# GREENE COUNTY BANCORP INC (GCBC) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from GREENE COUNTY BANCORP INC's 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/1070524/000114036122032848/brhc10041684_10k.htm Accession: 0001140361-22-032848 Filing date: 2022-09-09 Report date: 2022-06-30 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/GCBC/ All MD&A years: /company/GCBC/mda/ Previous year: /company/GCBC/mda/fy2021/ (FY 2021) Next year: /company/GCBC/mda/fy2023/ (FY 2023) ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion is an analysis of the Company’s results of operations for years shown and was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This annual 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 annual 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: [[GREPCENT_TABLE]] [["","(a)","changes in general market interest rates,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(b)","general economic conditions,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(c)","economic or policy changes related to the COVID-19 pandemic,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(d)","legislative and regulatory changes,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(e)","monetary and fiscal policies of the U.S. Treasury and the Federal Reserve,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(f)","changes in the quality or composition of Greene County Bancorp, Inc.\u2019s loan and investment portfolios,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(g)","deposit flows,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(h)","competition, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(i)","demand for financial services in Greene County Bancorp, Inc.\u2019s market area."]] [[/GREPCENT_TABLE]] 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. 23 Index Selected Financial Data [[GREPCENT_TABLE]] [["","","At or for the year ended June 30,"],["(Dollars in thousands, except per share amounts)","","2022","","","2021","","","2020"],["SELECTED FINANCIAL CONDITION DATA:"],["Total assets","","$","2,571,740","","","$","2,200,335","","","$","1,676,803"],["Loans receivable, net","","","1,229,355","","","","1,085,947","","","","993,522"],["Securities available-for-sale","","","408,062","","","","390,890","","","","226,709"],["Securities held-to-maturity","","","761,852","","","","496,914","","","","383,657"],["Equity securities","","","273","","","","307","","","","267"],["Deposits","","","2,212,604","","","","2,005,108","","","","1,501,075"],["Borrowings","","","123,700","","","","3,000","","","","25,484"],["Shareholders' equity","","","157,714","","","","149,584","","","","128,805"],["AVERAGE BALANCES:"],["Total assets","","","2,366,070","","","","1,931,589","","","","1,470,870"],["Interest-earning assets","","","2,291,448","","","","1,892,650","","","","1,450,398"],["Loans receivable, net","","","1,123,201","","","","1,042,280","","","","861,322"],["Securities","","","1,066,189","","","","751,690","","","","528,131"],["Deposits","","","2,134,584","","","","1,750,733","","","","1,318,027"],["Borrowings","","","51,193","","","","22,386","","","","15,300"],["Shareholders' equity","","","156,098","","","","137,511","","","","120,387"],["SELECTED OPERATIONS DATA:"],["Total interest income","","","63,444","","","","58,328","","","","53,314"],["Total interest expense","","","5,439","","","","5,183","","","","8,481"],["Net interest income","","","58,005","","","","53,145","","","","44,833"],["Provision for loan losses","","","3,278","","","","3,974","","","","3,905"],["Net interest income after provision for loan losses","","","54,727","","","","49,171","","","","40,928"],["Total noninterest income","","","12,137","","","","9,667","","","","8,650"],["Total noninterest expense","","","33,959","","","","31,223","","","","27,822"],["Income before provision for income taxes","","","32,905","","","","27,615","","","","21,756"],["Provision for income taxes","","","4,919","","","","3,673","","","","3,029"],["Net income","","","27,986","","","","23,942","","","","18,727"],["FINANCIAL RATIOS:"],["Return on average assets1","","","1.18","%","","","1.24","%","","","1.27","%"],["Return on average shareholders\u2019 equity2","","","17.93","","","","17.41","","","","15.56"],["Noninterest expenses to average total assets","","","1.44","","","","1.62","","","","1.89"],["Average interest-earning assets to average interest-bearing liabilities","","","114.57","","","","117.01","","","","118.84"],["Net interest rate spread3","","","2.50","","","","2.76","","","","2.98"],["Net interest margin4","","","2.53","","","","2.81","","","","3.09"],["Efficiency ratio5","","","48.41","","","","49.71","","","","52.02"],["Shareholders\u2019 equity to total assets, at end of period","","","6.13","","","","6.80","","","","7.68"],["Average shareholders\u2019 equity to average assets","","","6.60","","","","7.12","","","","8.18"],["Dividend payout ratio6","","","15.81","","","","17.08","","","","20.00"],["Actual dividends declared to net income7","","","9.41","","","","10.15","","","","11.95"],["Nonperforming assets to total assets, at end of period","","","0.25","","","","0.11","","","","0.24"],["Nonperforming loans to net loans, at end of period","","","0.51","","","","0.21","","","","0.41"],["Allowance for loan losses to nonperforming loans","","","360.31","","","","854.76","","","","402.04"],["Allowance for loan losses to total loans receivable","","","1.82","","","","1.77","","","","1.62"],["Book value per share8","","$","18.53","","","$","17.57","","","$","15.13"],["Basic earnings per share","","","3.29","","","","2.81","","","","2.20"],["Diluted earnings per share","","","3.29","","","","2.81","","","","2.20"],["OTHER DATA:"],["Closing market price of common stock","","$","45.29","","","$","28.12","","","$","22.30"],["Number of full-service offices","","","17","","","","17","","","","16"],["Number of full-time equivalent employees","","","198","","","","186","","","","182"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1","Ratio of net income to average total assets."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2","Ratio of net income to average shareholders\u2019 equity."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["3","The difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["4","Net interest income as a percentage of average interest-earning assets."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["5","Noninterest expense divided by the sum of net interest income and noninterest income."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["6","Dividends per share divided by basic earnings per share. This calculation does not take into account the waiver of dividends by Greene County Bancorp, MHC."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["7","Dividends declared divided by net income."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["8","Shareholders\u2019 equity divided by outstanding shares."]] [[/GREPCENT_TABLE]] 24 Index GENERAL Greene County Bancorp, Inc. (the “Company”) is the holding company for The Bank of Greene County (the “Bank”), a community-based bank offering a variety of financial services to meet the needs of the communities it serves.  Greene County Bancorp, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol “GCBC.”  Greene County Bancorp, MHC is a mutual holding company that owns 54.1% of the Company’s outstanding common stock.  The Bank of Greene County is a federally chartered savings bank.  The Bank of Greene County’s principal business is attracting deposits from customers within its market area and investing those funds primarily in loans, with excess funds used to invest in securities.  At June 30, 2022, The Bank of Greene County operated 17 full-service branches, an administration office, a customer call center, a lending center, and an operations center in New York’s Hudson Valley Region.  In June 2004, Greene County Commercial Bank (“Commercial Bank”) was opened for the limited purpose of providing financial services to local municipalities.  The Commercial Bank is a subsidiary of The Bank of Greene County, and is a New York State-chartered commercial bank.  In June 2011, 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.  Greene Properties Holding, Ltd. is a subsidiary of The Bank of Greene County.  Certain mortgages and notes held by The Bank of Greene County were transferred to and are beneficially owned by Greene Property Holdings, Ltd.  The Bank of Greene County continues to service these loans.  In December 2014, Greene Risk Management, Inc. was formed as a Nevada corporation that is operating as a pooled captive insurance company.  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. 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. 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. Management of Credit Risk Management considers credit risk to be an important risk factor affecting the financial condition and operating results of the Company. The potential for loss associated with this risk factor is managed through a combination of policies approved by the Company’s Board of Directors, the monitoring of compliance with these policies, and the periodic reporting and evaluation of loans with problem characteristics. Policies relate to the maximum amount that can be granted to a single borrower and such borrower’s related interests, the aggregate amount of loans outstanding by type in relation to total assets and capital, loan concentrations, loan-to-collateral value ratios, approval limits and other underwriting criteria. Policies also exist with respect to the rating of loans, determination of when loans should be placed on a nonperforming status and the factors to be considered in establishing the Company’s allowance for loan losses.  Management also considers credit risk when evaluating potential and current holdings of securities.  Credit risk is a critical component in evaluating corporate debt securities.  The Company has purchased municipal securities as part of its strategy based on the fact that such securities can offer a higher tax-equivalent yield than other similar investments. 25 Index During the COVID-19 pandemic, management has been working with borrowers to determine best strategies to help mitigate the impact of the temporary business closures, decline in business, and loss of employment, including payment deferrals, debt consolidations and/or loan restructurings. The Company instituted a loan deferment program of principal and/or interest payments.  During the quarter ended March 31, 2022, in accordance with the CARES Act and Consolidated Appropriations Act of 2021, the loan deferral program ended, therefore there were no loans that have payments deferred as of June 30, 2022. As of June 30, 2021 there were 8 loans aggregating $8.0 million.  As allowed under the CARES Act, and as amended by Section 541 of the Consolidated Appropriations Act of 2021, the Company did not report these loans as delinquent and Trouble Debt Restructuring disclosures, and continued to recognize interest income during the deferral period.  These loans were closely monitored to determine collectability, accrual and delinquency status.  The Company continues to monitor credit risk form negative impacts related to the COVID-19 pandemic.  For further discussion regarding loan deferrals see Part II, Item 8 Financial Statements and Supplemental Data, Note 4, Loans of this Report. FINANCIAL OVERVIEW Net income for the year ended June 30, 2022 amounted to $28.0 million, or $3.29 per basic and diluted share, as compared to $23.9 million, or $2.81 per basic and diluted share, for the year ended June 30, 2021, an increase of $4.1 million, or 16.9%.  The increase in net income was primarily the result of increases of $4.9 million in net interest income, $2.5 million in noninterest income and a decrease of $696,000 in provision for loan losses partially offset by an increase of $2.7 million in noninterest expense and $1.2 million in provision for income taxes. The increase in net interest income resulted from growth in interest-earning assets offset by the decrease in rates when comparing the years ended June 30, 2022 and 2021.  Growth in interest-earning assets was within both investment securities and loans. Growth in loans was primarily in commercial real estate mortgages and residential mortgages. Net interest rate spread and margin both decreased when comparing the years ended June 30, 2022 and 2021. Net interest rate spread decreased 26 basis points to 2.50% for the year ended June 30, 2022 compared to 2.76% for the year ended June 30, 2021. Net interest margin decreased 28 basis points to 2.53% for the year ended June 30, 2022 compared to 2.81% for the year ended June 30, 2021.  Decreases in net interest rate spread and net interest margin resulted primarily from lower yielding securities and loans offset by lower rates on deposits as well as growth in loan and securities balances. Total assets grew $371.4 million, or 16.9%, to $2.6 billion at June 30, 2022 as compared to $2.2 billion at June 30, 2021.  Net loans increased $143.4 million, or 13.2%, to $1.2 billion at June 30, 2022 as compared to $1.1 billion at June 30, 2021.  Included in net loans at June 30, 2022, are $610,000 of SBA Paycheck Protection Program loans. Securities classified as available-for-sale and held-to-maturity increased $282.1 million, or 31.8%, to $1.2 billion at June 30, 2022 as compared to $887.8 million at June 30, 2021.  Deposits grew $207.5 million, or 10.4%, to $2.2 billion at June 30, 2022 as compared to $2.0 billion at June 30, 2021.  Total shareholders’ equity amounted to $157.7 million and $149.6 million at June 30, 2022 and 2021, respectively, or 6.1% and 6.8% of total assets, respectively. Comparison of Financial Condition as of June 30, 2022 and 2021 SECURITIES Securities available-for-sale and held-to-maturity increased $282.1 million, or 31.8%, to $1.2 billion at June 30, 2022 as compared to $887.8 million at June 30, 2021. This increase was the result of utilizing excess cash on hand due to an increase in deposits. Securities purchases totaled $669.2 million during the year ended June 30, 2022 and consisted of $492.1 million of state and political subdivision securities, $106.1 million of mortgage-backed securities, $24.9 million of corporate securities, $23.2 million of US Treasury securities and $22.9 million of collateralized mortgage obligations. Principal pay-downs and maturities during the year amounted to $359.7 million, primarily consisting of $60.2 million of mortgage-backed securities, $297.2 million of state and political subdivision securities, $2.3 million of collateralized mortgage obligations. The Company holds 63.4% of its securities portfolio at June 30, 2022 in state and political subdivision securities to take advantage of tax savings and to promote the Company’s participation in the communities in which it operates. Mortgage-backed securities and asset-backed securities held within the portfolio do not contain sub-prime loans and are not exposed to the credit risk associated with such lending. Investment Maturity Schedule The following table set forth information with regard to contractual maturities of debt securities shown in amortized cost ($) and weighted average yield (%) at June 30, 2022. Weighted-average yields are an arithmetic computation of income not fully tax equivalent (“FTE”) adjusted divided by amortized cost.  Mortgage-backed securities balances are presented based on final maturity date and do not reflect the expected cash flows from monthly principal repayments.  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. No tax-equivalent adjustments were made in calculating the weighted average yield. 26 Index [[GREPCENT_TABLE]] [["(Dollars in thousands)","","1 Year or Less","","","1-5 Years","","","5-10 Years","","","After 10 Years","","","Total"],["Securities available-for-sale:"],["U.S. government sponsored enterprises","","$","-","","","","-","","","$","-","","","","-","","","$","13,066","","","","1.31","%","","$","-","","","","-","","","$","13,066","","","","1.31","%"],["U.S. treasury securities","","","-","","","","-","","","","7,767","","","","0.97","%","","","12,391","","","","1.39","%","","","-","","","","-","","","","20,158","","","","1.23","%"],["State and political subdivisions","","","247,894","","","","1.19","%","","","84","","","","1.89","%","","","-","","","","-","","","","-","","","","-","","","","247,978","","","","1.19","%"],["MBS-residential","","","-","","","","-","","","","174","","","","3.33","%","","","3,131","","","","0.66","%","","","29,881","","","","1.17","%","","","33,186","","","","1.13","%"],["MBS -multi-family","","","1,818","","","","2.22","%","","","8,202","","","","1.53","%","","","26,904","","","","1.13","%","","","62,429","","","","1.20","%","","","99,353","","","","1.22","%"],["Corporate debt securities","","","-","","","","-","","","","11,829","","","","2.72","%","","","4,555","","","","2.76","%","","","1,500","","","","3.03","%","","","17,884","","","","2.76","%"],["Total securities available-for-sale","","$","249,712","","","","1.20","%","","$","28,056","","","","1.89","%","","$","60,047","","","","1.32","%","","$","93,810","","","","1.22","%","","$","431,625","","","","1.26","%"],["Securities held-to-maturity:"],["U.S. treasury securities","","$","-","","","","-","","","$","21,878","","","","2.04","%","","$","11,745","","","","1.51","%","","$","-","","","","-","","","$","33,623","","","","1.85","%"],["State and political subdivisions","","","67,633","","","","1.31","%","","","145,056","","","","1.90","%","","","105,515","","","","2.16","%","","","175,693","","","","1.95","%","","","493,897","","","","1.89","%"],["MBS-residential","","","1","","","","4.50","%","","","684","","","","3.32","%","","","322","","","","3.50","%","","","41,454","","","","2.31","%","","","42,461","","","","2.34","%"],["MBS-multi-family","","","7,577","","","","2.51","%","","","42,999","","","","3.01","%","","","100,616","","","","1.49","%","","","20,729","","","","0.88","%","","","171,921","","","","1.84","%"],["Corporate debt securities","","","-","","","","-","","","","-","","","","-","","","","19,400","","","","4.08","%","","","500","","","","1.64","%","","","19,900","","","","4.02","%"],["Other securities","","","10","","","","3.22","%","","","-","","","","-","","","","1","","","","7.00","%","","","39","","","","4.93","%","","","50","","","","4.62","%"],["Total securities held-to-maturity","","$","75,221","","","","1.43","%","","$","210,617","","","","2.15","%","","$","237,599","","","","2.00","%","","$","238,415","","","","1.92","%","","$","761,852","","","","1.96","%"]] [[/GREPCENT_TABLE]] LOANS Net loans receivable increased $143.4 million, or 13.2%, to $1.2 billion at June 30, 2022 from $1.1 billion at June 30, 2021.  The loan growth experienced during the year consisted primarily of $122.7 million in commercial real estate loans, $35.7 million in residential real estate loans, $21.9 million in multi-family loans, $5.1 million in residential construction and land loans, $21.0 million in commercial construction loans and a $2.9 million net decrease in deferred fees due to the forgiveness of SBA PPP loans. This growth was partially offset by a $62.0 million decrease in commercial loans, $400,000 decrease in home equity loans and consumer installment loans, and $3.1 million increase in allowance for loan losses.  SBA PPP loans decreased $66.8 million to $610,000 at June 30, 2022 from $67.4 million at June 30, 2021, due to the receipt of forgiveness proceeds.   The Company continues to experience loan growth as a result of continued growth in its customer base and its relationships with other financial institutions in originating loan participations.  The Company continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products.  Updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status.  Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy. Loan Portfolio Composition Set forth below is selected information concerning the composition of the Company’s loan portfolio in dollar amounts and in percentages (before deductions for deferred fees and costs, unearned discounts and allowances for losses) as of the dates indicated. [[GREPCENT_TABLE]] [["","","At June 30,"],["","","2022","","","2021","","","2020","","","2019","","","2018"],["(Dollars in thousands)","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent"],["Residential real estate","","$","360,824","","","","28.82","%","","$","325,167","","","","29.34","%","","$","279,332","","","","27.58","%","","$","267,802","","","","33.55","%","","$","255,848","","","","35.75","%"],["Residential construction and land","","","15,298","","","","1.22","","","","10,185","","","","0.92","","","","11,847","","","","1.17","","","","7,462","","","","0.93","","","","9,951","","","","1.39"],["Multi-family","","","63,822","","","","5.10","","","","41,951","","","","3.78","","","","25,104","","","","2.48","","","","24,592","","","","3.08","","","","14,961","","","","2.09"],["Commercial real estate","","","595,635","","","","47.57","","","","472,887","","","","42.66","","","","381,415","","","","37.67","","","","329,668","","","","41.31","","","","283,935","","","","39.68"],["Commercial construction","","","83,748","","","","6.69","","","","62,763","","","","5.66","","","","74,920","","","","7.40","","","","36,361","","","","4.56","","","","39,366","","","","5.50"],["Home equity","","","17,877","","","","1.43","","","","18,285","","","","1.65","","","","22,106","","","","2.18","","","","23,185","","","","2.91","","","","21,919","","","","3.06"],["Consumer installment(1)","","","4,512","","","","0.36","","","","4,942","","","","0.45","","","","4,817","","","","0.48","","","","5,481","","","","0.69","","","","5,017","","","","0.70"],["Commercial loans","","","110,271","","","","8.81","","","","172,228","","","","15.54","","","","213,119","","","","21.04","","","","103,554","","","","12.97","","","","84,644","","","","11.83"],["Total gross loans","","$","1,251,987","","","","100.00","%","","$","1,108,408","","","","100.00","%","","$","1,012,660","","","","100.00","%","","$","798,105","","","","100.00","%","","$","715,641","","","","100.00","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Includes direct automobile loans (on both new and used automobiles) and personal loans."]] [[/GREPCENT_TABLE]] 27 Index Loan Maturity Schedule and Interest Rate Sensitivity The following table sets forth certain information as of June 30, 2022 regarding the amount of loans maturing or re-pricing in the Company's portfolio.  Adjustable-rate loans are included in the period in which interest rates are next scheduled to adjust rather than the period in which they contractually mature and fixed-rate loans are included in the period in which the final contractual repayment is due.  Lines of credit with no specified maturity date are included in the category “Within 1 Year.” Home equity loans are included within consumer loan portfolio below. [[GREPCENT_TABLE]] [["(In thousands)","","1 Year or Less","","","1-5 Years","","","5-15 Years","","","After 15 Years","","","Total"],["Fixed rate:"],["Residential real estate","","$","729","","","$","10,345","","","$","168,637","","","$","77,243","","","$","256,954"],["Residential construction and land","","","6,820","","","","136","","","","265","","","","-","","","","7,221"],["Multi-family","","","-","","","","748","","","","4,514","","","","-","","","","5,262"],["Commercial real estate","","","23,836","","","","28,387","","","","137,553","","","","3,493","","","","193,269"],["Commercial construction","","","8,559","","","","771","","","","-","","","","-","","","","9,330"],["Consumer loans","","","759","","","","4,130","","","","3,342","","","","-","","","","8,231"],["Commercial loans","","","6,603","","","","23,583","","","","34,559","","","","675","","","","65,420"],["Total fixed rate loans","","$","47,306","","","$","68,100","","","$","348,870","","","$","81,411","","","$","545,687"],["Variable rate:"],["Residential real estate","","$","16,037","","","$","52,072","","","$","35,761","","","$","-","","","$","103,870"],["Residential construction and land","","","8,077","","","","-","","","","-","","","","-","","","","8,077"],["Multi-family","","","2,207","","","","31,758","","","","24,595","","","","-","","","","58,560"],["Commercial real estate","","","151,565","","","","167,027","","","","79,352","","","","4,422","","","","402,366"],["Commercial construction","","","62,865","","","","11,553","","","","-","","","","-","","","","74,418"],["Consumer loans","","","14,158","","","","-","","","","-","","","","-","","","","14,158"],["Commercial loans","","","33,246","","","","3,629","","","","7,976","","","","-","","","","44,851"],["Total variable rate loans","","$","288,155","","","$","266,039","","","$","147,684","","","$","4,422","","","$","706,300"],["Total loan portfolio","","$","335,461","","","$","334,139","","","$","496,554","","","$","85,833","","","$","1,251,987"]] [[/GREPCENT_TABLE]] Potential Problem Loans 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 and other assets 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.  Assets that do not currently expose the insured financial institutions to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.”  For further discussion regarding how management determines when a loan should be classified, see Part II, Item 8 Financial Statements and Supplemental Data, Note 4, Loans of this Report. Management has been working with borrowers since the COVID-19 pandemic started to determine best strategies to help mitigate the impact of the temporary business closures, decline in business, and loss of employment, including payment deferrals, debt consolidations and/or loan restructurings. The Company has accounted for the loan deferment program in accordance with the CARES Act and Section 541 of the Consolidated Appropriations Act of 2021.  The program was ended during the quarter ended March 31, 2022 and therefore as of June 30, 2022, there were zero loans on payment deferral compared to eight loans aggregating $8.0 million as of June 30, 2021. For further discussion regarding loan deferrals, see Part II, Item 8 Financial Statements and Supplemental Data, Note 4, Loans of this Report. 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. 28 Index 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 II, Item 8 Financial Statements and Supplemental Data, Note 4 Loans of this Report. Analysis of Nonaccrual Loans, Nonperforming Assets and Restructured Loans The table below details additional information related to nonaccrual loans for the periods indicated: [[GREPCENT_TABLE]] [["","","At June 30,"],["(Dollars in thousands)","","2022","","","2021","","","2020","","","2019","","","2018"],["Nonaccrual loans:"],["Residential real estate","","$","2,948","","","$","1,324","","","$","2,513","","","$","2,474","","","$","1,778"],["Residential construction and land","","","1","","","","-","","","","-","","","","-","","","","-"],["Multi-family","","","-","","","","-","","","","151","","","","-","","","","-"],["Commercial real estate","","","1,269","","","","444","","","","781","","","","598","","","","1,147"],["Commercial construction","","","-","","","","-","","","","-","","","","-","","","","-"],["Home equity","","","188","","","","237","","","","319","","","","452","","","","298"],["Consumer installment","","","7","","","","-","","","","-","","","","6","","","","18"],["Commercial","","","1,904","","","","296","","","","313","","","","108","","","","276"],["Total nonaccrual loans","","","6,317","","","","2,301","","","","4,077","","","","3,638","","","","3,517"],["Accruing loans delinquent 90 days or more:"],["Residential real estate","","","-","","","","-","","","","-","","","","-","","","","62"],["Total accruing loans delinquent 90 days or more","","","-","","","","-","","","","-","","","","-","","","","62"],["Foreclosed real estate:"],["Residential real estate","","","68","","","","64","","","","-","","","","53","","","","119"],["Total foreclosed real estate","","","68","","","","64","","","","-","","","","53","","","","119"],["Total nonperforming assets","","$","6,385","","","$","2,365","","","$","4,077","","","$","3,691","","","$","3,698"],["Troubled debt restructuring:"],["Nonperforming (included above)","","$","2,707","","","$","354","","","$","304","","","$","531","","","$","774"],["Performing (accruing and excluded above)","","","2,336","","","","5,050","","","","909","","","","1,368","","","","1,557"],["Nonaccrual loans to total loans","","","0.50","%","","","0.21","%","","","0.40","%","","","0.46","%","","","0.49","%"],["Nonperforming loans to total loans","","","0.50","%","","","0.21","%","","","0.40","%","","","0.46","%","","","0.50","%"],["Nonperforming assets to total assets","","","0.25","%","","","0.11","%","","","0.24","%","","","0.29","%","","","0.32","%"],["Allowance for loan losses to nonperforming loans","","","360.31","%","","","854.76","%","","","402.04","%","","","362.84","%","","","335.96","%"],["Allowance for loan losses to nonaccrual loans","","","360.31","%","","","854.76","%","","","402.04","%","","","362.84","%","","","341.88","%"]] [[/GREPCENT_TABLE]] Nonperforming assets amounted to $6.4 million at June 30, 2022 and $2.4 million at June 30, 2021, respectively.  Total impaired loans amounted to $10.8 million at June 30, 2022 compared to $6.3 million at June 30, 2021, an increase of $4.5 million, or 71.1%.  The increase in impaired loans was the result of an increase in residential real estate loans, commercial real estate and commercial loans becoming delinquent and going on nonaccrual as well as commercial real estate loans becoming impaired based on management’s annual loan review process.  Impaired loans include loans that have been modified in a troubled debt restructuring and are performing under the modified terms and have therefore been returned to performing status. 29 Index Residential real estate impaired loans amounted to $2.9 million as of June 20, 2022, as compared to $1.1 million as of June 30, 2021, an increase of $1.8 million.  The increase in residential real estate impaired loans was the result of nine relationships continuing to deteriorate and moving into nonaccrual status, and therefore classified as impaired. The average recorded investment of these new impaired loans was $193,000 as of June 30, 2022.  Commercial real estate impaired loans amounted to $3.8 million as of June 30, 2022, as compared to $1.2 million as of June 30, 2021, an increase of $2.6 million.  The increase in commercial real estate impaired loans was the result of two relationships continuing to deteriorate and therefore classified as impaired. The average recorded investment of these new impaired loans was $1.4 million as of June 30, 2022. 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 real estate loans 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. These loans will be returned to accrual status once they have demonstrated a history of timely payments.  Loans on nonaccrual status totaled $2.3 million at June 30, 2021 of which $260,000 were in the process of foreclosure.  At June 30, 2021, there were two residential real estate loans totaling $158,000 and one commercial real estate loan totaling $102,000 in the process of foreclosure. Included in nonaccrual loans were $1.2 million of loans which were less than 90 days past due at June 30, 2021, 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. For additional details on impaired loans, see the table in Part II, Item 8 Financial Statements and Supplemental Data, Note 4, Loans of this Report. 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. Loans classified as substandard or special mention totaled $52.1 million at June 30, 2022 compared to $49.7 million at June 30, 2021, an increase of $2.4 million. During the year ended June 30, 2022 the Company further downgraded commercial real estate and residential real estate loans from pass and special mention to substandard due to deterioration in borrower cash flows, delinquent payments and further financial deterioration or not improving financial performance. This was offset by upgrading commercial construction loans from special mention and substandard to pass and upgrading commercial loans from substandard to pass, because of improvements in borrower cash flows and financial performance. Management continues to monitor classified loan relationships closely.  Reserves on these loans totaled $9.6 million at June 30, 2022 compared to $7.8 million at June 30, 2021, an increase of $1.8 million.  No loans were classified as doubtful or loss at June 30, 2022 or 2021. Allowance for loan losses to total loans receivable was 1.82% at June 30, 2022, and 1.77% at June 30, 2021.  As of June 30, 2022 and 2021, there were $610,000 and $67.4 million, respectively, in SBA PPP loans which are 100% guaranteed by the SBA with no allowance allocated to these loans.  Excluding the SBA guaranteed loans, the allowance for loan losses to total loans receivable would have been 1.82% and 1.89% at June 30, 2022 and 2021, respectively. The increase in the allowance for loan losses to total loans receivable is due to the increase in classified loan reserves, offset by a decrease in qualitative factors, given the overall economic improvements over the past year and improvements in delinquent loans. 30 Index Net charge-offs totaled $185,000 and $697,000 for the years ended June 30, 2022 and 2021, respectively.  The decrease in charge-off activity for the year was primarily within the commercial loan portfolio, as the Company received a partial recovery on a larger charge off that occurred in the second quarter of the fiscal year end June 30, 2021 and had lower charge off activity for the current fiscal year.  This was offset by an increase in charge off activity in the consumer loan portfolio. Nonperforming loans amounted to $6.3 million and $2.3 million at June 30, 2022 and 2021, respectively. At June 30, 2022 and June 30, 2021, respectively, nonperforming assets were 0.25% and 0.11% of total assets, and nonperforming loans were 0.50% and 0.21% of net loans, with deterioration split primarily in residential real estate loans and commercial loans, year over year.  We have not originated “no documentation” mortgage loans and our loan portfolio does not include any mortgage loans that we classify as sub-prime. Analysis of allowance for loan losses activity [[GREPCENT_TABLE]] [["","","At or for the Years Ended June 30,"],["(Dollars in thousands)","","2022","","","2021","","","2020","","","2019","","","2018"],["Balance at the beginning of the period","","$","19,668","","","$","16,391","","","$","13,200","","","$","12,024","","","$","11,022"],["Charge-offs:"],["Residential real estate","","","27","","","","26","","","","102","","","","287","","","","141"],["Commercial real estate","","","-","","","","-","","","","-","","","","74","","","","-"],["Consumer installment","","","454","","","","309","","","","459","","","","374","","","","318"],["Commercial loans","","","112","","","","500","","","","335","","","","51","","","","159"],["Total loans charged off","","","593","","","","835","","","","896","","","","786","","","","618"],["Recoveries:"],["Residential real estate","","","13","","","","13","","","","16","","","","13","","","","-"],["Consumer installment","","","115","","","","124","","","","130","","","","137","","","","85"],["Commercial loans","","","280","","","","1","","","","36","","","","153","","","","5"],["Total recoveries","","","408","","","","138","","","","182","","","","303","","","","90"],["Net charge-offs","","","185","","","","697","","","","714","","","","483","","","","528"],["Provisions charged to operations","","","3,278","","","","3,974","","","","3,905","","","","1,659","","","","1,530"],["Balance at the end of the period","","$","22,761","","","$","19,668","","","$","16,391","","","$","13,200","","","$","12,024"],["Allowance for loan losses to total loans receivable","","","1.82","%","","","1.77","%","","","1.62","%","","","1.65","%","","","1.68","%"],["Residential real estate net charge-offs to average loans outstanding","","","0.00","%","","","0.00","%","","","0.01","%","","","0.04","%","","","0.02","%"],["Commercial real estate net charge-offs to average loans outstanding","","","-","","","","-","","","","-","","","","0.01","%","","","-"],["Consumer installment net charge-offs to average loans outstanding","","","0.03","%","","","0.02","%","","","0.04","%","","","0.03","%","","","0.04","%"],["Commercial loans net charge-offs to average loans outstanding","","","(0.01","%)","","","0.05","%","","","0.03","%","","","(0.01","%)","","","0.02","%"],["Net charge-offs to average loans outstanding","","","0.02","%","","","0.07","%","","","0.08","%","","","0.06","%","","","0.08","%"],["Net charge-offs to average assets","","","0.01","%","","","0.04","%","","","0.05","%","","","0.04","%","","","0.05","%"]] [[/GREPCENT_TABLE]] 31 Index Allocation of Allowance for Loan Losses The following table sets forth the allocation of the allowance for loan losses by loan category at the dates indicated.  The allowance is allocated to each loan category based on historical loss experience and economic conditions. [[GREPCENT_TABLE]] [["","","At June 30,"],["","","2022","","","2021","","","2020","","","2019","","","2018"],["","","","","","Percent","","","","","","Percent","","","","","","Percent","","","","","","Percent","","","","","","Percent"],["","","","","","of loans","","","","","","of loans","","","","","","of loans","","","","","","of loans","","","","","","of loans"],["","","","","","in each","","","","","","in each","","","","","","in each","","","","","","in each","","","","","","in each"],["","","Amount of","","","category","","","Amount of","","","category","","","Amount of","","","category","","","Amount of","","","category","","","Amount of","","","category"],["","","loan loss","","","to total","","","loan loss","","","to total","","","loan loss","","","to total","","","loan loss","","","to total","","","loan loss","","","to total"],["(Dollars in thousands)","","allowance","","","loans","","","allowance","","","loans","","","allowance","","","loans","","","allowance","","","loans","","","allowance","","","loans"],["Residential real estate","","$","2,373","","","","28.8","%","","$","2,012","","","","29.3","%","","$","2,091","","","","27.6","%","","$","2,026","","","","33.6","%","","$","2,116","","","","35.8","%"],["Residential construction and land","","","141","","","","1.2","","","","106","","","","0.9","","","","141","","","","1.2","","","","87","","","","0.9","","","","114","","","","1.4"],["Multi-family","","","119","","","","5.1","","","","186","","","","3.8","","","","176","","","","2.5","","","","180","","","","3.1","","","","162","","","","2.1"],["Commercial real estate","","","16,221","","","","47.6","","","","13,049","","","","42.7","","","","8,634","","","","37.6","","","","7,110","","","","41.3","","","","5,979","","","","39.6"],["Commercial construction","","","1,114","","","","6.7","","","","1,535","","","","5.7","","","","2,053","","","","7.4","","","","872","","","","4.5","","","","950","","","","5.5"],["Home equity","","","89","","","","1.4","","","","165","","","","1.6","","","","295","","","","2.2","","","","314","","","","2.9","","","","317","","","","3.1"],["Consumer installment","","","349","","","","0.4","","","","267","","","","0.5","","","","197","","","","0.5","","","","250","","","","0.7","","","","224","","","","0.7"],["Commercial loans","","","2,355","","","","8.8","","","","2,348","","","","15.5","","","","2,804","","","","21.0","","","","2,361","","","","13.0","","","","2,128","","","","11.8"],["Unallocated","","","-","","","","-","","","","-","","","","-","","","","-","","","","-","","","","-","","","","-","","","","34","","","","-"],["Totals","","$","22,761","","","","100.0","%","","$","19,668","","","","100.0","%","","$","16,391","","","","100.0","%","","$","13,200","","","","100.0","%","","$","12,024","","","","100.0","%"]] [[/GREPCENT_TABLE]] For further discussion and detail regarding the Allowance for Loan Loss, please refer to Part II, Item 8 Financial Statements and Supplemental Data, Note 4 Loans of this Report. PREMISES AND EQUIPMENT Premises and equipment amounted to $14.4 million and $14.1 million at June 30, 2022 and 2021, respectively.  Purchases totaled $1.1 million during the year ended June 30, 2022, consisting primarily of building improvements, IT equipment and new ATMs.  Purchases totaled $1.3 million during the year ended June 30, 2021, consisting primarily of building improvements and equipment for a new branch located in Albany, New York, equipment for disaster recovery and new ATMs. Depreciation for the year ended June 30, 2022 totaled $826,000, compared to $775,000 for the year ended June 30, 2021.  There were no disposals of premises and equipment during the fiscal years ended June 30, 2022 and 2021. PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets totaled $15.2 million at June 30, 2022, compared to $8.5 million at June 30, 2021, an increase of $6.7 million.  The increase was due to an increase of $7.0 million in deferred taxes due to the increase in unrealized losses on available for sale securities, offset by a decrease of $176,000 in prepaid expense. Real estate acquired as a result of foreclosure, or in-substance foreclosure, is classified as foreclosed real estate (“FRE”) until such time as it is sold.  When real estate is classified as FRE, it is recorded at its fair value, less estimated costs of disposal establishing a new cost basis. Upon transfer to FRE, if the value of the property is less than the loan, less any related specific loan loss provisions, the difference is charged against the allowance for loan losses.  Any subsequent write-down of FRE is charged against earnings.  There were $68,000 in FRE assets at June 30, 2022.  At June 30, 2021, there were $64,000 in FRE assets. DEPOSITS Deposits totaled $2.2 billion at June 30, 2022 and $2.0 billion at June 30, 2021, an increase of $207.5 million, or 10.4%. Noninterest-bearing deposits increased $13.6 million, or 7.8%, NOW deposits increased $133.4 million, or 9.9%, money market deposits increased $11.8 million, or 8.1%, savings deposits increased $42.7 million, or 14.2% and certificates of deposits increased $6.0 million, or 17.3% when comparing June 30, 2022 and June 30, 2021.  Included within certificates of deposits at June 30, 2022 were $7.2 million in brokered certificates of deposit. Deposits increased during the year ended June 30, 2022 as a result of an increase in new account relationships and stimulus funds deposited across all three of our primary business lines, retail, commercial and municipal. 32 Index [[GREPCENT_TABLE]] [["","","At June 30,"],["","","2022","","","2021","","","2020"],["(Dollars in thousands)","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent"],["Transaction and savings deposits:"],["Noninterest-bearing deposits","","$","187,697","","","","8.5","%","","$","174,114","","","","8.7","%","","$","138,187","","","","9.2","%"],["Certificates of deposit","","","40,801","","","","1.8","","","","34,791","","","","1.7","","","","35,625","","","","2.4"],["Savings deposits","","","343,731","","","","15.5","","","","301,050","","","","15.0","","","","241,371","","","","16.1"],["Money market deposits","","","157,623","","","","7.1","","","","145,832","","","","7.3","","","","133,970","","","","8.9"],["NOW deposits","","","1,482,752","","","","67.0","","","","1,349,321","","","","67.3","","","","951,922","","","","63.4"],["Total deposits","","$","2,212,604","","","","100.0","%","","$","2,005,108","","","","100.0","%","","$","1,501,075","","","","100.0","%"]] [[/GREPCENT_TABLE]] The following table summarizes total uninsured deposits based on the same methodologies and assumptions used for the bank regulatory reporting: [[GREPCENT_TABLE]] [["","","At June 30,"],["(Dollars in thousands)","","2022","","","2021","","","2020"],["Estimated amount of uninsured deposits","","$","328,352","","","$","278,632","","","$","172,852"]] [[/GREPCENT_TABLE]] The following table presents the maturity distribution of certificates of deposits of $250,000 or more: [[GREPCENT_TABLE]] [["(Dollars in thousands)","","At June 30, 2022"],["Portion of certificates of deposits in excess of insurance limits","","$","3,385"],["Certificates of deposits otherwise uninsured with a maturity of:"],["Within three months","","$","1,401"],["After three but within six months","","","300"],["After six but within twelve months","","","301"],["Over twelve months","","","1,383"]] [[/GREPCENT_TABLE]] The amount of certificates of deposit by time remaining to maturity as of June 30, 2022 is set forth in Part II, Item 8 Financial Statements and Supplemental Data, Note 6, Deposits of this Report. BORROWINGS At June 30, 2022, borrowings for the Company amounted to $173.0 million, compared to $22.6 million at June 30, 2021, an increase of $150.4 million.  At June 30, 2022, borrowings consisted of $49.3 million of Fixed-to-Floating Rate Subordinated Notes and $123.7 million of overnight borrowings with Federal Home Loan Bank of New York (“FHLB”). During the year ended June 30, 2022, the Company repaid $3.0 million of short-term borrowings with Atlantic Central Bankers Bank. 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 15, 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 June 30, 2022, there were $19.7 million of 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 June 30, 2022, there were $29.6 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs. The Company’s borrowing agreements are discussed further within Part II, Item 8 Financial Statements and Supplemental Data, Note 7 Borrowings of this Report. 33 Index OTHER LIABILITIES Other liabilities, consisting primarily of accrued liabilities, totaled $28.4 million at June 30, 2022, compared to $23.0 million at June 30, 2021, an increase of $5.4 million.  This increase was due primarily to increased accrued expenses for various employee benefit plans, including short-term and long-term incentive plans, and supplemental executive retirement plan.  The ASU 2016-02 lease liability also increased by $119,000 when comparing the year ended June 30, 2022 to June 30, 2021. This was partially offset by a decrease in the pension liability of $404,000 when comparing the year ended June 30, 2022 to June 30, 2021. For further information regarding these changes, see Part II, Item 8 Financial Statements and Supplemental Data, Note 9 Employee Benefits Plans and Note 10 Stock-Based Compensation of this Report. SHAREHOLDERS’ EQUITY Shareholders’ equity increased to $157.7 million at June 30, 2022 from $149.6 million at June 30, 2021, resulting primarily from net income of $28.0 million partially offset by dividends declared and paid of $2.6 million and increase in other comprehensive loss, net of taxes of $17.2 million. Other comprehensive loss increased during the year due to the change in the market value of securities available for sale. On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program.  Under the repurchase program, the Company may repurchase up to 200,000 shares of its common stock.  Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. As of June 30, 2022, the Company had repurchased a total of 24,400 shares of the 200,000 shares authorized by the repurchase program. The Company did not repurchase any shares during the year ended June 30, 2022. [[GREPCENT_TABLE]] [["Selected Equity Data:","","At June 30,"],["","","2022","","","2021"],["Shareholders\u2019 equity to total assets, at end of period","","","6.13","%","","","6.80","%"],["Book value per share","","$","18.53","","","$","17.57"],["Closing market price of common stock","","$","45.29","","","$","28.12"],["","","For the years ended June 30,"],["","","","2022","","","","2021"],["Average shareholders\u2019 equity to average assets","","","6.60","%","","","7.12","%"],["Dividend payout ratio1","","","15.81","%","","","17.08","%"],["Actual dividends paid to net income2","","","9.41","%","","","10.15","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1","The 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 (\u201cMHC\u201d), the owner of 54.1% of the Company\u2019s shares outstanding."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2","Dividends declared divided by net income. The MHC waived its right to receive dividends declared during the three months ended; September 30, 2020; December 31, 2020; June 30, 2021; September 30, 2021; December 31, 2021 and March 31, 2022. Dividends declared during the three months ended March 31, 2021 and June 30, 2022 were paid to the MHC. The MHC\u2019s 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."]] [[/GREPCENT_TABLE]] 34 Index Comparison of Operating Results for the Years Ended June 30, 2022 and 2021 Average Balance Sheet The following table sets forth certain information relating to the Company for the years ended June 30, 2022 and 2021.  For the years 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 are 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. [[GREPCENT_TABLE]] [["","","Fiscal Years Ended June 30,"],["","","","","","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 receivable1","","$","1,144,308","","","$","47,125","","","","4.12","%","","$","1,060,471","","","$","45,275","","","","4.27","%"],["Securities non-taxable","","","652,468","","","","9,517","","","","1.46","","","","455,684","","","","7,953","","","","1.75"],["Securities taxable","","","413,721","","","","6,595","","","","1.59","","","","296,006","","","","4,958","","","","1.68"],["Interest-earning bank balances and federal funds","","","79,489","","","","157","","","","0.20","","","","79,345","","","","81","","","","0.10"],["FHLB stock","","","1,462","","","","50","","","","3.42","","","","1,144","","","","61","","","","5.33"],["Total interest-earning assets","","","2,291,448","","","","63,444","","","","2.77","%","","","1,892,650","","","","58,328","","","","3.08","%"],["Cash and due from banks","","","13,474","","","","","","","","","","","","12,526"],["Allowance for loan losses","","","(21,107",")","","","","","","","","","","","(18,191",")"],["Other noninterest-earning assets","","","82,255","","","","","","","","","","","","44,604"],["Total assets","","$","2,366,070","","","","","","","","","","","$","1,931,589"],["Interest-Bearing Liabilities:"],["Savings and money market deposits","","$","467,543","","","$","759","","","","0.16","%","","$","403,360","","","$","952","","","","0.24","%"],["NOW deposits","","","1,446,381","","","","2,434","","","","0.17","","","","1,156,672","","","","2,895","","","","0.25"],["Certificates of deposit","","","34,948","","","","283","","","","0.81","","","","35,044","","","","374","","","","1.07"],["Borrowings","","","51,193","","","","1,963","","","","3.83","","","","22,386","","","","962","","","","4.30"],["Total interest-bearing liabilities","","","2,000,065","","","","5,439","","","","0.27","%","","","1,617,462","","","","5,183","","","","0.32","%"],["Noninterest-bearing deposits","","","185,712","","","","","","","","","","","","155,657"],["Other noninterest-bearing liabilities","","","24,195","","","","","","","","","","","","20,959"],["Shareholders' equity","","","156,098","","","","","","","","","","","","137,511"],["Total liabilities and equity","","$","2,366,070","","","","","","","","","","","$","1,931,589"],["Net interest income","","","","","","$","58,005","","","","","","","","","","","$","53,145"],["Net interest rate spread","","","","","","","","","","","2.50","%","","","","","","","","","","","2.76","%"],["Net earnings assets","","$","291,383","","","","","","","","","","","$","275,188"],["Net interest margin","","","","","","","","","","","2.53","%","","","","","","","","","","","2.81","%"],["Average interest-earning assets to average interest-bearing liabilities","","","114.57","%","","","","","","","","","","","117.01","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1","Calculated net of deferred loan fees and costs, loan discounts, and loans in process."]] [[/GREPCENT_TABLE]] 35 Index Taxable-equivalent net interest income and net interest margin [[GREPCENT_TABLE]] [["","","For the year ended June 30,"],["(Dollars in thousands)","","2022","","","2021"],["Net interest income (GAAP)","","$","58,005","","","$","53,145"],["Tax-equivalent adjustment(1)","","","3,670","","","","3,032"],["Net interest income (fully taxable-equivalent)","","$","61,675","","","$","56,177"],["Average interest-earning assets","","$","2,291,448","","","$","1,892,650"],["Net interest margin (fully taxable-equivalent)","","","2.69","%","","","2.97","%"]] [[/GREPCENT_TABLE]] (1) Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. The rate used for this adjustment was approximately 21% for federal income taxes for the periods ended June 30, 2022 and 2021, and 4.44% for New York State income taxes for the periods ended June 30, 2022 and 2021. Rate / Volume Analysis The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated.  Information is provided in each category with respect to: [[GREPCENT_TABLE]] [["","(i)","Change attributable to changes in volume (changes in volume multiplied by prior rate);"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(ii)","Change attributable to changes in rate (changes in rate multiplied by prior volume); and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(iii)","The net change."]] [[/GREPCENT_TABLE]] The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate. [[GREPCENT_TABLE]] [["","","Years Ended June 30,"],["","","2022 versus 2021","","","2021 versus 2020"],["","","Increase/(Decrease)","","","Total","","","Increase/(Decrease)","","","Total"],["","","Due To","","","Increase/","","","Due To","","","Increase/"],["(In thousands)","","Volume","","","Rate","","","(Decrease)","","","Volume","","","Rate","","","(Decrease)"],["Interest-earning Assets:"],["Loans receivable, net1","","$","3,484","","","$","(1,634",")","","$","1,850","","","$","7,938","","","$","(1,822",")","","$","6,116"],["Securities non-taxable","","","3,040","","","","(1,476",")","","","1,564","","","","2,627","","","","(1,749",")","","","878"],["Securities taxable","","","1,884","","","","(247",")","","","1,637","","","","2,034","","","","(3,442",")","","","(1,408",")"],["Interest-earning bank balances and federal funds","","","-","","","","76","","","","76","","","","274","","","","(815",")","","","(541",")"],["FHLB stock","","","14","","","","(25",")","","","(11",")","","","(15",")","","","(16",")","","","(31",")"],["Total interest-earning assets","","","8,422","","","","(3,306",")","","","5,116","","","","12,858","","","","(7,844",")","","","5,014"],["Interest-Bearing Liabilities:"],["Savings and money market deposits","","","146","","","","(339",")","","","(193",")","","","224","","","","(620",")","","","(396",")"],["NOW deposits","","","610","","","","(1,071",")","","","(461",")","","","1,881","","","","(5,400",")","","","(3,519",")"],["Certificates of deposit","","","(1",")","","","(90",")","","","(91",")","","","(15",")","","","(90",")","","","(105",")"],["Borrowings","","","1,117","","","","(116",")","","","1,001","","","","152","","","","570","","","","722"],["Total interest-bearing liabilities","","","1,872","","","","(1,616",")","","","256","","","","2,242","","","","(5,540",")","","","(3,298",")"],["Net change in net interest income","","$","6,550","","","$","(1,690",")","","$","4,860","","","$","10,616","","","$","(2,304",")","","$","8,312"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1","Calculated net of deferred loan fees, loan discounts, and loans in process."]] [[/GREPCENT_TABLE]] As the above table shows, net interest income for the fiscal year ended June 30, 2022 has been affected most significantly by the increase in volume of loans and securities, partially offset by an increase in volume of interest-bearing liabilities and a decrease in rate on interest-earning assets. Net interest rate spread decreased 26 basis points to 2.50% for the fiscal year ended June 30, 2022 as compared to 2.76% for the fiscal year ended June 30, 2021.  Net interest margin decreased 28 basis points to 2.53% for the fiscal year ended June 30, 2022 as compared to 2.81% for the fiscal year ended June 30, 2021. 36 Index The Federal Reserve Board has taken a number of measures in an attempt to slow inflation. The Federal Reserve Board changed their Monetary Policy to raise rates in the recent two quarters. The rise in the federal funds rate will 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.   The Company continually monitors its interest rate risk, the impact to net interest income and capital from the increase in interest rate and is well within established limits. INTEREST INCOME Interest income for the year ended June 30, 2022 amounted to $63.4 million as compared to $58.3 million for the year ended June 30, 2021, an increase of $5.1 million, or 8.8%.  The increase in average loan and securities balances had the greatest impact on interest income when comparing the years ended June 30, 2022 and 2021.   Interest income is derived from loans, securities and other interest-earning assets.  Total average interest-earning assets increased to $2.3 billion for the year ended June 30, 2022 as compared to $1.9 billion for the year ended June 30, 2021, an increase of $398.8 million, or 21.1%.   The yield earned on such assets decreased 31 basis points to 2.77% for the year ended June 30, 2022 as compared to 3.08% for the year ended June 30, 2021. Interest income earned on loans increased to $47.1 million for the year ended June 30, 2022 as compared to $45.3 million for the year ended June 30, 2021.  Average loans outstanding increased $83.8 million, or 7.9%, to $1.1 billion for the year ended June 30, 2022 as compared to $1.1 billion for the year ended June 30, 2021.  The yield on such loans decreased 15 basis points to 4.12% for the year ended June 30, 2022 as compared to 4.27% for the year ended June 30, 2021. At June 30, 2022, approximately 56.4% of the loan portfolio was adjustable rate, of which a large portion is tied to the Prime Rate. Interest income earned on securities (excluding FHLB stock) increased to $16.1 million for the year ended June 30, 2022 as compared to $12.9 million for the year ended June 30, 2021.  Included in interest income earned on securities is yield maintenance payments received when various agency mortgage-backed securities prepaid in advance of maturity of $264,000 for the year ended June 30, 2022, a decrease of $565,000 from $829,000 when compared to June 30, 2021. The average balance of securities increased $314.5 million to $1.1 billion for the year ended June 30, 2022 as compared to $751.7 million for the year ended June 30, 2021 resulting from growth in deposits within our retail, commercial and municipal lines of business.  The average yield on such securities-non taxable decreased 29 basis points to 1.46% for the year ended June 30, 2022 as compared to 1.75% for the year ended June 30, 2021.  The average yield on such securities-taxable decreased 9 basis points to 1.59% for the year ended June 30, 2022 as compared to 1.68% for the year ended June 30, 2021.  No adjustments were made to tax-effect the income for the state and political subdivision securities, which often carry a lower yield because of the offset expected from income tax benefits gained from holding such securities. Interest income earned on federal funds and interest-earning deposits amounted to $157,000 for the year ended June 30, 2022 as compared to $81,000 for the year ended June 30, 2021.  The average balance of federal funds and interest-earning deposits increased marginally at $79.5 million for the year ended June 30, 2022 as compared to $79.3 million for the year ended June 30, 2021.  Dividends on FHLB stock decreased to $50,000 for the year ended June 30, 2022 as compared to $61,000 for the year ended June 30, 2021. INTEREST EXPENSE Interest expense for the year ended June 30, 2022 amounted to $5.4 million as compared to $5.2 million for the year ended June 30, 2021, an increase of $0.2 million, or 4.9%.  The increase in average balance of interest-bearing liabilities had the greatest impact on interest expense when comparing the years ended June 30, 2022 and 2021. Total average interest-bearing liabilities increased to $2.0 billion for the year ended June 30, 2022 as compared to $1.6 billion for the year ended June 30, 2021, an increase of $382.6 million, or 23.7%.  Much of this increase related to NOW accounts, primarily resulting from growth in new deposit relationships within our retail, commercial and municipal lines of business. The overall rate paid on interest-bearing liabilities decreased 5 basis points to 0.27% for the year ended June 30, 2022 compared to 0.32% for the year ended June 30, 2021. Interest expense paid on savings and money market accounts amounted to $759,000 for the year ended June 30, 2022 as compared to $952,000 for the year ended June 30, 2021, a decrease of $193,000, or 20.3%. The average rate paid on savings and money market accounts decreased 8 basis points to 0.16% for the year ended June 30, 2022 as compared to 0.24% for the year ended June 30, 2021.  The average balance of savings and money market accounts increased by $64.2 million to $467.5 million for the year ended June 30, 2022 as compared to $403.4 million for the year ended June 30, 2021. Interest expense paid on NOW accounts amounted to $2.4 million for the year ended June 30, 2022 as compared to $2.9 million for the year ended June 30, 2021, a decrease of $461,000 or 15.9%. The average rate paid on NOW accounts decreased 8 basis points to 0.17% for the year ended June 30, 2022 as compared to 0.25% for the year ended June 30, 2021.  The average balance of NOW accounts increased by $289.7 million to $1.4 billion for the year ended June 30, 2022 as compared to $1.2 billion for the year ended June 30, 2021. 37 Index Interest expense paid on certificates of deposit amounted to $283,000 for the year ended June 30, 2022 as compared to $374,000 for the year ended June 30, 2021, a decrease of $91,000.  The average rate paid on certificates of deposit decreased 26 basis points to 0.81% for the year ended June 30, 2022 as compared to 1.07% for the year ended June 30, 2021.  The average balance on certificates of deposit was $35.0 million at both the year ended June 30, 2022 and June 30, 2021. Interest expense on borrowings amounted to $2.0 million for the year ended June 30, 2022 as compared to $962,000 for the year ended June 30, 2021, as the average balance of borrowings increased $28.8 million to $51.2 million for the year ended June 30, 2022 as compared to $22.4 million for the year ended June 30, 2021. The average rate paid on borrowings decreased 47 basis points to 3.83% from 4.30% during the period.  The decrease in the average rate and increase in average valance of borrowings was due to the Company entering into subordinated note purchase agreements in September 2021, which was at a lower rate than the subordinated note purchase agreements purchased in September of 2020. PROVISION FOR LOAN LOSSES Management continues to closely monitor asset quality and adjust the level of the allowance for loan losses when necessary.  The amount recognized for the provision for loan losses is determined by management based on its ongoing analysis of the adequacy of the allowance for loan losses. Provision for loan losses amounted to $3.3 million and $4.0 million for the years ended June 30, 2022 and 2021, respectively, a decrease of $696,000. The provision for the year ended June 30, 2022 was due to further downgrades in classified loans and loan growth, offset by economic improvements, including full labor participation, as well as the lifting of the COVID-19 pandemic restrictions. The provision for the year ended June 30, 2021 was mainly due to the economic uncertainty related to the COVID-19 pandemic and loan growth.  The allocation of this provision was primarily for commercial real estate and commercial loans.  For additional details relating to the allocation of the provision for loan losses, see Part II, Item 8 Financial Statements and Supplemental Data, Note 4, Loans of this report. NONINTEREST INCOME [[GREPCENT_TABLE]] [["(Dollars in thousands)","","For the years ended June 30,","","","Change from Prior Year"],["","","2022","","","2021","","","Amount","","","Percent"],["Service charges on deposit accounts","","$","4,439","","","$","3,414","","","$","1,025","","","","30.02","%"],["Debit card fees","","","4,381","","","","3,860","","","","521","","","","13.50"],["Investment services","","","944","","","","732","","","","212","","","","28.96"],["E-commerce fees","","","107","","","","113","","","","(6",")","","","(5.31",")"],["Bank owned life insurance","","","1,269","","","","425","","","","844","","","","198.59"],["Other operating income","","","997","","","","1,123","","","","(126",")","","","(11.22",")"],["Total noninterest income","","$","12,137","","","$","9,667","","","$","2,470","","","","25.55","%"]] [[/GREPCENT_TABLE]] Noninterest income increased $2.4 million, or 25.6%, to $12.1 million for the year ended June 30, 2022 as compared to $9.7 million for the year ended June 30, 2021.  The increase was primarily due to an increase in service charges on deposit accounts and debit card fees, which is a result from continued growth in the number of deposit accounts and checking accounts with debit cards. There was also increase from the income from bank owned life insurance purchased in at the end of the prior fiscal year with additional purchases in the current fiscal year. NONINTEREST EXPENSE [[GREPCENT_TABLE]] [["(Dollars in thousands)","","For the years ended June 30,","","","Change from Prior Year"],["","","2022","","","2021","","","Amount","","","Percent"],["Salaries and employee benefits","","$","20,667","","","$","19,166","","","$","1,501","","","","7.83","%"],["Occupancy expense","","","2,305","","","","2,169","","","","136","","","","6.27"],["Equipment and furniture expense","","","806","","","","637","","","","169","","","","26.53"],["Service and data processing fees","","","2,589","","","","2,621","","","","(32",")","","","(1.22",")"],["Computer software, supplies and support","","","1,531","","","","1,369","","","","162","","","","11.83"],["Advertising and promotion","","","491","","","","491","","","","-","","","","0.00"],["FDIC insurance premiums","","","826","","","","738","","","","88","","","","11.92"],["Legal and professional fees","","","1,414","","","","1,212","","","","202","","","","16.67"],["Other","","","3,330","","","","2,820","","","","510","","","","18.09"],["Total noninterest expense","","$","33,959","","","$","31,223","","","$","2,736","","","","8.76","%"]] [[/GREPCENT_TABLE]] 38 Index Noninterest expense increased $2.8 million, or 8.8%, to $34.0 million for the year ended June 30, 2022 as compared to $31.2 million for the year ended June 30, 2021. The increase during the year ended June 30, 2022 was primarily due to an increase in salaries and employee benefits expense resulting from creating 14 new positions during the year.  The new positions were required to support growth in our lending department, human resource department, marketing department, information technology department and finance department.  Other expense increased for the year ended June 30, 2022, compared to the year ended June 30, 2021 due to The Bank of Greene County’s contributing $250 thousand to The Bank of Greene County Charitable Foundation in both September 2021 and June 2022.  INCOME TAXES Provision for income taxes directly reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements.  The effective tax rate was 14.9% and 13.3% for the years ended June 30, 2022 and 2021, respectively.  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 Liquidity resources. The Company’s primary sources of funds are deposits and proceeds from principal and interest payments on loans and securities, as well as lines of credit and term borrowing facilities available through the Federal Home Loan Bank as needed.  While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and borrowings are greatly influenced by general interest rates, economic conditions and competition. The Company’s most liquid assets are cash and cash equivalent accounts.  The levels of these assets are dependent on the Company’s operating, financing, lending and investing activities during any given period.  At June 30, 2022, cash and cash equivalents totaled $69.0 million, or 2.7% of total assets. The Company’s primary investing activities are the origination of residential and commercial real estate mortgage loans, other consumer and commercial loans, and the purchase of securities.  Loan originations exceeded repayments by $143.4 million and $92.9 million and purchases of securities totaled $669.2 million and $626.6 million for the years ended June 30, 2022 and 2021, respectively.  These activities were funded primarily through deposit growth, and principal payments on loans and securities and borrowings.  Loan sales did not provide an additional source of liquidity during the years ended June 30, 2022 and 2021, as the Company originated loans for retention in its portfolio. The Company experienced a net increase in total deposits of $207.5 million and $504.0 million for the years ended June 30, 2022 and 2021, respectively.  Deposits increased during the year ended June 30, 2022 as a result of an increase in new account relationships across all three of our primary business lines, retail, commercial and municipal.  The Company continues to benefit from consolidation of other depository institutions within its market area and has successfully launched several marketing campaigns aimed at different segments of the market. The Company monitors its liquidity position on a daily basis.  Excess short-term liquidity is usually invested in interest-earning deposits with the Federal Reserve Bank of New York.  In the event the Company requires funds beyond its ability to generate them internally, additional sources of funds are available through the use of FHLB advance programs made available to The Bank of Greene County.  During the year ended June 30, 2022, The Bank of Greene County’s maximum borrowing from the FHLB reached $123.7 million and the minimum amounted to no borrowings.  As of the year ended June 30, 2022 there were $123.7 borrowings outstanding with the FHLB.  The liquidity position can be significantly impacted on a daily basis by funding needs associated with Greene County Commercial Bank.  These funding needs are also impacted by the collection of taxes and state aid for the municipalities using the services of Greene County Commercial Bank.  At June 30, 2022, liquidity measures were as follows: [[GREPCENT_TABLE]] [["Cash equivalents/(deposits plus short term borrowings)","","","2.95","%"],["(Cash equivalents plus unpledged securities)/(deposits plus short term borrowings)","","","10.99","%"],["(Cash equivalents plus unpledged securities plus additional borrowing capacity)/(deposits plus short term borrowings)","","","23.18","%"]] [[/GREPCENT_TABLE]] Off-balance sheet arrangements. In the normal course of business the Company is party to certain financial instruments, which in accordance with accounting principles generally accepted in the United States, are not included in its Consolidated Statements of Condition. These transactions include commitments to fund new loans and unused portions of lines of credit and are undertaken to accommodate the financing needs of the Company’s customers. Loan commitments are agreements by the Company to lend monies at a future date. These loan commitments are subject to the same credit policies and reviews as the Company’s loans. Because most of these loan commitments expire within one year from the date of issue, the total amount of these loan commitments as of June 30, 2022, are not necessarily indicative of future cash requirements. 39 Index The Company’s unfunded loan commitments and unused lines of credit are as follows at June 30, 2022 and 2021: [[GREPCENT_TABLE]] [["(In thousands)","","2022","","","2021"],["Unfunded loan commitments","","$","213,420","","","$","121,775"],["Unused lines of credit","","","85,971","","","","86,456"],["Standby letters of credit","","","189","","","","175"],["Total commitments","","$","299,580","","","$","208,406"]] [[/GREPCENT_TABLE]] The Company anticipates that it will have sufficient funds available to meet current loan commitments.  Certificates of deposit scheduled to mature in one year or less from June 30, 2022 totaled $26.8 million.  Based upon the Company’s experience and its current pricing strategy, management believes that a significant portion of such deposits will remain with the Company. The Company has an Irrevocable Letter of Credit Reimbursement Agreement with the FHLB, whereby upon The Bank of Greene County’s request, on behalf of Greene County Commercial Bank, an irrevocable letter of credit is issued to secure municipal transactional deposit accounts.  These letters of credit are secured by residential and commercial real estate mortgage loans.  The amount of funds available to the Company through the FHLB line of credit is reduced by any letters of credit outstanding.  There were no municipal letters of credit outstanding at June 30, 2022. The Company has risk participation agreements (“RPAs”) which 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 where 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 June 30, 2022 or 2021.  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-ins as of June 30, 2022 due to the recent rise in interest rate and was $7.2 million at June 30, 2021.  The RPAs participations-ins are spread out over four financial institution counterparties and terms range between 5 to 14 years. Capital Resources.  The Company and the Bank considers current needs and future growth, with the sources of capital being the retention of earnings, less dividends paid, and proceeds from the issuance of subordinated debt. The Company believes its current capital is adequate to support ongoing operations. As a result of the significant growth in assets, the Company contributed $7.0 million of additional capital to The Bank of Greene County during the fiscal year ended June 30, 2022.  At June 30, 2022 and 2021, The Bank of Greene County and Greene County Commercial Bank exceeded all of their regulatory capital requirements, as illustrated in Part II, Item 8 Financial Statements and Supplementary Data Note 17. Regulatory Matters of this Report.  Shareholders’ equity represented 6.1% and 6.8% of total consolidated assets at June 30, 2022 and 2021, respectively. IMPACT OF INFLATION AND CHANGING PRICES The consolidated financial statements of Greene County Bancorp, Inc. and notes thereto, presented elsewhere herein, have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation.  The impact of inflation is reflected in the increased cost of Greene County Bancorp, Inc.’s operations.  Unlike most industrial companies, nearly all the assets and liabilities of Greene County Bancorp, Inc. are monetary.  As a result, interest rates have a greater impact on Greene County Bancorp, Inc.’s performance than do the effects of general levels of inflation.  Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services. 40 Index IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements which may impact the Company’s financial statements are discussed within Part II, Item 8 Financial Statements and Supplementary Data, Note 1 Summary of significant accounting policies of this Report.