write-downs required when the related loan receivable is exchanged for the underlying real estate collateral at the time of transfer to foreclosed real estate are charged to the allowance for loan losses. Values are derived from appraisals, similar to impaired loans, of underlying collateral or discounted cash flow analysis. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as, changes in absorption rates and market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition. Either change could result in adjustment to lower the property value estimates indicated in the appraisals. These measurements are classified as Level 3 within the fair value hierarchy.

                     
Fair Value Measurements Using
  
(In thousands)
  
Recorded
Investment
    
Related
Allowance
    
Fair Value
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
December 31, 2022
                                    
Impaired loans
  
$
8,768
    
$
2,617
    
$
6,151
    
$
-
    
$
-
    
$
6,151
  
                                                 
June 30, 2022
                                                
Impaired loans
  
$
9,401
    
$
2,347
    
$
7,054
    
$
-
    
$
-
    
$
7,054
  
Foreclosed real estate     68       -       68       -       -       68  

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were utilized to determine fair value:

(Dollars in thousands)
  
Fair Value
  
Valuation Technique
Unobservable Input
  
Range
    
Weighted
Average
  
December 31, 2022
                      
Impaired Loans
  
$
4,578
  
Appraisal of collateral(1)
Appraisal adjustments(2)
    
7.06%-33.73
%
    
19.70
%
                                                 
Liquidation expenses(3)
    
3.98%-5.58
%
    
4.33
%
     
1,573
  
Discounted cash flow
Discount rate
    
3.79%-11.95
%
    
6.63
%
June 30, 2022
                            
Impaired loans
  
$
4,333
  
Appraisal of collateral(1)
Appraisal adjustments(2)
    
7.06%-33.73
%
    
21.67
%
                                                 
Liquidation expenses(3)
    
3.98%-5.58
%
    
4.72
%
     
2,721
  
Discounted cash flow
Discount rate
    
4.19%-11.95
%
    
6.21
%
Foreclosed real estate     68   Appraisal of collateral(1)  Appraisal adjustments(2)     10.46 %     10.46 %


(1)
Fair value is generally determined through independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.

(2)
Appraisals may be adjusted downwards by management for qualitative factors such as economic conditions. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received or age of the appraisal.

(3)
Appraisals are adjusted downwards by management for qualitative factors such as the estimated costs to liquidate the collateral.

No other financial assets or liabilities were re-measured during the year on a nonrecurring basis.

The carrying amounts reported in the statements of financial condition for total cash and cash equivalents, long term certificates of deposit, accrued interest receivable and accrued interest payable approximate their fair values.  Fair values of securities are based on quoted market prices (Level 1), where available, or matrix pricing (Level 2), which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.  The carrying amount of Federal Home Loan Bank stock approximates fair value due to its restricted nature.  The fair values for loans are measured using the “exit price” notion which is a reasonable estimate of what another party might pay in an orderly transaction.  Fair values for variable rate loans that reprice frequently, with no significant credit risk, are based on carrying value.  Fair values for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.  Fair values disclosed for demand and savings deposits are equal to carrying amounts at the reporting date.  The carrying amounts for variable rate money market deposits approximate fair values at the reporting date.  Fair values for long term certificates of deposit are estimated using discounted cash flows and interest rates currently being offered in the market on similar certificates.  Fair value for Federal Home Loan Bank long term borrowings are estimated using discounted cash flows and interest rates currently being offered on similar borrowings.  The carrying value of short-term Federal Home Loan Bank borrowings approximates its fair value.  Fair value for subordinated notes payable is estimated based on a discounted cash flow methodology or observations of recent highly-similar transactions.

22
The fair value of commitments to extend credit is estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the credit-worthiness of the potential borrowers. At December 31, 2022 and June 30, 2022, the estimated fair values of these off-balance sheet financial instruments were immaterial, and are therefore excluded from the table below.

The carrying amounts and estimated fair value of financial instruments are as follows:


  
December 31, 2022
    
Fair Value Measurements Using
  
(In thousands)  
Carrying
Amount
    
Fair Value
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Cash and cash equivalents
  
$
60,816
    
$
60,816
    
$
60,816
    
$
-
    
$
-
  
Long term certificates of deposit
    
4,096
      
3,939
      
-
      
3,939
      
-
  
Securities available-for-sale
    
335,118
      
335,118
      
-
      
335,118
      
-
  
Securities held-to-maturity
    
742,470
      
682,210
      
-
      
682,210
      
-
  
Equity securities
    
281
      
281
      
281
      
-
      
-
  
Federal Home Loan Bank stock
    
6,159
      
6,159
      
-
      
6,159
      
-
  
Net loans receivable
    
1,367,866
      
1,262,902
      
-
      
-
      
1,262,902
  
Accrued interest receivable
    
12,068
      
12,068
      
-
      
12,068
      
-
  
Deposits
    
2,265,394
      
2,265,600
      
-
      
2,265,600
      
-
  
Borrowings     107,600       107,808       -       107,808       -  
Subordinated notes payable, net
    
49,403
      
46,057
      
-
      
46,057
      
-
  
Accrued interest payable
    
816
      
816
      
-
      
816
      
-
  


 
June 30, 2022
    
Fair Value Measurements Using
  
(In thousands)  
Carrying
Amount
    
Fair Value
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Cash and cash equivalents
  
$
69,009
    
$
69,009
    
$
69,009
    
$
-
    
$
-
  
Long term certificates of deposit
    
4,107
      
3,993
      
-
      
3,993
      
-
  
Securities available-for-sale
    
408,062
      
408,062
      
-
      
408,062
      
-
  
Securities held-to-maturity
    
761,852
      
710,453
      
-
      
710,453
      
-
  
Equity securities
    
273
      
273
      
273
      
-
      
-
  
Federal Home Loan Bank stock
    
6,803
      
6,803
      
-
      
6,803
      
-
  
Net loans receivable
    
1,229,355
      
1,170,960
      
-
      
-
      
1,170,960
  
Accrued interest receivable
    
8,917
      
8,917
      
-
      
8,917
      
-
  
Deposits
    
2,212,604
      
2,212,743
      
-
      
2,212,743
      
-
  
Borrowings
    
123,700
      
123,793
      
-
      
123,793
      
-
  
Subordinated notes payable, net     49,310       49,168       -       49,168       -  
Accrued interest payable
    
603
      
603
      
-
      
603
      
-
  

23
(7)          Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding under the treasury stock method if all potentially dilutive common shares (such as stock options) issued became vested during the period. There were no dilutive or anti-dilutive securities or contracts outstanding during the three and six months ended December 31, 2022 and 2021.

   
For the three months
ended December 31,
    
For the six months
ended December 31,
  
   
2022
    
2021
     2022     2021  
                         
Net Income
  
$
7,198,000
    
$
6,877,000
     $ 16,234,000
     $ 13,991,000
  
Weighted Average Shares – Basic
    
8,513,414
      
8,513,414
       8,513,414       8,513,414  
Weighted Average Shares - Diluted
    
8,513,414
      
8,513,414
       8,513,414       8,513,414  
                                 
Earnings per share - Basic
  
$
0.85
    
$
0.81
     $ 1.91     $ 1.64  
Earnings per share - Diluted
  
$
0.85
    
$
0.81
     $ 1.91     $ 1.64  

(8)          Dividends

On October 19, 2022, the Company announced that its Board of Directors has approved a quarterly cash dividend of $0.14 per share on the Company’s common stock. The dividend reflects an annual cash dividend rate of $0.56 per share, which was the same rate as the dividend declared during the previous quarter. The dividend was payable to stockholders of record as of November 15, 2022, and was paid on November 30, 2022. Greene County Bancorp, MHC waived its right to receive this dividend.

(9)          Impact of Recent Accounting Pronouncements
Accounting Pronouncements to be adopted in future periods

In June 2016, the FASB issued an Update (ASU 2016-13) to its guidance on “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above. Further, the ASU made certain targeted amendments to the existing impairment model for available-for-sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.  An entity will apply the amendments in this Update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which aligns the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements and clarifies the scope of the guidance in the amendments in ASU 2016-13.  In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments to Topic 326 and other topics in  ASU 2019-04 include items related to the amendments in ASU 2016-13 discussed at the June 2018 and November 2018 Credit Losses TRG meetings. The amendments clarify or address stakeholders’ specific issues about certain aspects of the amendments in ASU 2016-13 on a number of different topics, including the following:  accrued interest, transfers between classifications or categories for loans and debt securities, recoveries, consideration of prepayments in determining the effective interest rate, consideration of estimated costs to sell when foreclosure is probable, vintage disclosures— line-of-credit arrangements converted to term loans, and contractual extensions and renewals. The effective dates and transition requirements for the amendments related to this Update are the same as the effective dates and transition requirements in ASU 2016-13.  In November 2019, the FASB issued ASU 2019-11 Codification Improvements to Topic 326 Financial Instruments Credit Losses provides additional clarification to specific issues about certain aspects of the amendments in ASU 2016-13 related to measuring the allowance for loan losses under the new guidance. The Company is currently evaluating the potential impact on our consolidated results of operations or financial position. The initial adjustment will not be reported in earnings and therefore will not have any material impact on our consolidated results of operations, but it is expected that it will have an impact on our consolidated financial position at the date of adoption.  At this time, we have not calculated the estimated impact that this Update will have on our allowance for credit losses, however, we anticipate it will have a significant impact on the methodology process we utilize to calculate the allowance. To date, the Company has implemented a detailed project plan, established a governance structure, selected a software vendor, hired resources to support the CECL modeling, incorporated data requirements and enhancements into our standard processes, selected portfolio segmentations, determined the credit loss methodology for each portfolio, started to perform parallel calculations for certain elements of the model, selected a model validation firm and have finalized the methodology and reserve processes for the CECL related to HTM investment and the CECL related to off-balance sheet credit exposures. We are in process of documenting accounting policy elections, processes and controls. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, excluding small reporting companies such as the Company, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses which amends the implementation effective date for small reporting companies, such as the Company, and non-public business entities, for fiscal years beginning after December 15, 2022. All entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will implement this standard for the fiscal year beginning July 1, 2023.

24
In March 2020, the FASB issued an Update (ASU 2020-04), Reference Rate Reform (Topic 848). On January 7, 2021, the FASB issued (ASU 2021-01), which refines the scope of ASC 848 and clarifies some of its guidance. The ASU and related amendments provide temporary optional expedients and exceptions to the existing guidance for applying GAAP to affected contract modifications and hedge accounting relationships in the transition away from the London Interbank Offered Rate (“LIBOR”) or other interbank offered rate on financial reporting. The guidance also allows a one-time election to sell and/or reclassify to AFS or trading HTM debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective March 12, 2020 through December 31, 2022 and permits relief solely for reference rate reform actions and permits different elections over the effective date for legacy and new activity.  The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.  The Company does not expect the impact of adopting the new guidance to have a material impact on the consolidated financial statements. The Company’s LIBOR exposure is minimal and limited to a couple of participation loans and risk participation agreements. The Company is working with the lead lenders to execute the required contract modifications.

In March 2022, the FASB issued ASU No. 2022-02, amendments related to Troubled Debt Restructurings (TDRs) for all entities after they adopt ASU 2016-13 and amendments related to vintage disclosures that affect public business entities with investments in financing receivables, under Financial Instruments-Credit Losses (Topic 326). The ASU eliminates the guidance on TDRs and requires an evaluation on all loan modifications to determine if they result in a new loan or a continuation of the existing loan. The ASU also requires that entities disclose current-period gross charge-offs by year of origination and eliminates the recognition and measurement guidance for TDRs in Subtopic 310-40. The effective dates for the amendments in this Update are the same as the effective dates in ASU 2016-13. The amendments in this Update should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. The Company will implement the Update with the adoption of ASU 2016-13.

(10)        Employee Benefit Plans

Defined Benefit Plan

The components of net periodic pension cost related to the defined benefit pension plan for the three and six months ended December 31, 2022 and 2021 were as follows:
   
Three months ended
December 31,
    
Six months ended
December 31,
  
(In thousands)
  
2022
    
2021
    
2022
    
2021
  
Interest cost
  
$
50
    
$
42
    
$
100
    
$
84
  
Expected return on plan assets
    
(55
)
    
(70
)
    
(110
)
    
(140
)
Amortization of net loss
    
27
      
32
      
54
      
64
  
Net periodic pension cost
  
$
22
    
$
4
    
$
44
    
$
8
  

The interest cost, expected return on plan assets and amortization of net loss components are included in other noninterest expense on the consolidated statements of income. On an annual basis, upon the completion of the third-party actuarial valuation related to the defined benefit pension plan, the Company records adjustments to accumulated other comprehensive income. The Company does not anticipate that it will make any additional contributions to the defined benefit pension plan during fiscal 2023.

25
SERP

The Board of Directors of The Bank of Greene County adopted The Bank of Greene County Supplemental Executive Retirement Plan (the “SERP”), effective as of July 1, 2010. The SERP benefits certain key senior executives of the Bank who have been selected by the Board to participate.  The SERP is intended to provide a benefit from the Bank upon vested retirement, death or disability or voluntary or involuntary termination of service (other than “for cause”).  The SERP is more fully described in Note 9 of the consolidated financial statements for the year ended June 30, 2022.

The net periodic pension costs related to the SERP for the three and six months ended December 31, 2022 were $390,000 and $761,000, respectively, included within salaries and benefits expense on the consolidated statements of income. The total liability for the SERP was $11.1 million at December 31, 2022 and $9.9 million at June 30, 2022, and is included in accrued expenses and other liabilities.  The total liability for the SERP includes both accumulated net periodic pension costs and participant contributions.

(11)         Stock-Based Compensation

Phantom Stock Option Plan and Long-term Incentive Plan

The Greene County Bancorp, Inc. 2011 Phantom Stock Option and Long-term Incentive Plan (the “Plan”) was adopted effective July 1, 2011, to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s shareholders. The Plan is intended to provide benefits to employees and directors of the Company or any subsidiary as designated by the Compensation Committee of the Board of Directors of the Company (“Committee”).  A phantom stock option represents the right to receive a cash payment on the date the award vests. The Plan is more fully described in Note 10 of the consolidated financial statements for the year ended June 30, 2022.

A summary of the Company’s phantom stock option activity and related information for the Plan for the three and six months ended December 31, 2022 and 2021 were as follows:

   
Three months ended December 31,
    
Six months ended December 31,
  
   
2022
    
2021
    
2022
    
2021
  
Number of options outstanding, beginning of period
    
1,786,120
      
1,982,720
      
1,479,520
      
1,507,600
  
Options Granted
    
-
      
-
      
403,600
      
475,120
  
Options Paid in Cash
    
(478,700
)
    
(476,200
)
    
(575,700
)
    
(476,200
)
Number of options outstanding, end of period
    
1,307,420
      
1,506,520
      
1,307,420
      
1,506,520
  


 
Three months ended December 31,
    
Six months ended December 31,
  
(In thousands)
  
2022
    
2021
    
2022
    
2021
  
Cash paid out on options vested
  
$
3,594
    
$
3,054
    
$
4,104
    
$
3,054
  
Compensation costs recognized
   $
1,026
     $
1,067
     $
1,994
     $
1,877
  

The total liability for the Plan was $4.0 million and $6.1 million at December 31, 2022 and June 30, 2022, respectively, and is included in accrued expenses and other liabilities on the consolidated statements of financial condition.
 
26
(12)        Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss at December 31, 2022 and 2021 are presented as follows:

Activity for the three months ended December 31, 2022 and 2021
(In thousands)
  
Unrealized
gain (losses)
on securities
available-for-
sale
    
Pension
benefits
    
Total
  
Balance - September 30, 2021
  
$
(1,006
)
  
$
(1,509
)
  
$
(2,515
)
Other comprehensive loss before reclassification
    
(1,218
)
    
-
      
(1,218
)
Other comprehensive loss for the three months ended December 31, 2021
    
(1,218
)
    
-
      
(1,218
)
Balance - December 31, 2021
  
$
(2,224
)
  
$
(1,509
)
  
$
(3,733
)
                         
Balance - September 30, 2022
  
$
(23,886
)
  
$
(1,115
)
  
$
(25,001
)
Other comprehensive income before reclassification
    
1,791
      
-
      
1,791
  
Amounts reclassified to net loss on sale of available-for-sale securities non-interest income
     251       -       251  
Tax expense effect
     67       -       67  
Net of tax
     184       -       184  
Other comprehensive income for the three months ended December 31, 2022
    
1,975
      
-
      
1,975
  
Balance - December 31, 2022
  
$
(21,911
)
  
$
(1,115
)
  
$
(23,026
)

Activity for the six months ended December 31, 2022 and 2021
(In thousands)
  
Unrealized
gain (losses)
on securities
available-for-
sale
    
Pension
benefits
    
Total
  
Balance at June 30, 2021
  
$
348
    
$
(1,509
)
  
$
(1,161
)
Other comprehensive loss before reclassification
    
(2,572
)
    
-
      
(2,572
)
Other comprehensive loss for the six months ended December 31, 2021
    
(2,572
)
    
-
      
(2,572
)
Balance at December 31, 2021
  
$
(2,224
)
  
$
(1,509
)
  
$
(3,733
)
                         
Balance - June 30, 2022
  
$
(17,268
)
  
$
(1,115
)
  
$
(18,383
)
Other comprehensive loss before reclassification
    
(4,827
)
    
-
      
(4,827
)
Amounts reclassified to net loss on sale of available-for-sale securities non-interest income     251       -       251  
Tax expense effect     67       -       67  
Net of tax
     184       -       184  
Other comprehensive loss for the six months ended December 31, 2022
    
(4,643
)
    
-
      
(4,643
)
Balance at December 31, 2022
  
$
(21,911
)
  
$
(1,115
)
  
$
(23,026
)

(13)        Operating leases

The Company leases certain branch properties under long-term, operating lease agreements. The Company’s operating lease agreements contain non-lease components, which are accounted for separately. The Company’s lease agreements do not contain any residual value guarantee.

27
The following includes quantitative data related to the Company’s operating leases as of December 31, 2022 and June 30, 2022, and for the three and six months ended December 31, 2022 and 2021:

(In thousands, except weighted-average information).
            
Operating lease amounts:
  
December 31, 2022
    
June 30, 2022
  
Right-of-use assets
  
$
1,817
    
$
1,980
  
Lease liabilities
  
$
1,881
    
$
2,040
  

 
For the three months ended
December 31,
  
 
2022
  
2021
  
(In thousands)
        
Other information:
        
Operating outgoing cash flows from operating leases
  
$
90
    
$
87
  
Right-of-use assets obtained in exchange for new operating lease liabilities
   $
-     $
415  
                 
Lease costs:
                
Operating lease cost
  
$
82
    
$
81
  
Variable lease cost
  
$
10
    
$
10
  

   
For the six months ended
December 31,
  
   
2022
    
2021
  
(In thousands)
            
Other information:
            
Operating outgoing cash flows from operating leases
  
$
179
    
$
174
  
Right-of-use assets obtained in exchange for new operating lease liabilities
  
$
-
    
$
415
  
                 
Lease costs:
                
Operating lease cost
  
$
163
    
$
161
  
Variable lease cost
  
$
20
    
$
20
  

28
The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, as of December 31, 2022:

(in thousands)
      
Within the twelve months ended December 31,
      
2023
  
$
366
  
2024
    
377
  
2025
    
369
  
2026
    
340
  
2027
    
258
  
Thereafter
    
285
  
Total undiscounted cash flow
    
1,995
  
Less net present value adjustment
    
(114
)
Lease Liability
  
$
1,881
  
         
Weighted-average remaining lease term (Years)
    
4.39
  
Weighted-average discount rate
    
2.15
%

Right-of-use assets are included in prepaid expenses and other assets, and lease liabilities are included in accrued expenses and other liabilities within the Company’s consolidated statements of financial condition.

(14)        Commitments and Contingent Liabilities



In the normal course of business there are various commitments and contingent liabilities outstanding pertaining to the granting of loans and the lines of credit, which are not reflected in the accompanying consolidated financial statements.



The Company’s unfunded loan commitments and unused lines of credit are as follows:


(In thousands)
  
December 31, 2022
    
June 30, 2022
  
Unfunded loan commitments
  
$
118,242
    
$
213,420
  
Unused lines of credit
    
93,697
      
85,971
  
Standby letters of credit
    
889
      
189
  
Total commitments
  
$
212,828
    
$
299,580
  



Commitments to extend credit in the form of loan commitments and lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral, if any, required upon an extension of credit is based on management’s evaluation of customer credit. Commitments to extend mortgage credit are primarily collateralized by first liens on real estate. Collateral on extensions of commercial lines of credit vary but may include accounts receivable, inventory, property, plant and equipment, and income producing commercial property.



The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Except as noted below, management believes there are no such legal proceedings pending or threatened against the Company or its subsidiaries, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.


29

On April 26, 2022, Andrew Broockmann, a customer of The Bank of Greene County (the “Bank”), filed a putative class action complaint against the Bank in the United States District Court for the Northern District of New York. The complaint alleges that the Bank improperly assessed overdraft fees on debit-card transactions that were authorized on a positive account balance but settled on a negative balance. Mr. Broockmann, on behalf of the putative class, seeks compensatory damages, punitive damages, enjoinment of the conduct complained of, and costs and fees. The complaint is similar to complaints filed against other financial institutions pertaining to overdraft fees. The Bank denies that it improperly assessed overdraft fees or breached any agreement with Mr. Broockmann or with members of the putative class. The parties have reached an agreement in principle to settle the lawsuit, which remains subject to court approval.  The Company reserved $1.15 million in the quarter ended December 31, 2022 in connection with the matter, which is included in accrued expenses and other liabilities on the consolidated statements of financial condition.

(15)        Subsequent events

On January 18, 2023, the Board of Directors announced a cash dividend for the quarter ended December 31, 2022 of $0.14 per share on Greene County Bancorp, Inc.’s common stock.  The dividend reflects an annual cash dividend rate of $0.56 per share, which was the same rate as the dividend declared during the previous quarter.  The dividend will be payable to stockholders of record as of February 13, 2023, and is expected to be paid on February 27, 2023.  The Greene County Bancorp, MHC intends to waive its receipt of this dividend.

As previously disclosed to, and approved by, the Company’s shareholders at the Company’s Annual Meeting held on November 5, 2022, the Company’s charter was amended, effective January 19, 2023, to increase the number of authorized shares of common stock from 12,000,000 to 36,000,000.

30
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation

Overview of the Company’s Activities and Risks

The Company’s results of operations depend primarily on its net interest income, which is the difference between the income earned on the Company’s loan and securities portfolios and its cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by the Company’s provision for loan losses, noninterest income and noninterest expense.  Noninterest income consists primarily of fees and service charges.  The Company’s noninterest expense consists principally of compensation and employee benefits, occupancy, equipment and data processing, and other operating expenses. Results of operations are also significantly affected by general economic and competitive conditions, changes in interest rates, as well as government policies and actions of regulatory authorities. Additionally, future changes in applicable law, regulations or government policies may materially affect the Company.

To operate successfully, the Company must manage various types of risk, including but not limited to, market or interest rate risk, credit risk, transaction risk, liquidity risk, security risk, strategic risk, reputation risk and compliance risk. While all of these risks are important, the risks of greatest significance to the Company relate to market or interest rate risk and credit risk.

Market risk is the risk of loss from adverse changes in market prices and/or interest rates. Since net interest income (the difference between interest earned on loans and investments and interest paid on deposits and borrowings) is the Company’s primary source of revenue, interest rate risk is the most significant non-credit related market risk to which the Company is exposed. Net interest income is affected by changes in interest rates as well as fluctuations in the level and duration of the Company’s assets and liabilities.

Interest rate risk is the exposure of the Company’s net interest income to adverse movements in interest rates. In addition to directly impacting net interest income, changes in interest rates can also affect the amount of new loan originations, the ability of borrowers and debt issuers to repay loans and debt securities, the volume of loan repayments and refinancing, and the flow and mix of deposits.

Credit risk is the risk to the Company’s earnings and shareholders’ equity that results from customers, to whom loans have been made and to the issuers of debt securities in which the Company has invested, failing to repay their obligations. The magnitude of risk depends on the capacity and willingness of borrowers and debt issuers to repay and the sufficiency of the value of collateral obtained to secure the loans made or investments purchased.

Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes or systems, the misconduct or errors of people, and adverse external events. Operational losses result from internal fraud; external fraud; employment practices and workplace safety, clients, products, and business practices; damage to physical assets; business disruption and system failures; and execution, delivery, and process management.

Special Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements. Greene County Bancorp, Inc. desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all such forward-looking statements. These forward-looking statements, which are included in this Management’s Discussion and Analysis and elsewhere in this quarterly report, describe future plans or strategies and include Greene County Bancorp, Inc.’s expectations of future financial results. The words “believe,” “expect,” “anticipate,” “project,” and similar expressions identify forward-looking statements. Greene County Bancorp, Inc.’s ability to predict results or the effect of future plans or strategies or qualitative or quantitative changes based on market risk exposure is inherently uncertain. Factors that could affect actual results include but are not limited to:


 (a)
changes in general market interest rates,

(b)
general economic conditions,

(c)
legislative and regulatory changes,

(d)
monetary and fiscal policies of the U.S. Treasury and the Federal Reserve,

(e)
changes in the quality or composition of Greene County Bancorp, Inc.’s loan and investment portfolios,

(f)
deposit flows,

(g)
competition, and

(h)
demand for financial services in Greene County Bancorp, Inc.’s market area.

These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements, since results in future periods may differ materially from those currently expected because of various risks and uncertainties.

31
Non-GAAP Financial Measures

Regulation G, a rule adopted by the Securities and Exchange Commission (SEC), applies to certain SEC filings, including earnings releases, made by registered companies that contain “non-GAAP financial measures.”  GAAP is generally accepted accounting principles in the United States of America.  Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure (if a comparable GAAP measure exists) and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures.  The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP.  When these exempted measures are included in public disclosures, supplemental information is not required. Financial institutions like the Company and its subsidiary banks are subject to an array of bank regulatory capital measures that are financial in nature but are not based on GAAP and are not easily reconcilable to the closest comparable GAAP financial measures, even in those cases where a comparable measure exists. The Company follows industry practice in disclosing its financial condition under these various regulatory capital measures, including period-end regulatory capital ratios for itself and its subsidiary banks, in its periodic reports filed with the SEC, and it does so without compliance with Regulation G, on the widely-shared assumption that the SEC regards such non-GAAP measures to be exempt from Regulation G.  The Company uses in this Report additional non-GAAP financial measures that are commonly utilized by financial institutions and have not been specifically exempted by the SEC from Regulation G. The Company provides, as supplemental information, such non-GAAP measures included in this Report as described immediately below.

Tax-Equivalent Net Interest Income and Net Interest Margin: Net interest income, as a component of the tabular presentation by financial institutions of Selected Financial Information regarding their recently completed operations, as well as disclosures based on that tabular presentation, is commonly presented on a tax-equivalent basis.  That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total.  This adjustment is considered helpful in comparing one financial institution's net interest income to that of another institution or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations.  Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average interest-earning assets.  For purposes of this measure as well, tax-equivalent net interest income is generally used by financial institutions, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time. While we present net interest income and net interest margin utilizing GAAP measures (no tax-equivalent adjustments) as a component of the tabular presentation within our disclosures, we do provide as supplemental information net interest income and net interest margin on a tax-equivalent basis.

Critical Accounting Policies

The Company’s critical accounting policies relate to the allowance for loan losses.  The allowance for loan losses is based on management’s estimation of an amount that is intended to absorb losses in the existing portfolio.  The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, specific impaired loans and current economic conditions.  Such evaluation, which includes a review of all loans for which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for the allowance of loan losses.  However, this evaluation involves a high degree of complexity and requires management to make subjective judgments that often require assumptions or estimates about highly uncertain matters.  This critical accounting policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

Comparison of Financial Condition at December 31, 2022 and June 30, 2022

ASSETS

Total assets of the Company were $2.6 billion at December 31, 2022 and $2.6 billion at June 30, 2022, an increase of $44.6 million, or 1.7%.  Securities available-for-sale and held-to-maturity decreased $92.3 million, or 7.9%, to $1.1 billion at December 31, 2022 as compared to $1.2 billion at June 30, 2022.  Net loans receivable increased $138.5 million, or 11.3%, to $1.4 billion at December 31, 2022 from $1.2 billion at June 30, 2022.

32
CASH AND CASH EQUIVALENTS

Total cash and cash equivalents decreased $8.2 million to $60.8 million at December 31, 2022 from $69.0 million at June 30, 2022. The level of cash and cash equivalents is a function of the daily account clearing needs and deposit levels as well as activities associated with securities transactions and loan funding. All of these items can cause cash levels to fluctuate significantly on a daily basis.

SECURITIES

Securities available-for-sale and held-to-maturity decreased $92.3 million, or 7.9%, to $1.1 billion at December 31, 2022 as compared to $1.2 billion at June 30, 2022. The decrease was the result of utilizing maturing investments to fund loan growth during the period and due to the increase in unrealized loss on securities of $6.3 million. Securities purchases totaled $107.5 million during the six months ended December 31, 2022 and consisted primarily of $105.8 million of state and political subdivision securities. Principal pay-downs and maturities during the six months ended December 31, 2022 amounted to $190.2 million, primarily consisting of $166.2 million of state and political subdivision securities, and $22.3 million of mortgage-backed securities.  At December 31, 2022, 63.2% of our securities portfolio consisted of state and political subdivision securities to take advantage of tax savings and to promote Company’s participation in the communities in which it operates. Mortgage-backed securities, which represent 27.7% of our securities portfolio at December 31, 2022, do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

   
December 31, 2022
    
June 30, 2022
  
(Dollars in thousands)
  
Balance
    
Percentage of
portfolio
    
Balance
    
Percentage of
portfolio
  
Securities available-for-sale:
                        
U.S. Government sponsored enterprises
  
$
10,729
      
1.0
%
  
$
11,319
      
0.9
%
U.S. Treasury securities
    
16,106
      
1.5
      
18,427
      
1.6
  
State and political subdivisions
    
193,897
      
18.0
      
248,076
      
21.2
  
Mortgage-backed securities-residential
    
26,696
      
2.5
      
29,897
      
2.6
  
Mortgage-backed securities-multifamily
    
71,631
      
6.6
      
83,709
      
7.2
  
Corporate debt securities
    
16,059
      
1.5
      
16,634
      
1.4
  
Total securities available-for-sale
    
335,118
      
31.1
      
408,062
      
34.9
  
Securities held-to-maturity:
                                
U.S. treasury securities
    
33,664
      
3.1
      
33,623
      
2.9
  
State and political subdivisions
    
487,495
      
45.2
      
493,897
      
42.2
  
Mortgage-backed securities-residential
    
39,530
      
3.7
      
42,461
      
3.6
  
Mortgage-backed securities-multifamily
    
160,100
      
14.9
      
171,921
      
14.7
  
Corporate debt securities
    
21,641
      
2.0
      
19,900
      
1.7
  
Other securities
    
40
      
0.0
      
50
      
0.0
  
Total securities held-to-maturity
    
742,470
      
68.9
      
761,852
      
65.1
  
Total securities
  
$
1,077,588
      
100.0
%
  
$
1,169,914
      
100.0
%

LOANS

Net loans receivable increased $138.5 million, or 11.3%, to $1.4 billion at December 31, 2022 from $1.2 billion at June 30, 2022.  The loan growth experienced during the six months consisted primarily of $110.0 million in commercial real estate loans, $10.8 million in residential real estate loans, $5.0 million in residential construction and land loans, $3.9 million in multi-family loans, and $3.5 million in commercial construction loans.   The Company continues to experience loan growth as a result of continued growth in its customer base and its relationships with other financial institutions in originating loan participations.  The Company continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products.  Updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status.  Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy.

33
   
December 31, 2022
    
June 30, 2022
  
(Dollars in thousands)
  
Balance
    
Percentage of
Portfolio
    
Balance
    
Percentage of
Portfolio
  
Residential real estate
  
$
371,646
      
26.7
%
  
$
360,824
      
28.8
%
Residential construction and land
    
20,334
      
1.4
      
15,298
      
1.2
  
Multi-family
    
67,733
      
4.9
      
63,822
      
5.1
  
Commercial real estate
    
705,649
      
50.8
      
595,635
      
47.6
  
Commercial construction
    
87,267
      
6.3
      
83,748
      
6.7
  
Home equity
    
20,669
      
1.5
      
17,877
      
1.4
  
Consumer installment
    
4,588
      
0.3
      
4,512
      
0.4
  
Commercial loans
    
112,169
      
8.1
      
110,271
      
8.8
  
Total gross loans
    
1,390,055
      
100.0
%
    
1,251,987
      
100.0
%
Allowance for loan losses
    
(22,289
)
            
(22,761
)
        
Deferred fees and costs, net
    
100
              
129
          
Total net loans
  
$
1,367,866
            
$
1,229,355
          

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions.  Such evaluation, which includes a review of certain identified loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for an allowance for loan loss.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to recognize additions to the allowance based on their judgment about information available to them at the time of their examination.  The Company disaggregates its loan portfolio as noted in the below allocation of allowance for loan losses table to evaluate for impairment collectively based on historical loss experience.  The Company evaluates nonaccrual loans that are over $250 thousand and all trouble debt restructured loans individually for impairment, if it is probable that the Company will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements.  The measurement of impaired loans is generally based on the fair value of the underlying collateral. The Company charges loans off against the allowance for loan losses when it becomes evident that a loan cannot be collected within a reasonable amount of time or that it will cost the Company more than it will receive, and all possible avenues of repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers.  Generally, consumer loans and smaller business loans (not secured by real estate) in excess of 90 days are charged-off against the allowance for loan losses, unless equitable arrangements are made.  For loans secured by real estate, a charge-off is recorded when it is determined that the collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries of loans previously charged-off and is reduced by charge-offs.

34
Analysis of allowance for loan losses activity

   
At or for the six months ended
December 31,
  
(Dollars in thousands)
  
2022
    
2021
  
Balance at the beginning of the period
  
$
22,761
    
$
19,668
  
Charge-offs:
                
Consumer installment
    
304
      
211
  
Commercial loans
    
11
      
107
  
Total loans charged off
    
315
      
318
  
                 
Recoveries:
                
Residential real estate
    
5
      
7
  
Consumer installment
    
75
      
57
  
Commercial loans
    
18
      
2
  
Total recoveries
    
98
      
66
  
                 
Net charge-offs
    
217
      
252
  
                 
Provisions charged to operations
    
(255
)
    
2,268
  
Balance at the end of the period
  
$
22,289
    
$
21,684
  
                 
Net charge-offs to average loans outstanding (annualized)
    
0.03
%
    
0.05
%
Net charge-offs to nonperforming assets (annualized)
    
8.07
%
    
13.01
%
Allowance for loan losses to nonperforming loans
    
414.52
%
    
559.59
%
Allowance for loan losses to total loans receivable
    
1.60
%
    
1.89
%

Nonaccrual Loans and Nonperforming Assets

Loans are reviewed on a regular basis to assess collectability of all principal and interest payments due.  Management determines that a loan is impaired or nonperforming when it is probable at least a portion of the principal or interest will not be collected in accordance with contractual terms of the note.  When a loan is determined to be impaired, the measurement of the loan is based on present value of estimated future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral.

Generally, management places loans on nonaccrual status once the loans have become 90 days or more delinquent or sooner if there is a significant reason for management to believe the collectability is questionable and, therefore, interest on the loan will no longer be recognized on an accrual basis.  The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment.”  Management may consider a loan impaired once it is classified as nonaccrual and when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring. A loan does not have to be 90 days delinquent in order to be classified as nonperforming.  Foreclosed real estate is considered to be a nonperforming asset. For further discussion and detail regarding impaired loans please refer to Part I, Financial Statements (unaudited), Note 5 Loans and Allowance for Loan Losses of this Report.

35
Analysis of Nonaccrual Loans and Nonperforming Assets

(Dollars in thousands)
  
December 31, 2022
    
June 30, 2022
  
Nonaccruing loans:
            
Residential real estate
  
$
2,685
    
$
2,948
  
Residential construction and land
    
-
      
1
  
Commercial real estate
    
828
      
1,269
  
Home equity
    
185
      
188
  
Consumer installment
    
-
      
7
  
Commercial
    
1,679
      
1,904
  
Total nonaccruing loans
  
$
5,377
    
$
6,317
  
Foreclosed real estate:
                
Residential real estate
    
-
      
68
  
Total foreclosed real estate
    
-
      
68
  
Total nonperforming assets
  
$
5,377
    
$
6,385
  
                 
Troubled debt restructuring:
                
Nonperforming (included above)
  
$
3,136
    
$
2,707
  
Performing (accruing and excluded above)
    
2,600
      
2,336
  
                 
Total nonperforming assets as a percentage of total assets
    
0.21
%
    
0.25
%
Total nonperforming loans to net loans
    
0.39
%
    
0.50
%

At December 31, 2022 and June 30, 2022, there were no loans greater than 90 days and accruing.

Nonperforming assets amounted to $5.4 million and $6.4 million at December 31, 2022 and June 30, 2022, respectively.  Loans on nonaccrual status totaled $5.4 million at December 31, 2022 of which $669,000 were in process of foreclosure.  At December 31, 2022, there were five residential loans totaling $567,000 and one commercial real estate loan for $102,000 in the process of foreclosure. Included in nonaccrual loans were $3.1 million of loans which were less than 90 days past due at December 31, 2022, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments.  Loans on nonaccrual status totaled $6.3 million at June 30, 2022 of which $528,000 were in the process of foreclosure. At June 30, 2022, there were three residential loans in the process of foreclosure totaling $426,000 and one commercial real estate loan totaling $102,000 in the process of foreclosure. Included in nonaccrual loans were $4.4 million of loans which were less than 90 days past due at June 30, 2022, but have a recent history of delinquency greater than 90 days past due.

Impaired Loans

The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment.” A loan is considered impaired when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring.

The table below details additional information on impaired loans at December 31, 2022 and June 30, 2022:

(In thousands)
  
December 31, 2022
    
June 30, 2022
  
Balance of impaired loans, with a valuation allowance
  
$
8,614
    
$
9,235
  
Allowances relating to impaired loans included in allowance for loan losses
    
2,617
      
2,347
  
Balance of impaired loans, without a valuation allowance
    
1,628
      
1,536
  
Total impaired loans
    
10,242
      
10,771
  

   
For the three months
ended December 31,
    
For the six months
ended December 31,
  
(In thousands)
  
2022
    
2021
    
2022
    
2021
  
Average balance of impaired loans for the periods ended
  
$
10,567
    
$
7,988
    
$
10,346
    
$
7,014
  
Interest income recorded on impaired loans during the periods ended
    
69
      
103
      
130
      
164
  

36
Residential real estate average balance of impaired loans with a valuation allowance amounted to $2.3 million for the three months ended December 31, 2022, as compared to $2.0 million for the three months ended June 30, 2022, an increase of $300,000.  The increase in residential real estate impaired loans was primarily the result of two loan relationships moving into impairment status during the quarter end December 31, 2022. Commercial loans average balance of impaired loans with a valuation allowance amounted to $2.6 million for the three months ended December 31, 2022, as compared to $3.4 million for the three months ended June 30, 2022, a decrease of $800,000.  The decrease was primarily the result of one loan paying off during the quarter end December 31, 2022.

DEPOSITS

Deposits totaled $2.3 billion at December 31, 2022 and $2.2 billion at June 30, 2022, an increase of $52.8 million, or 2.4%. NOW deposits increased $36.3 million, or 2.4%, and certificates of deposits increased $61.9 million, or 151.6% when comparing December 31, 2022 and June 30, 2022. Included within certificates of deposits at December 31, 2022 and June 30, 2022 were $68.6 million and $7.2 million in brokered certificates of deposit, respectively. Money market deposits decreased $20.4 million, or 12.9%, savings deposits decreased $3.6 million, or 1.0%, and noninterest-bearing deposits decreased $21.4 million, or 11.4% when comparing December 31, 2022 and June 30, 2022.  Deposits increased during the six months ended December 31, 2022 as a result of an increase in municipal deposits at Greene County Commercial Bank, primarily from tax collection, and new account relationships.

Major classifications of deposits at December 31, 2022 and June 30, 2022 are summarized as follows:

(In thousands)
  
December 31, 2022
    
Percentage
of Portfolio
    
June 30, 2022
    
Percentage
of Portfolio
  
Noninterest-bearing deposits
  
$
166,295
      
7.3
%
  
$
187,697
      
8.5
%
Certificates of deposit
    
102,670
      
4.5
      
40,801
      
1.9
  
Savings deposits
    
340,150
      
15.0
      
343,731
      
15.5
  
Money market deposits
    
137,269
      
6.1
      
157,623
      
7.1
  
NOW deposits
    
1,519,010
      
67.1
      
1,482,752
      
67.0
  
Total deposits
  
$
2,265,394
      
100.0
%
  
$
2,212,604
      
100.0
%

BORROWINGS

At December 31, 2022, the Bank had pledged approximately $549.4 million of its residential and commercial mortgage portfolio as collateral for borrowing and irrevocable municipal letters of credit at the Federal Home Loan Bank of New York (“FHLB”). The maximum amount of funding available from the FHLB was $363.4 million at December 31, 2022, of which there were no term borrowings and $65.0 million irrevocable municipal letters of credit outstanding at December 31, 2022. There were $107.6 million and $123.7 million in overnight borrowings at December 31, 2022 and June 30, 2022, respectively. Interest rates on overnight borrowings are determined at the time of borrowing. There were no long-term fixed rate, fixed term advances at December 31, 2022 and June 30, 2022. The $65.0 million of irrevocable municipal letters of credit with the FHLB have been issued to secure municipal transactional deposit accounts, on behalf of Greene County Commercial Bank.

The Bank also pledges securities and certificates of deposit as collateral at the Federal Reserve Bank discount window for overnight borrowings. At December 31, 2022, approximately $16.8 million of collateral was available to be pledged against potential borrowings at the Federal Reserve Bank discount window. There were no balances outstanding with the Federal Reserve Bank at December 31, 2022.

The Bank has established unsecured lines of credit with Atlantic Central Bankers Bank for $15.0 million and two other financial institutions for $50.0 million. The Company has also established an unsecured line of credit with Atlantic Central Bankers Bank for $7.5 million. The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. There were no borrowings outstanding with these lines of credit for both the Company and the Bank at December 31, 2022 and June 30, 2022.

On September 17, 2020, the Company entered into Subordinated Note Purchase Agreements with 14 qualified institutional investors, issued at 4.75% Fixed-to-Floating Rate due September 17, 2030, in the aggregate principal amount of $20.0 million, carried net of issuance costs of $424,000 amortized over a period of 60 months.  These notes are callable on September 15, 2025.  At December 31, 2022, there were $19.8 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

On September 15, 2021, the Company entered into Subordinated Note Purchase Agreements with 18 qualified institutional investors, issued at 3.00% Fixed-to-Floating Rate due September 15, 2031, in the aggregate principal amount of $30.0 million, carried net of issuance costs of $499,000 amortized over a period of 60 months.  These notes are callable on September 15, 2026. At September 30, 2022, there were $29.6 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

At December 31, 2022, there were no other long-term borrowings and therefore no scheduled maturities of long-term borrowings.

37
EQUITY

Shareholders’ equity increased to $168.2 million at December 31, 2022 from $157.7 million at June 30, 2022, resulting primarily from net income of $16.2 million, partially offset by dividends declared and paid of $1.1 million and an increase in accumulated other comprehensive loss of $4.6 million. Unrealized loss on available for sale securities increased at December 31, 2022 compared to June 30, 2022, but decreased compared to September 30, 2022 as the yields on bonds increased during the current three months ended December 31, 2022.

On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 200,000 shares of its common stock. Repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance.  For the three and six months ending December 31, 2022, the Company did not repurchase any shares.

Selected Equity Data:
      
   
December 31, 2022
    
June 30, 2022
  
Shareholders’ equity to total assets, at end of period
    
6.43
%
    
6.13
%
Book value per share
  
$
19.76
    
$
18.53
  
Closing market price of common stock
  
$
57.42
    
$
45.29
  

   
For the six months ended December 31,
  
   
2022
    
2021
  
Average shareholders’ equity to average assets
    
6.35
%
    
6.80
%
Dividend payout ratio1
    
14.66
%
    
15.85
%
Actual dividends paid to net income2
    
6.76
%
    
7.29
%

1The dividend payout ratio has been calculated based on the dividends declared per share divided by basic earnings per share.  No adjustments have been made for dividends waived by Greene County Bancorp, MHC (“MHC”), the owner of 54.1% of the Company’s shares outstanding.
2 Dividends declared divided by net income. The MHC waived its right to receive dividends declared during the three months ended June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022, September 30, 2022, and December 31, 2022. Dividends declared during the three months ended March 31, 2021 and June 30, 2022 were paid to the MHC. The MHC’s ability to waive the receipt of dividends is dependent upon annual approval of its members as well as receiving the non-objection of the Federal Reserve Board.

Comparison of Operating Results for the Three and Six Months Ended December 31, 2022 and 2021

Average Balance Sheet

The following table sets forth certain information relating to the Company for the three and six months ended December 31, 2022 and 2021. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates.  No tax equivalent adjustments were made.  Average balances were based on daily averages. Average loan balances include nonperforming loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields.

38
   
Three months ended December 31,
  
   
2022
    
2021
  
(Dollars in thousands)
  
Average
Outstanding
Balance
    
Interest
Earned /
Paid
    
Average
Yield /
Rate
    
Average
Outstanding
Balance
    
Interest
Earned /
Paid
    
Average
Yield /
Rate
  
Interest-earning Assets:
                                    
Loans receivable, net1
  
$
1,367,759
    
$
14,801
      
4.33
%
  
$
1,126,568
    
$
11,990
      
4.26
%
Securities non-taxable
    
683,294
      
3,504
      
2.05
      
636,062
      
2,253
      
1.42
  
Securities taxable
    
407,916
      
1,999
      
1.96
      
407,193
      
1,517
      
1.49
  
Interest-bearing bank balances and federal funds
    
21,195
      
169
      
3.19
      
97,611
      
39
      
0.16
  
FHLB stock
    
2,812
      
55
      
7.82
      
1,114
      
12
      
4.31
  
Total interest-earning assets
    
2,482,976
      
20,528
      
3.31
%
    
2,268,548
      
15,811
      
2.79
%
Cash and due from banks
    
11,790
                      
12,495
                  
Allowance for loan losses
    
(22,369
)
                    
(20,952
)
                
Other noninterest-earning assets
    
95,110
                      
80,126
                  
Total assets
  
$
2,567,507
                    
$
2,340,217
                  
                                                 
Interest-Bearing Liabilities:
                                                
Savings and money market deposits
  
$
477,179
    
$
207
      
0.17
%
  
$
446,953
    
$
200
      
0.18
%
NOW deposits
    
1,583,966
      
3,200
      
0.81
      
1,440,348
      
575
      
0.16
  
Certificates of deposit
    
62,273
      
331
      
2.13
      
34,811
      
74
      
0.85
  
Borrowings
    
82,058
      
867
      
4.23
      
49,699
      
509
      
4.10
  
Total interest-bearing liabilities
    
2,205,476
      
4,605
      
0.84
%
    
1,971,811
      
1,358
      
0.28
%
Noninterest-bearing deposits
    
175,391
                      
189,830
                  
Other noninterest-bearing liabilities
    
23,393
                      
21,393
                  
Shareholders' equity
    
163,247
                      
157,183
                  
Total liabilities and equity
  
$
2,567,507
                    
$
2,340,217
                  
                                                 
Net interest income
          
$
15,923
                    
$
14,453
          
Net interest rate spread
                    
2.47
%
                    
2.51
%
Net earnings assets
  
$
277,500
                    
$
296,737
                  
Net interest margin
                    
2.57
%
                    
2.55
%
Average interest-earning assets to average interest-bearing liabilities
    
112.58
 %                    
115.05
 %                


1Calculated net of deferred loan fees and costs, loan discounts, and loans in process.

 
Taxable-equivalent net interest income and net interest margin
  
For the three months ended
December 31,
  
(Dollars in thousands)
  
2022
    
2021
  
Net interest income (GAAP)
  
$
15,923
    
$
14,453
  
Tax-equivalent adjustment(1)
    
1,283
      
816
  
Net interest income (fully taxable-equivalent)
  
$
17,206
    
$
15,269
  
                 
Average interest-earning assets
  
$
2,482,976
    
$
2,268,548
  
Net interest margin (fully taxable-equivalent)
    
2.77
%
    
2.69
%

1Net 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. The rate used for this adjustment was 21% for federal income taxes and 4.44% for New York State income taxes for the periods ended December 31, 2022 and 2021, respectively.

39
   
Six months ended December 31,
  
   
2022
    
2021
  
(Dollars in thousands)
  
Average
Outstanding
Balance
    
Interest
Earned /
Paid
    
Average
Yield /
Rate
    
Average
Outstanding
Balance
    
Interest
Earned /
Paid
    
Average
Yield /
Rate
  
Interest-earning Assets:
                                    
Loans receivable, net1
  
$
1,340,927
    
$
28,183
      
4.20
%
  
$
1,115,578
    
$
24,057
      
4.31
%
Securities non-taxable
    
690,716
      
6,581
      
1.91
      
607,722
      
4,344
      
1.43
  
Securities taxable
    
420,718
      
4,118
      
1.96
      
387,488
      
2,917
      
1.51
  
Interest-bearing bank balances and federal funds
    
13,333
      
196
      
2.94
      
100,411
      
81
      
0.16
  
FHLB stock
    
3,033
      
90
      
5.93
      
1,103
      
25
      
4.53
  
Total interest-earning assets
    
2,468,727
      
39,168
      
3.17
%
    
2,212,262
      
31,424
      
2.84
%
Cash and due from banks
    
12,348
                      
12,327
                  
Allowance for loan losses
    
(22,707
)
                    
(20,338
)
                
Other noninterest-earning assets
    
92,906
                      
77,511
                  
Total assets
  
$
2,551,274
                    
$
2,281,762
                  
                                                 
Interest-Bearing Liabilities:
                                                
Savings and money market deposits
  
$
488,173
    
$
410
      
0.17
%
  
$
447,248
    
$
406
      
0.18
%
NOW deposits
    
1,541,588
      
4,787
      
0.62
      
1,397,923
      
1,140
      
0.16
  
Certificates of deposit
    
66,030
      
551
      
1.67
      
34,775
      
151
      
0.87
  
Borrowings
    
88,094
      
1,663
      
3.78
      
38,612
      
875
      
4.53
  
Total interest-bearing liabilities
    
2,183,885
      
7,411
      
0.68
%
    
1,918,558
      
2,572
      
0.27
%
Noninterest-bearing deposits
    
179,803
                      
185,911
                  
Other noninterest-bearing liabilities
    
25,489
                      
22,174
                  
Shareholders' equity
    
162,097
                      
155,119
                  
Total liabilities and equity
  
$
2,551,274
                    
$
2,281,762
                  
                                                 
Net interest income
          
$
31,757
                    
$
28,852
          
Net interest rate spread
                    
2.49
%
                    
2.57
%
Net earnings assets
  
$
284,842
                    
$
293,704
                  
Net interest margin
                    
2.57
%
                    
2.61
%
Average interest-earning assets to average interest-bearing liabilities
    
113.04
%
                    
115.31
%
                


1Calculated net of deferred loan fees and costs, loan discounts, and loans in process.
2Includes tax-free securities, mortgage-backed securities, and asset-backed securities.

Taxable-equivalent net interest income and net interest margin
  
For the six months ended
December 31,
  
(Dollars in thousands)
  
2022
    
2021
  
Net interest income (GAAP)
  
$
31,757
    
$
28,852
  
Tax-equivalent adjustment(1)
    
2,407
      
1,582
  
Net interest income (fully taxable-equivalent)
  
$
34,164
    
$
30,434
  
                 
Average interest-earning assets
  
$
2,468,727
    
$
2,212,262
  
Net interest margin (fully taxable-equivalent)
    
2.77
%
    
2.75
%

1Net 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. The rate used for this adjustment was 21% for federal income taxes and 4.44% for New York State income taxes for the periods ended December 31, 2022 and 2021, respectively.

40
Rate / Volume Analysis

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated.  Information is provided in each category with respect to:

 (i)
Change attributable to changes in volume (changes in volume multiplied by prior rate);

(ii)
Change attributable to changes in rate (changes in rate multiplied by prior volume); and
  (iii)
The net change.
The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

   
Three Months Ended December 31,
2022 versus 2021
    
Six Months Ended December 31,
2022 versus 2021
  
(Dollars in thousands)
  
Increase/(Decrease)
Due To
    
Total
Increase/
    
Increase/(Decrease)
Due To
    
Total
Increase/
  
   
Volume
    
Rate
    
(Decrease)
    
Volume
    
Rate
    
(Decrease)
  
                                     
Interest Earning Assets:
                                    
Loans receivable, net1
  
$
2,611
    
$
200
    
$
2,811
    
$
4,753
    
$
(627
)
  
$
4,126
  
Securities non-taxable
    
179
      
1,072
      
1,251
      
647
      
1,590
      
2,237
  
Securities taxable
    
3
      
479
      
482
      
269
      
932
      
1,201
  
Interest-bearing bank balances and federal funds
    
(54
)
    
184
      
130
      
(127
)
    
242
      
115
  
FHLB stock
    
28
      
15
      
43
      
55
      
10
      
65
  
Total interest-earning assets
    
2,767
      
1,950
      
4,717
      
5,597
      
2,147
      
7,744
  
                                                 
Interest-Bearing Liabilities:
                                                
Savings and money market deposits
    
16
      
(9
)
    
7
      
30
      
(26
)
    
4
  
NOW deposits
    
63
      
2,562
      
2,625
      
126
      
3,521
      
3,647
  
Certificates of deposit
    
88
      
169
      
257
      
198
      
202
      
400
  
Borrowings
    
341
      
17
      
358
      
954
      
(166
)
    
788
  
Total interest-bearing liabilities
    
508
      
2,739
      
3,247
      
1,308
      
3,531
      
4,839
  
Net change in net interest income
  
$
2,259
    
$
(789
)
  
$
1,470
    
$
4,289
    
$
(1,384
)
  
$
2,905
  


1 Calculated net of deferred loan fees, loan discounts, and loans in process.

GENERAL

Return on average assets and return on average equity are common methods of measuring operating results. Annualized return on average assets decreased to 1.12% from 1.18% for the three months ended December 31, 2022 and 2021, respectively, and increased to 1.27% from 1.23% for the six months ended December 31, 2022 and 2021, respectively.  Annualized return on average equity increased to 17.64% for the three months and increased to 20.03% for the six months ended December 31, 2022 as compared to 17.50% for the three months and 18.04% for the six months ended December 31, 2021.  The decrease in return on average assets for the three months ended December 31, 2022 was due to a decrease in net income, due to an increase in noninterest expense of $1.6 million for the quarter as discussed below.  The increase in return on average assets for the six months ended December 31, 2022 and increase in return on average equity for the three and six months ended December 31, 2022 was primarily the result of net income outpacing growth in the balance sheet. Net income amounted to $7.2 million and $6.9 million for the three months ended December 31, 2022 and 2021, respectively, an increase of $321,000, or 4.7%, and amounted to $16.2 million and $14.0 million for the six months ended December 31, 2022 and 2021, respectively, an increase of $2.2 million, or 16.0%.  Average assets increased $227.3 million, or 9.7%, to $2.6 billion for the three months ended December 31, 2022 as compared to $2.3 billion for the three months ended December 31, 2021. Average equity increased $6.1 million, or 3.9%, to $163.2 million for the three months ended December 31, 2022 as compared to $157.2 million for the three months ended December 31, 2021. Average assets increased $269.5 million, or 11.8%, to $2.6 billion for the six months ended December 31, 2022 as compared to $2.3 billion for the six months ended December 31, 2021. Average equity increased $7.0 million, or 4.5%, to $162.1 million for the six months ended December 31, 2022 as compared to $155.1 million for the six months ended December 31, 2021.

41
INTEREST INCOME

Interest income amounted to $20.5 million for the three months ended December 31, 2022 as compared to $15.8 million for the three months ended December 31, 2021, an increase of $4.7 million, or 29.8%. Interest income amounted to $39.2 million for the six months ended December 31, 2022 as compared to $31.4 million for the six months ended December 31, 2021, an increase of $7.7 million, or 24.6%. The increase in average balances on loans and securities had the greatest impact on interest income. The rates earned on securities also increased during the quarter contributing to higher interest income.

Average loan balances increased $241.2 million and $225.3 million and the yield on loans increased 7 basis points and decreased 11 basis points when comparing the three and six months ended December 31, 2022 and 2021, respectively. The yield on loans decreased for the six months ended December 31, 2022 due to the fee income recognized on Paycheck Protection Program (“PPP”) loans for the six months ended December 31, 2021. Excluding PPP loan fees, loan yields increased 33 basis points when comparing the six months ended December 31, 2022 and 2021. Average securities increased $48.0 million and $116.3 million and the yield on such securities increased 29 and 47 basis points when comparing the three and six months ended December 31, 2022 and 2021, respectively.  Average interest-bearing bank balances and federal funds decreased $76.4 million and $87.1 million, and the yield increased 303 and 278 basis points when comparing the three and six months ended December 31, 2022 and 2021, respectively.

INTEREST EXPENSE

Interest expense amounted to $4.6 million for the three months ended December 31, 2022 as compared to $1.4 million for the three months ended December 31, 2021, an increase of $3.2 million or 239.1%. Interest expense amounted to $7.4 million for the six months ended December 31, 2022 as compared to $2.6 million for the six months ended December 31, 2021, an increase of $4.8 million or 188.1%. The increase in average cost of NOW deposits and certificates of deposit had the greatest impact on interest expense during the three and six months ended December 31, 2022.

Cost of interest-bearing liabilities increased 56 and 41 basis points when comparing the three and six months ended December 31, 2022 and 2021. The cost of NOW deposits increased 65 and 46 basis points, the cost of certificates of deposit increased 128 and 80 basis points, and the cost of savings and money market deposits remained flat when comparing the three and six months ended December 31, 2022 and 2021, respectively. The increase in the cost of interest-bearing liabilities was also due to growth in the average balance of interest-bearing liabilities of $233.7 million and $265.3 million, most notably due to an increase in NOW deposits of $143.6 million and $143.7 million, an increase in average savings and money market deposits of $30.2 million and $40.9 million, an increase in average borrowings of $32.4 million and $49.5 million, and an increase in average certificates of deposits of $27.5 million and $31.3 million, when comparing the three and six months ended December 31, 2022 and 2021, respectively. Yields on interest-earning assets and costs of interest-bearing deposits increased for the three and six months ended December 31, 2022, as the Federal Reserve Board raised interest rates throughout the calendar year 2022.

NET INTEREST INCOME

Net interest income increased $1.4 million to $15.9 million for the three months ended December 31, 2022 from $14.5 million for the three months ended December 31, 2021. Net interest income increased $2.9 million to $31.8 million for the six months ended December 31, 2022 from $28.9 million for the six months ended December 31, 2021. The increase in net interest income was the result of growth in the average balance of interest-earning assets, and increases in interest rates on interest-earning assets, which increased 52 and 33 basis points when comparing the three and six months ended December 31, 2022 and 2021, respectively. The increase in net interest income was offset by increases in the average balance of interest-bearing liabilities, and increases in rates paid on interest-bearing liabilities.

Net interest rate spread and margin both decreased when comparing the six months ended December 31, 2022 and 2021. Net interest rate spread decreased 4 and 8 basis points to 2.47% and 2.49% for the three and six months ended December 31, 2022 compared to 2.51% and 2.57% for the three and six months ended December 31, 2021, respectively. Net interest margin increased 2 basis points to 2.57%, for the three months ended December 31, 2022 compared to 2.55% for the three months ended December 31, 2021. Net interest margin decreased 4 basis points to 2.57%, for the six months ended December 31, 2022 compared to 2.61% for the six months ended December 31, 2021. The decrease during the current quarter was due to the higher interest rate environment, which resulted in higher rates paid on deposits, resulting in higher interest expense. This was partially offset by increases in interest income on loans and securities, as they are being repriced at higher yields and the interest rates earned on new balances are higher than the historic low levels.

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 2.77% and 2.69% for the three months ended December 31, 2022 and 2021, respectively, and was 2.77% and 2.75% for the six months ended December 31, 2022 and 2021, respectively.

42
Due to the large portion of fixed-rate residential mortgages in the Company’s portfolio, the Company closely monitors its interest rate risk, and the Company will continue to monitor and adjust the asset and liability mix as much as possible to take advantage of the benefits and reduce the risks or potential negative effects of changes in interest rates.  Management attempts to mitigate the interest rate risk through balance sheet composition. Several strategies are used to help manage interest rate risk such as maintaining a high level of liquid assets such as short-term federal funds sold and various investment securities and maintaining a high concentration of less interest-rate sensitive and lower-costing core deposits.

The Federal Reserve Board has taken a number of measures in an attempt to slow inflation. The Federal Reserve Board changed its Monetary Policy to raise rates in recent quarters. The rise in the federal funds rate has and is expected to continue to have a positive impact to the Company’s interest spread and margin as the rates on new loans and securities purchased are at a higher rate than in the prior year, however given how quickly the rate rise has been, it has not allowed the Company to reprice assets as quickly as deposits.

PROVISION FOR LOAN LOSSES

Provision for loan losses amounted to $244,000 and $1.3 million for the three months ended December 31, 2022 and 2021, respectively, and amounted to a benefit of $255,000 and a charge of $2.3 million for the six months ended December 31, 2022 and 2021, respectively. The provision for loan losses for the three months ended December 31, 2022 was due to the growth in gross loans partially offset by the decrease in loans classified as substandard. The benefit for the six months ended December 31, 2022 was due to a decrease in the balance and reserve percentage on loans adversely classified, partially offset by the growth in gross loans. Loans classified as substandard or special mention totaled $44.9 million at December 31, 2022 and $52.1 million at June 30, 2022, a decrease of $7.2 million.  Reserves on loans classified as substandard or special mention totaled $6.7 million at December 31, 2022 compared to $9.6 million at June 30, 2022, a decrease of $2.9 million. There were no loans classified as doubtful or loss at December 31, 2022 or June 30, 2022. Allowance for loan losses to total loans receivable was 1.60% at December 31, 2022 compared to 1.82% at June 30, 2022.

Net charge-offs amounted to $102,000 and $89,000 for the three months ended December 31, 2022 and 2021, respectively, an increase of $13,000. Net charge-offs totaled $217,000 and $252,000 for the six months ended December 31, 2022 and 2021, respectively, a decrease of $35,000. There were no significant charge offs in each loan segment during the three and six months ended December 31, 2022.

Nonperforming loans amounted to $5.4 million and $6.3 million at December 31, 2022 and June 30, 2022, respectively. The decrease in nonperforming loans during the period was primarily due to $1.1 million in loan repayments, $134,000 in loans returning to performing status, and $7,000 in charge-offs, partially offset by $277,000 of loans placed into nonperforming status. At December 31, 2022 nonperforming assets were 0.21% of total assets compared to 0.25% at June 30, 2022. Nonperforming loans were 0.39% and 0.50% of net loans at December 31, 2022 and June 30, 2022, respectively.

NONINTEREST INCOME

(In thousands)
  
For the three months
ended December 31,
    
Change from Prior Year
    
For the six months
ended December 31,
    
Change from Prior Year
  
Noninterest income:
  
2022
    
2021
    
Amount
    
Percent
    
2022
    
2021
    
Amount
    
Percent
  
Service charges on deposit accounts
  
$
1,234
    
$
1,158
    
$
76
      
6.56
%
  
$
2,451
    
$
2,227
    
$
224
      
10.06
%
Debit card fees
    
1,138
      
1,107
      
31
      
2.80
      
2,280
      
2,190
      
90
      
4.11
  
Investment services
    
198
      
278
      
(80
)
    
(28.78
)
    
378
      
491
      
(113
)
    
(23.01
)
E-commerce fees
    
29
      
27
      
2
      
7.41
      
55
      
60
      
(5
)
    
(8.33
)
Bank-owned life insurance
    
340
      
315
      
25
      
7.94
      
680
      
616
      
64
      
10.39
  
Net loss on available-for-sale securities
    
(251
)
    
-
      
(251
)
    
(100.00
)
    
(251
)
    
-
      
(251
)
    
(100.00
)
Other operating income
    
207
      
353
      
(146
)
    
(41.36
)
    
400
      
583
      
(183
)
    
(31.39
)
Total noninterest income
  
$
2,895
    
$
3,238
    
$
(343
)
    
(10.59
)%
  
$
5,993
    
$
6,167
    
$
(174
)
    
(2.82
)%

Noninterest income decreased $343,000, or 10.6%, to $2.9 million for the three months ended December 31, 2022 compared to $3.2 million for the three months ended December 31, 2021. Noninterest income decreased $174,000, or 2.8%, to $6.0 million for the six months ended December 31, 2022 compared to $6.2 million for the six months ended December 31, 2021. The decrease was primarily due to a decrease in investment service income and a net loss on sale of available for sale securities. This was partially offset by an increase in debit card fees and service charges on deposit accounts resulting from continued growth in the number of checking accounts with debit cards and the number of deposit accounts, and the income from bank-owned life insurance.

43
NONINTEREST EXPENSE

(In thousands)
  
For the three months
ended December 31,
    
Change from Prior Year
    
For the six months
ended December 31,
    
Change from Prior Year
  
Noninterest expense:
  
2022
    
2021
    
Amount
    
Percent
    
2022
    
2021
    
Amount
    
Percent
  
Salaries and employee benefits
  
$
5,449
    
$
5,034
    
$
415
      
8.24
%
  
$
10,877
    
$
9,771
    
$
1,106
      
11.32
%
Occupancy expense
    
513
      
573
      
(60
)
    
(10.47
)
    
1,037
      
1,078
      
(41
)
    
(3.80
)
Equipment and furniture expense
    
221
      
231
      
(10
)
    
(4.33
)
    
379
      
387
      
(8
)
    
(2.07
)
Service and data processing fees
    
664
      
650
      
14
      
2.15
      
1,366
      
1,288
      
78
      
6.06
  
Computer software, supplies and
    support
    
369
      
394
      
(25
)
    
(6.35
)
    
750
      
772
      
(22
)
    
(2.85
)
Advertising and promotion
    
145
      
98
      
47
      
47.96
      
221
      
199
      
22
      
11.06
  
FDIC insurance premiums
    
205
      
201
      
4
      
1.99
      
447
      
421
      
26
      
6.18
  
Legal and professional fees
    
1,697
      
421
      
1,276
      
303.09
      
2,148
      
817
      
1,331
      
162.91
  
Other
    
688
      
735
      
(47
)
    
(6.39
)
    
1,523
      
1,565
      
(42
)
    
(2.68
)
Total noninterest expense
  
$
9,951
    
$
8,337
    
$
1,614
      
19.36
%
  
$
18,748
    
$
16,298
    
$
2,450
      
15.03
%

Noninterest expense increased $1.6 million or 19.4%, to $9.9 million for the three months ended December 31, 2022 compared to $8.3 million for the three months ended December 31, 2021. Noninterest expense increased $2.4 million, or 15.0%, to $18.7 million for the six months ended December 31, 2022, compared to $16.3 million for the six months ended December 31, 2021. The increase during the three and six months ended December 31, 2022 was primarily due a non-recurring litigation reserve expense of $1.2 million and increases in salaries and employee benefits expense due to new positions created during the period to support the Company’s growth.

INCOME TAXES

Provision for income taxes reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements. The effective tax rate was 16.5% and 15.7% for the three and six months ended December 31, 2022 and 14.8% and 15.0% for the three and six months ended December 31, 2021. The statutory tax rate is impacted by the benefits derived from tax-exempt bond and loan income, the Company’s real estate investment trust subsidiary income, income received on the bank-owned life insurance, as well as the tax benefits derived from premiums paid to the Company’s pooled captive insurance subsidiary to arrive at the effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates or prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. The Company’s most significant form of market risk is interest rate risk since the majority of Company’s assets and liabilities are sensitive to changes in interest rates.  The Company’s primary sources of funds are deposits and proceeds from principal and interest payments on loans, mortgage-backed securities and debt securities, with lines of credit available through the Federal Home Loan Bank and Atlantic Central Bankers Bank as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition. At December 31, 2022, the Company had $60.8 million in cash and cash equivalents, representing 2.3% of total assets, and had $280.1 million available in unused lines of credit.

At December 31, 2022, liquidity measures were as follows:

Cash equivalents/(deposits plus short term borrowings)
    
2.56
%
(Cash equivalents plus unpledged securities)/(deposits plus short term borrowings)
    
8.34
%
(Cash equivalents plus unpledged securities plus additional borrowing capacity)/(deposits plus short term borrowings)
    
20.15
%

The Company’s unfunded loan commitments and unused lines of credit are as follows at December 31, 2022:

(In thousands)
      
Unfunded loan commitments
  
$
118,242
  
Unused lines of credit
    
93,697
  
Standby letters of credit
    
889
  
Total commitments
  
$
212,828
  

The Company anticipates that it will have sufficient funds available to meet current loan commitments based on the level of cash and cash equivalents as well as the available-for-sale investment portfolio and borrowing capacity.

44
Risk Participation Agreements

Risk participation agreements (“RPAs”) are guarantees issued by the Company to other parties for a fee, whereby the Company agrees to participate in the credit risk of a derivative customer of the other party. Under the terms of these agreements, the “participating bank” receives a fee from the “lead bank” in exchange for the guarantee of reimbursement if the customer defaults on an interest rate swap. The interest rate swap is transacted such that any and all exchanges of interest payments (favorable and unfavorable) are made between the lead bank and the customer. In the event that an early termination of the swap occurs and the customer is unable to make a required close out payment, the participating bank assumes that obligation and is required to make this payment.

RPAs in which the Company acts as the lead bank are referred to as “participations-out,” in reference to the credit risk associated with the customer derivatives being transferred out of the Company.  Participations-out generally occur concurrently with the sale of new customer derivatives.  The Company had no participations-out at December 31, 2022 or June 30, 2022.  RPAs where the Company acts as the participating bank are referred to as “participations-in,” in reference to the credit risk associated with the counterparty’s derivatives being assumed by the Company. The Company’s maximum credit exposure is based on its proportionate share of the settlement amount of the referenced interest rate swap. Settlement amounts are generally calculated based on the fair value of the swap plus outstanding accrued interest receivables from the customer. There was no credit exposure associated with risk participations-in as of December 31, 2022 and June 30, 2022 due to the recent rise in interest rate. The RPAs participations-ins are spread out over four financial institution counterparties and terms range between 5 to 14 years.

The Bank of Greene County and its wholly-owned subsidiary, Greene County Commercial Bank, met all applicable regulatory capital requirements at December 31, 2022 and June 30, 2022.

(Dollars in thousands)
  
Actual
    
For Capital
Adequacy
Purposes
    
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
    
Capital Conservation
Buffer
  
The Bank of Greene County
  
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
    
Actual
    
Required
  
As of December 31, 2022:
                                                
                                                 
Total risk-based capital
  
$
239,371
      
15.9
%
  
$
120,406
      
8.0
%
  
$
150,508
      
10.0
%
    
7.90
%
    
2.50
%
Tier 1 risk-based capital
    
220,515
      
14.7
      
90,305
      
6.0
      
120,406
      
8.0
      
8.65
      
2.50
  
Common equity tier 1 capital
    
220,515
      
14.7
      
67,728
      
4.5
      
97,830
      
6.5
      
10.15
      
2.50
  
Tier 1 leverage ratio
    
220,515
      
8.5
      
103,859
      
4.0
      
129,824
      
5.0
      
4.49
      
2.50
  
                                                                 
As of June 30, 2022:
                                                                
                                                                 
Total risk-based capital
  
$
221,236
      
16.0
%
  
$
110,294
      
8.0
%
  
$
137,867
      
10.0
%
    
8.05
%
    
2.50
%
Tier 1 risk-based capital
    
203,935
      
14.8
      
82,720
      
6.0
      
110,294
      
8.0
      
8.79
      
2.50
  
Common equity tier 1 capital
    
203,935
      
14.8
      
62,040
      
4.5
      
89,614
      
6.5
      
10.29
      
2.50
  
Tier 1 leverage ratio
    
203,935
      
8.1
      
100,193
      
4.0
      
125,242
      
5.0
      
4.14
      
2.50
  

Greene County Commercial Bank
                                                
As of December 31, 2022:
                                                
                                                 
Total risk-based capital
  
$
102,602
      
45.5
%
  
$
18,036
      
8.0
%
  
$
22,545
      
10.0
%
    
37.51
%
    
2.50
%
Tier 1 risk-based capital
    
102,602
      
45.5
      
13,527
      
6.0
      
18,036
      
8.0
      
39.51
      
2.50
  
Common equity tier 1 capital
    
102,602
      
45.5
      
10,145
      
4.5
      
14,655
      
6.5
      
41.01
      
2.50
  
Tier 1 leverage ratio
    
102,602
      
8.7
      
47,019
      
4.0
      
58,774
      
5.0
      
4.73
      
2.50
  
                                                                 
As of June 30, 2022:
                                                                
                                                                 
Total risk-based capital
  
$
94,408
      
41.5
%
  
$
18,195
      
8.0
%
  
$
22,744
      
10.0
%
    
33.51
%
    
2.50
%
Tier 1 risk-based capital
    
94,408
      
41.5
      
13,646
      
6.0
      
18,195
      
8.0
      
35.51
      
2.50
  
Common equity tier 1 capital
    
94,408
      
41.5
      
10,235
      
4.5
      
14,783
      
6.5
      
37.01
      
2.50
  
Tier 1 leverage ratio
    
94,408
      
8.1
      
46,874
      
4.0
      
58,593
      
5.0
      
4.06
      
2.50
  

45
Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4.
Controls and Procedures

Under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the  Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and in timely altering them to material information relating to the Company (or its consolidated subsidiaries) required to be filed in its periodic SEC filings.

There has been no change in the Company's internal control over financial reporting in connection with the quarterly evaluation that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II.
Other Information

 
Item 1.
Legal Proceedings
The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Except as noted below, management believes there are no such legal proceedings pending or threatened against the Company or its subsidiaries, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries. See Note 14 – Commitments and Contingent Liabilities to the Notes to the unaudited financial statements for a description of a current lawsuit in which the Company has been named a party.

 
Item 1A.
Risk Factors
Not applicable to smaller reporting companies.

 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
a)
Not applicable
 
b)
Not applicable
 
c)
On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program.  Under the repurchase program, the Company is authorized to repurchase up to 200,000 shares of its common stock. Repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. There were no additional share repurchases during the quarter ended December 31, 2022.

 
Item 3.
Defaults Upon Senior Securities
Not applicable.

 
Item 4.
Mine Safety Disclosures
Not applicable.

 
Item 5.
Other Information

a)
Not applicable

b)
There were no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors during the period covered by this Form 10-Q.

46
 
Item 6.
Exhibits

 
Exhibits
  
     
 
Greene County Bancorp, Inc. Stock Holding Company Charter as amended on January 19, 2023.
 
Certification of Chief Executive Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a)
 
Certification of Chief Financial Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a)
 
Statement of Chief Executive Officer, furnished pursuant to U.S.C. Section 1350
 
 Statement of Chief Financial Officer, furnished pursuant to U.S.C. Section 1350
 
101
The following materials from Greene County Bancorp, Inc. Form 10-Q for the quarter ended December 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements, (detail tagged).
 
104
Cover Page Integrative Data File (formatted in iXBRL and included in exhibit 101).

47
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.

Greene County Bancorp, Inc.

Date:  February 10, 2023

By: /s/ Donald E. Gibson

Donald E. Gibson
President and Chief Executive Officer

Date:  February 10, 2023

By: /s/ Michelle M. Plummer

Michelle M. Plummer, CPA, CGMA
Senior Executive Vice President, Chief Financial Officer, and Chief Operating Officer


48
EXHIBIT 3.1

GREENE COUNTY BANCORP, INC.

STOCK HOLDING COMPANY CHARTER

Section 1.  Corporate Title.  The full corporate title of the mutual holding company subsidiary holding company is Greene County Bancorp, Inc. (the “Company”).

Section 2.  Domicile.  The domicile of the Company shall be located in the Village of Catskill in the State of New York.

Section 3.  Duration.  The duration of the Company is perpetual.

Section 4.  Purpose and Powers.  The purpose of the Company is to pursue any or all of the lawful objectives of a federal mutual holding company chartered under Section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all of the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision (the "Office").

Section 5.  Capital Stock.  The total number of shares of all classes of the capital stock which the Company has authority to issue is 37,000,000 of which 36,000,000 shares shall be common stock, par value $0.10 per share, and of which 1,000,000 shares shall be serial preferred stock.  The shares may be issued from time to time as authorized by the board of directors without the approval of its stockholders, except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation.  The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par value.  Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Company.  The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted to the Company), labor, or services actually performed for the Company, or any combination of the foregoing.  In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the Company, shall be conclusive.  Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable.  In the case of a stock dividend, that part of the retained earnings of the Company that is transferred to common stock or paid in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance.

Except for shares issued in the initial organization of the Company, no shares of capital stock (including shares issuable upon conversion, exchange, or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons (except for shares issued to the parent mutual holding company) of the Company other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.

Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share, and there shall be no cumulation of votes for the election of directors.  Provided, that this restriction on voting separately by class or series shall not apply:


 (i)
To any provision which would authorize the holders of preferred stock, voting as a class or series, to elect some members of the board of directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock;


(ii)
To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Company with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Company if the preferred stock is exchanged for securities of such other corporation:  Provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the Office or the Federal Deposit Insurance Corporation;


(iii)
To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences.  An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving Company in a merger or consolidation for the Company, shall not be considered to be such an adverse change.

A description of the different classes and series of the Company's capital stock and a statement of the designations, and the relative rights, preferences and limitations of the shares of each class of and series of capital stock are as follows:

A.          Common Stock.  Except as provided in this Section 5 (or in any supplementary sections thereto) the holders of common stock shall exclusively possess all voting power.  Each holder of shares of common stock shall be entitled to one vote for each share held by such holder and there shall be no such cumulative voting.

Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to payment of dividends, the full amount of dividends and of sinking fund, retirement fund or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends.

In the event of any liquidation, dissolution, or winding up of the Company, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Company available for distribution remaining after:  (i) payment or provision for payment of the Company's debts and liabilities; (ii) distributions or provision for distributions in settlement of its liquidation account; and (iii) distributions or provisions for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Company.  Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock.

B.           Preferred Stock.  The Company may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified.  The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes.  The terms of each series shall be set forth in a supplementary section to the charter.  All shares of the same class shall be identical, except as to the following relative rights and preferences, as to which there may be variations between different series:


 (a)
The distinctive serial designation and the number of shares constituting such series;


(b)
The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s), the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends;


(c)
The voting powers, full or limited, if any, of shares of such series;


(d)
Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;


(e)
The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company;


(f)
Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund;


(g)
Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Company and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;


(h)
The price or other consideration for which the shares of such series shall be issued; and


(i)
Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock.

Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.

The board of directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series and, within the limitations set forth in this section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established.

Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the board of directors, the Company shall file with the Secretary to the Office a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof.

Section 6.  Preemptive Rights.  Holders of the capital stock of the Company shall not be entitled to preemptive rights with respect to any shares of the Company which may be issued.

Section 7.  Directors.  The Company shall be under the direction of a board of directors.  The authorized number of directors, as stated in the Company’s bylaws, shall not be fewer than five nor more than fifteen except when a greater or lesser number is approved by the Director of the Office, or his or her delegate.

Section 8.  Amendment of Charter.  Except as provided in Section 5, no amendment, addition, alteration, change or repeal of this charter shall be made, unless such is proposed by the board of directors of the Company, approved by the stockholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the Office.

GREENE COUNTY BANCORP, INC.
       
ATTEST:
  
/s/ Susan P. Timan
  
   
Susan P. Timan
  
   
Corporate Secretary
  
       

By:
/s/ Donald E. Gibson
  
   
Donald E. Gibson
  
   
President and Chief Executive Officer
  

Effective Date:  May 15, 2001, as amended January 19, 2023

EXHIBIT 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Donald E. Gibson, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Greene County Bancorp, Inc.;

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the consolidated financial condition, consolidated results of operations and consolidated cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2023
/s/ Donald E. Gibson
  
 
Donald E. Gibson,

President and Chief Executive Officer


EXHIBIT 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michelle M. Plummer, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Greene County Bancorp, Inc.;

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the consolidated financial condition, consolidated results of operations and consolidated cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2023
/s/ Michelle M. Plummer
  
 
Michelle M. Plummer, CPA, CGMA

Senior Executive Vice President, Chief Financial Officer
and Chief Operating Officer


EXHIBIT 32.1

Statement of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Donald E. Gibson, President and Chief Executive Officer, of Greene County Bancorp, Inc. (the “Company”) certifies in his capacity as an officer of the Company that he has reviewed the Quarterly Report of the Company on Form 10-Q for the quarter ended December 31, 2022 and that to the best of his knowledge:


 a.
the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


b.
the information contained in the report fairly presents, in all material respects, the consolidated financial condition and consolidated results of operations of the Company as of the dates and for the periods covered by the report.

This statement is authorized to be attached as an exhibit to the report so that this statement will accompany the report at such time as the report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 USC 1350.  It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.

Date: February 10, 2023
/s/ Donald E. Gibson
  
 
Donald E. Gibson,

President and Chief Executive Officer


EXHIBIT 32.2

Statement of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Michelle M. Plummer, Chief Financial Officer, of Greene County Bancorp, Inc. (the “Company”) certifies in her capacity as an officer of the Company that he or she has reviewed the Quarterly Report of the Company on Form 10-Q for the quarter ended December 31, 2022 and that to the best of her knowledge:


 a.
the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


b.
the information contained in the report fairly presents, in all material respects, the consolidated financial condition and consolidated results of operations of the Company as of the dates and for the periods covered by the report.

This statement is authorized to be attached as an exhibit to the report so that this statement will accompany the report at such time as the report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 USC 1350.  It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.

Date: February 10, 2023
/s/ Michelle M. Plummer
  
 
Michelle M. Plummer, CPA, CGMA

Senior Executive Vice President, Chief Financial Officer
and Chief Operating Officer