Greene County Bancorp (GCBC) 10-Q 2024 Q3 Quarterly report

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 MARCH 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT

Commission File Number:  0-25165

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)

Indicate by check mark 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  May 9, 2024, the registrant had 17,026,828 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)
	*   Consolidated Statements of Financial Condition	3
	*   Consolidated Statements of Income	4
	*   Consolidated Statements of Comprehensive Income	5
	*   Consolidated Statements of Changes in Shareholders’ Equity	6
	*   Consolidated Statements of Cash Flows	7
	*   Notes to Consolidated Financial Statements	8-32
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33-49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	50
	Signatures	51

2

Greene County Bancorp, Inc.

Consolidated Statements of Financial Condition

At March 31, 2024 and June 30, 2023

(Unaudited)

(In thousands, except share and per share amounts)

ASSETS	March 31, 2024			June 30, 2023
Cash and due from banks	$	11,234		$	15,305
Interest-bearing deposits		244,589			181,140
Total cash and cash equivalents		255,823			196,445
Long-term certificates of deposit		3,083			4,576
Securities available-for-sale, at fair value		345,519			281,133
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $498 at March 31, 2024		700,371			726,363
Equity securities, at fair value		343			306
Federal Home Loan Bank stock, at cost		2,219			1,682
Loans receivable		1,477,635			1,408,866
Allowance for credit losses on loans		(20,382	)		(21,212	)
Net loans receivable		1,457,253			1,387,654
Premises and equipment, net		15,651			15,028
Bank-owned life insurance		56,618			55,063
Accrued interest receivable		16,762			12,249
Foreclosed real estate		302			302
Prepaid expenses and other assets		17,567			17,482
Total assets	$	2,871,511		$	2,698,283
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	131,452		$	159,039
Interest-bearing deposits		2,425,655			2,278,122
Total deposits		2,557,107			2,437,161
Borrowings, short-term		2,000			-
Borrowings, long-term		34,156			-
Subordinated notes payable, net		49,635			49,495
Accrued expenses and other liabilities		29,428			28,344
Total liabilities		2,672,326			2,515,000
SHAREHOLDERS’ EQUITY
Preferred stock, Authorized - 1,000,000 shares; Issued - None		-			-
Common stock, par value $0.10 per share; Authorized - 36,000,000 shares; Issued – 17,222,680 shares at March 31, 2024 and June 30, 2023; Outstanding – 17,026,828 shares at March 31, 2024, and June 30, 2023		1,722			1,722
Additional paid-in capital		10,156			10,156
Retained earnings		208,632			193,721
Accumulated other comprehensive loss		(20,417	)		(21,408	)
Treasury stock, at cost 195,852 shares at March 31, 2024, and June 30, 2023		(908	)		(908	)
Total shareholders’ equity		199,185			183,283
Total liabilities and shareholders’ equity	$	2,871,511		$	2,698,283

See notes to consolidated financial statements

3

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Three and Nine Months Ended March 31, 2024 and 2023

(Unaudited)

(In thousands, except share and per share amounts)

	For the three months ended March 31,					For the nine months ended March 31,
	2024		2023			2024		2023
Interest income:
Loans	$	18,063	$	15,676		$	53,044	$	43,859
Investment securities - taxable		1,116		722			2,689		2,076
Mortgage-backed securities		1,625		1,422			4,691		4,276
Investment securities - tax exempt		4,426		3,836			13,050		10,417
Interest-bearing deposits and federal funds sold		841		277			2,862		473
Total interest income		26,071		21,933			76,336		61,101
Interest expense:
Interest on deposits		12,944		5,559			36,109		11,307
Interest on borrowings		832		1,148			2,105		2,811
Total interest expense		13,776		6,707			38,214		14,118
Net interest income		12,295		15,226			38,122		46,983
Provision for credit losses		290		(944	)		917		(1,199	)
Net interest income after provision for credit losses		12,005		16,170			37,205		48,182
Noninterest income:
Service charges on deposit accounts		1,011		1,132			3,468		3,583
Debit card fees		1,120		1,082			3,373		3,362
Investment services		265		213			714		591
E-commerce fees		24		26			83		81
Bank-owned life insurance		615		340			1,551		1,020
Net loss on sale of available-for-sale securities		-		-			-		(251	)
Other operating income		377		266			1,000		666
Total noninterest income		3,412		3,059			10,189		9,052
Noninterest expense:
Salaries and employee benefits		6,102		6,193			17,247		17,070
Occupancy expense		688		617			1,818		1,654
Equipment and furniture expense		151		150			527		529
Service and data processing fees		661		674			1,866		2,040
Computer software, supplies and support		319		407			1,301		1,157
Advertising and promotion		122		115			321		336
FDIC insurance premiums		326		191			952		638
Legal and professional fees		319		507			1,119		2,655
Other		546		1,002			2,254		2,525
Total noninterest expense		9,234		9,856			27,405		28,604
Income before provision for income taxes		6,183		9,373			19,989		28,630
Provision for income taxes		322		1,282			1,952		4,305
Net income	$	5,861	$	8,091		$	18,037	$	24,325
Basic and diluted earnings per share	$	0.34	$	0.48		$	1.06	$	1.43
Basic and diluted average shares outstanding		17,026,828		17,026,828			17,026,828		17,026,828

See notes to consolidated financial statements

4

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three and Nine Months Ended March 31, 2024 and 2023

(Unaudited)

(In thousands)

	For the three months ended March 31,					For the nine months ended March 31,
	2024			2023		2024		2023
Net Income	$	5,861		$	8,091	$	18,037	$	24,325
Other comprehensive income (loss):
Unrealized holding (losses) gains on available-for-sale securities, gross		(1,839	)		3,994		1,353		(2,593	)
Tax effect		(492	)		1,067		362		(693	)
Unrealized holding (losses) gains on available-for-sale securities, net		(1,347	)		2,927		991		(1,900	)
Reclassification adjustment for loss on sale of available-for-sale securities realized in net income, gross		-			-		-		251
Tax effect		-			-		-		67
Reclassification adjustment for loss on sale of available-for-sale securities realized in net income, net		-			-		-		184
Total other comprehensive (loss) income, net of taxes		(1,347	)		2,927		991		(1,716	)
Comprehensive income	$	4,514		$	11,018	$	19,028	$	22,609

See notes to consolidated financial statements.

5

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended March 31, 2024 and 2023

(Unaudited)

(In thousands)

	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total shareholders’ equity
Balance at December 31, 2022	$	1,722	$	10,156	$	180,263		$	(23,026	)	$	(908	)	$	168,207
Dividends declared						(547	)								(547	)
Net income						8,091									8,091
Other comprehensive income, net of taxes									2,927						2,927
Balance at March 31, 2023	$	1,722	$	10,156	$	187,807		$	(20,099	)	$	(908	)	$	178,678

	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total shareholders’ equity
Balance at December 31, 2023	$	1,722	$	10,156	$	203,396		$	(19,070	)	$	(908	)	$	195,296
Dividends declared						(625	)								(625	)
Net income						5,861									5,861
Other comprehensive loss, net of taxes									(1,347	)					(1,347	)
Balance at March 31, 2024	$	1,722	$	10,156	$	208,632		$	(20,417	)	$	(908	)	$	199,185

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended March 31, 2024 and 2023

(Unaudited)

(In thousands)

	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total shareholders’ equity
Balance at June 30, 2022	$	1,722	$	10,156	$	165,127		$	(18,383	)	$	(908	)	$	157,714
Dividends declared						(1,645	)								(1,645	)
Net income						24,325									24,325
Other comprehensive loss, net of taxes									(1,716	)					(1,716	)
Balance at March 31, 2023	$	1,722	$	10,156	$	187,807		$	(20,099	)	$	(908	)	$	178,678

	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total shareholders’ equity
Balance at June 30, 2023	$	1,722	$	10,156	$	193,721		$	(21,408	)	$	(908	)	$	183,283
Cumulative effect adjustment for ASU 2016-13 Current Expected Credit Losses						(510	)								(510	)
Dividends declared						(2,616	)								(2,616	)
Net income						18,037									18,037
Other comprehensive income, net of taxes									991						991
Balance at March 31, 2024	$	1,722	$	10,156	$	208,632		$	(20,417	)	$	(908	)	$	199,185

See notes to consolidated financial statements.

6

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2024 and 2023

(Unaudited)

(In thousands)

	2024			2023
Cash flows from operating activities:
Net Income	$	18,037		$	24,325
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		685			647
Deferred income tax expense		394			146
Net amortization of investment premiums and discounts		580			1,951
Net amortization of deferred loan costs and fees		289			197
Amortization of subordinated debt issuance costs		140			139
Provision for credit losses		917			(1,199	)
Bank-owned life insurance income		(1,551	)		(1,020	)
Net loss on sale of available-for-sale securities		-			251
Net gain on equity securities		(37	)		(22	)
Net loss on sale of foreclosed real estate		-			5
Net increase (decrease) in accrued income taxes		33			(2,089	)
Net increase in accrued interest receivable		(4,513	)		(5,075	)
Net increase in prepaid expenses and other assets		(689	)		(767	)
Net (decrease) increase in accrued expense and other liabilities		(440	)		239
Net cash provided by operating activities		13,845			17,728
Cash flows from investing activities:
Securities available-for-sale:
Proceeds from maturities		104,739			180,225
Proceeds from sale of securities		-			1,675
Purchases of securities		(170,192	)		(104,456	)
Proceeds from principal payments on securities		2,498			10,446
Securities held-to-maturity:
Proceeds from maturities		36,394			49,576
Purchases of securities		(24,341	)		(42,060	)
Proceeds from principal payments on securities		12,796			16,133
Net (purchase) redemption of Federal Home Loan Bank Stock		(537	)		5,342
Purchase of long-term certificate of deposit		-			(1,225	)
Maturity of long-term certificates of deposit		1,480			735
Surrender of bank owned life insurance		23,100			-
Purchase of bank owned life insurance		(23,104	)		-
Net increase in loans receivable		(69,478	)		(158,426	)
Proceeds from sale of foreclosed real estate		-			63
Purchases of premises and equipment		(1,308	)		(817	)
Net cash used in investing activities		(107,953	)		(42,789	)
Cash flows from financing activities:
Net increase (decrease) in short-term advances		2,000			(123,700	)
Proceeds from long-term advances		34,156			-
Payment of cash dividends		(2,616	)		(1,645	)
Net increase in deposits		119,946			259,719
Net cash provided by financing activities		153,486			134,374
Net increase in cash and cash equivalents		59,378			109,313
Cash and cash equivalents at beginning of period		196,445			69,009
Cash and cash equivalents at end of period	$	255,823		$	178,322
Non-cash investing activities:
Foreclosed loans transferred to foreclosed real estate	$	-		$	462
Cash paid during period for:
Interest	$	38,357		$	14,415
Income taxes	$	1,525		$	6,248

See notes to consolidated financial statements

7

Greene County Bancorp, Inc.

Notes to Consolidated Financial Statements

At and for the Three and Nine Months Ended March 31, 2024 and 2023

(1)          Summary of Significant Accounting Policies

Principles of  Consolidation and Basis of Presentation

Within the accompanying unaudited interim consolidated financial statements and related notes to the consolidated financial statements, the June 30, 2023 data was derived from the audited consolidated financial statements and notes of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, The Bank of Greene County (the “Bank”) and the Bank’s wholly owned subsidiaries, Greene County Commercial Bank (the “Commercial Bank”) and Greene Property Holdings, Ltd. The interim consolidated financial statements at and for the three and nine months ended March 31, 2024 and 2023 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, 2023, 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. Certain previous years’ amounts in the unaudited consolidated financial statements and notes thereto, have been reclassified 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 nine months ended March 31, 2024 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2024. 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.

Nature of Operations

The Company’s primary business is the ownership and operation of its subsidiaries.  At March 31, 2024, the Bank has 18 full-service offices, lending centers, an operations center, customer call center, and wealth management 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.

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 credit losses on loans and on unfunded commitments.

Interest-bearing deposits

At March 31, 2024, included within interest bearing deposits, is $23.2 million of restricted cash. The restriction is due to the surrender of bank owned life insurance during the quarter ended December 31, 2023.

8

Allowance for Credit Losses on Loans

The Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) approach requires an estimate of the credit losses expected over the life of a loan (or pool of loans). The allowance is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and amounts expected to be charged-off.

Collateral dependent loans that are on nonaccrual status, with a balance of $250,000 or greater are evaluated on an individual basis and excluded from the pooled loan evaluation. The fair value of collateral for collateral dependent loans less selling costs will be compared to the loan balance to determine if a CECL reserve is required. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs.

The loan portfolio is segmented based on the level at which the Company develops and documents a systematic methodology to determine its allowance for credit losses. Management developed the following segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation and have been combined as needed to ensure loans of similar risk profiles are appropriately pooled: residential real estate, commercial real estate, consumer loan, home equity and commercial loans.

Management estimates the allowance for credit losses on loans by using relevant information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts that affect the collectability of loans. Historical loss experience was considered by the Company for estimating expected credit losses and determined the need to use peer data, with similar risk profiles, to develop and calculate the CECL reserve models.

Historical credit loss experience for the Company and peer losses by loan segments, provide a foundation for estimating an expected credit loss. The observed credit losses are converted to probability of default (“PD”) rate curves through the use of loss given default (“LGD”) risk factors that converts default rates to estimated loss for each loan segment. This is based on industry-level, observed relationships between the PD and LGD variables for each segment. The historical PD curves correspond to economic variables through historical economic cycles, which establishes a quantitative relationship between forecasted economic conditions and loan performance.

Using the historical quantitative relationship between economic conditions and loan performance, management developed a model, using selected external economic forecasts that is highly correlated for each loan segment. These forecasts are then applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line methodology.

The allowance for credit losses on loans is measured on a collective basis, when similar risk characteristics are present, with both a quantitative and qualitative analysis that is applied on a quarterly basis. The respective quantitative reserve for each segment is calculated using a PD/LGD modeling methodology, with segment-specific regression models. The discounted cash flows methodology uses expected credit losses estimated over the effective life of each loan by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level stated interest rate.

Management applies a qualitative adjustment for each segment as of the balance sheet date. The qualitative adjustments include limitations inherent in the quantitative model; changes in lending policies and procedures; changes in international, national, regional, and local economic conditions; changes in the nature and volume of the portfolio and terms of loans; the experience, ability and depth of lending management and staff; changes in the volume and severity of past due loans; changes in value of underlying collateral; existence and effect of any concentrations of credit and changes in the levels of such concentrations; and the effect of external factors; such as competition, legal and regulatory requirements.

Allowance for Credit Losses on Unfunded Commitments

The Company estimates expected credit losses over the contractual period in which the Company has exposure to a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments exposure is recognized in other liabilities and is adjusted as an expense in other noninterest expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over the estimated contractual life. The Company considers the following segments of unfunded commitments exposure; home equity line of credits, commercial line of credits, consumer loans, the residential and commercial real estate loans committed but not closed and the unfunded portion of the construction loans. The probable funding amount by segment is multiplied by the respective reserve percentage calculated in the allowance for credit losses on loans to calculate a reserve on unfunded commitments.

9

Allowance for Credit Losses on Securities Held-to-Maturity(“HTM”)

The Company is required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on HTM debt securities on a collective basis by major security types that share similar risk characteristics. Management classifies the HTM portfolio into the following major security types: U.S. Treasury securities, state and political subdivisions, mortgage-backed securities-residential, mortgage-backed securities-multi-family, corporate debt securities and other securities.

Expected losses are calculated on a pooled basis using a probability of default/loss given default(PD/LGD) model, based on historical credit loss data from a reliable source. Management utilizes municipal and corporate default and loss rates which provides decades of data across all municipal and corporate sectors and geographies. Management may exercise discretion to make adjustments based on environmental factors. The model calculates the expected loss for each security over the contractual life. If the risk of a held-to-maturity debt security no longer matches the collective assessment pool, it is removed and individually assessed for credit deterioration.

U.S. Treasury and mortgage-backed securities are issued by U.S. government entities and agencies. These securities are either explicitly and/or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of zero credit losses. Therefore, the Company determined a zero credit loss assumption, and did not calculate or record an allowance for credit loss for these securities.

Allowance for Credit Losses on Securities Available-for-sale (“AFS”)

The credit loss model for AFS debt securities requires credit losses to be presented as an allowance rather than a direct write-down of debt securities. AFS debt securities continue to be recorded at fair value with changes in fair value reflected in other comprehensive income. When the fair value of an AFS debt security falls below the amortized cost basis it is evaluated to determine if any of the decline in value is attributable to credit loss. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. The cash flows are estimated using information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts. Decreases in fair value attributable to credit loss are recorded directly to earnings with a corresponding allowance for credit losses, limited to the amount that the fair value is less than the amortized cost basis. If the credit quality subsequently improves, the allowance is reversed up to a maximum of the previously recorded credit losses. When the Company intends to sell an impaired AFS debt security, or if it is more likely than not that the Company will be required to sell the security prior to recovering the amortized cost basis, the entire fair value adjustment will immediately be recognized in earnings with no corresponding allowance for credit losses.

Investments in Federal Home Loan Bank (“FHLB”) stock are required for membership and are carried at cost since there is no market value available. The FHLB New York continues to pay dividends and repurchase stock. As such, the Company has not recognized any credit loss on its holdings of FHLB stock.

Accrued Interest Receivable

Accrued interest receivable balances are presented separately on the consolidated statements of financial condition and are not included in amortized cost when determining the allowance for credit losses. Accrued interest receivable that is deemed uncollectible is written off timely. For loans, write off typically occurs upon becoming over 90 to 120 days past due and therefore the amount of such write offs are immaterial. Historically, the Company has not experienced uncollectible accrued interest receivable on investment securities.

Derivative Instruments

The Company enters into interest rate swap agreements that are not designated as hedges for accounting purposes. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not present any material exposure to the Company’s consolidated statements of income. The Company records its interest rate swap agreements at fair value and is presented on a gross basis within other assets and other liabilities on the consolidated statements of financial condition. Changes in the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income.

10

(2)          Recent Accounting Pronouncements

Recently Adopted Accounting Standards

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) 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 debt securities available-for-sale (AFS). 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 Update 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 Update 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 Update 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 Update 2016-13 related to measuring the allowance for loan losses under the new guidance.

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 adopted CECL on July 1, 2023 (“Day-one”) using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after July 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $510,000 as of July 1, 2023 for the cumulative effect of adopting ASC 326. The transition adjustment includes a $1.3 million decrease to the allowance for credit losses on loans, a $503,000 increase to the allowance for credit losses on investment securities held-to-maturity, a $1.5 million increase to the allowance for credit losses on unfunded commitment exposures, and a $186,000 impact to the deferred tax asset. Refer to Note 3 Securities and Note 4 Loans and Allowance for Credit Losses on Loans, included in this Form 10-Q for more information.

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 adopted this standard on a prospective basis as of July 1, 2023, concurrent with the adoption of ASU 2016-13.

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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 Company adopted the standard during the quarter ended September 30, 2023, and it did not have a material impact on the consolidated financial statements as the Company’s LIBOR exposure was minimal and limited to a couple of participation loans and risk participation agreements.

In December 2022, the FASB issued an Update (ASU 2022-06), Reference Rate Reform (Topic 848) Deferral of the Sunset Date of Topic 848. The ASU extends the period of time companies can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01. The guidance, which was effective upon issuance, defers the sunset date from December 31, 2022 to December 31, 2024, after which companies will no longer be permitted to apply the relief guidance in Topic 848. The adoption did not have a material impact on the consolidated financial statements and related disclosures.

Accounting Standards Issued Not Yet Adopted

In March 2023, the FASB issued (ASU 2023-02), Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The election can be made for each individual qualifying tax credit investment. Under the proportional amortization method, the initial cost of an investment is amortized in proportion to the amount of tax credits and other tax benefits received, with the amortization and tax credits recognized as a component of income tax expense. To qualify for the proportional amortization method, all of the following conditions must be met: (1) it is probable that the income tax credits allocated to the tax equity investor will be available; (2) the tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project; (3) substantially all of the projected benefits are from income tax credits and other income tax benefits; (4) the tax equity investor’s projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (5) the tax equity investor is a limited liability investor in the entity for both legal and tax purposes. Under the proportional amortization method, the investment shall be tested for impairment when events or changes in circumstances indicate that it is more likely than not that the carrying amount of the investment will not be realized. An impairment loss shall be measured as the amount by which the carrying amount of an investment exceeds its fair value. ASU 2023-02 is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The Company’s adoption of this standard is not expected to have a material impact on the consolidated financial statements.

(3)          Securities

The following tables summarize the amortized cost and fair value of securities available-for-sale by major type:

	At March 31, 2024
(In thousands)	Amortized cost (1)		Unrealized gains		Unrealized losses		Fair value
U.S. government sponsored enterprises	$	13,045	$	-	$	2,095	$	10,950
U.S. Treasury securities		45,075		-		1,942		43,133
State and political subdivisions		170,252		725		1		170,976
Mortgage-backed securities-residential		33,277		30		3,929		29,378
Mortgage-backed securities-multi-family		90,692		-		18,175		72,517
Corporate debt securities		19,845		20		1,300		18,565
Total securities available-for-sale	$	372,186	$	775	$	27,442	$	345,519

	At June 30, 2023
(In thousands)	Amortized cost (1)		Unrealized gains		Unrealized losses		Fair value
U.S. government sponsored enterprises	$	13,054	$	-	$	2,231	$	10,823
U.S. Treasury securities		18,349		-		1,849		16,500
State and political subdivisions		137,343		670		2		138,011
Mortgage-backed securities-residential		29,586		-		3,985		25,601
Mortgage-backed securities-multi-family		91,016		-		18,930		72,086
Corporate debt securities		19,805		-		1,693		18,112
Total securities available-for-sale	$	309,153	$	670	$	28,690	$	281,133

(1) Amortized cost excludes accrued interest receivable of $4.8 million and $2.9 million at March 31, 2024 and June 30, 2023, respectively, which is included in accrued interest receivable in the consolidated statements of financial condition.

There was no allowance for credit losses on securities available-for-sale at the quarter ended March 31, 2024.

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The following tables summarize the amortized cost, fair value, and allowance for credit loss on securities held-to-maturity by major type:

	At March 31, 2024
(In thousands)	Amortized cost (1)		Unrealized gains		Unrealized losses		Fair value		Allowance(2)		Net carrying value
U.S. Treasury securities	$	33,767	$	-	$	1,849	$	31,918	$	-	$	33,767
State and political subdivisions		462,643		6,518		34,182		434,979		45		462,598
Mortgage-backed securities-residential		33,947		-		3,319		30,628		-		33,947
Mortgage-backed securities-multi-family		145,234		-		17,981		127,253		-		145,234
Corporate debt securities		25,246		20		2,572		22,694		452		24,794
Other securities		32		-		-		32		1		31
Total securities held-to-maturity	$	700,869	$	6,538	$	59,903	$	647,504	$	498	$	700,371

	At June 30, 2023
(In thousands)	Amortized cost (1)		Unrealized gains		Unrealized losses		Fair value		Allowance(2)		Net carrying value
U.S. Treasury securities	$	33,705	$	-	$	2,438	$	31,267	$	-	$	33,705
State and political subdivisions		478,756		5,178		30,662		453,272		-		478,756
Mortgage-backed securities-residential		37,186		-		3,625		33,561		-		37,186
Mortgage-backed securities-multi-family		155,046		-		20,324		134,722		-		155,046
Corporate debt securities		21,632		-		3,426		18,206		-		21,632
Other securities		38		-		-		38		-		38
Total securities held-to-maturity	$	726,363	$	5,178	$	60,475	$	671,066	$	-	$	726,363

(1) Amortized cost excludes accrued interest receivable of $5.3 million and $3.9 million at March 31, 2024 and June 30, 2023, respectively, which is included in accrued interest receivable in the consolidated statements of financial condition.

(2) The Company adopted ASU 2016-13 (CECL) on July 1, 2023. For periods subsequent to adoption, an allowance is calculated under the CECL methodology. The periods prior to adoption did not have an allowance for credit losses under applicable GAAP for those periods.

U.S. Treasury and mortgage-backed securities are issued by U.S. government entities and agencies. These securities are either explicitly and/or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of zero credit losses. Therefore, the Company determined a zero credit loss assumption, and did not calculate or record an allowance for credit loss for these securities. An allowance for credit losses on investment securities held-to-maturity as of March 31, 2024 has been recorded for certain municipal securities issued by state and political subdivisions and corporate debt securities to account for expected lifetime credit loss using the CECL methodology.

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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 March 31, 2024, 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.

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 balance sheet interest rate swaps or caps.

The following table summarizes the activity in the allowance for credit losses on securities held-to-maturity:

(In thousands)	Three months ended March 31, 2024		Nine months ended March 31, 2024
Balance beginning of period	$	485	$	-
Adoption of ASU 2016-13 (CECL) on July 1, 2023		-		503
Provision (benefit) for credit losses		13		(5	)
Balance end of period	$	498	$	498

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 March 31, 2024.

	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	$	-	$	-		-	$	10,950	$	2,095		5	$	10,950	$	2,095		5
U.S. Treasury securities		27,318		313		4		15,815		1,629		6		43,133		1,942		10
State and political subdivisions		-		-		-		62		1		1		62		1		1
Mortgage-backed securities-residential		1,972		5		1		23,414		3,924		26		25,386		3,929		27
Mortgage-backed securities-multi-family		-		-		-		72,517		18,175		31		72,517		18,175		31
Corporate debt securities		-		-		-		16,637		1,300		16		16,637		1,300		16
Total securities available-for-sale		29,290		318		5		139,395		27,124		85		168,685		27,442		90
Securities held-to-maturity:
U.S. Treasury securities		-		-		-		31,918		1,849		8		31,918		1,849		8
State and political subdivisions		13,610		46		131		296,385		34,136		2,164		309,995		34,182		2,295
Mortgage-backed securities-residential		-		-		1		30,628		3,319		28		30,628		3,319		29
Mortgage-backed securities-multi-family		-		-		-		127,253		17,981		52		127,253		17,981		52
Corporate debt securities		-		-		-		19,265		2,572		18		19,265		2,572		18
Total securities held-to-maturity		13,610		46		132		505,449		59,857		2,270		519,059		59,903		2,402
Total securities	$	42,900	$	364		137	$	644,844	$	86,981		2,355	$	687,744	$	87,345		2,492

14

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, 2023.

	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	$	-	$	-		-	$	10,823	$	2,231		5	$	10,823	$	2,231		5
U.S. Treasury securities		761		57		2		15,739		1,792		6		16,500		1,849		8
State and political subdivisions		-		-		-		82		2		1		82		2		1
Mortgage-backed securities-residential		476		29		7		25,125		3,956		21		25,601		3,985		28
Mortgage-backed securities-multi-family		2,679		182		1		69,407		18,748		30		72,086		18,930		31
Corporate debt securities		2,352		40		2		15,760		1,653		15		18,112		1,693		17
Total securities available-for-sale		6,268		308		12		136,936		28,382		78		143,204		28,690		90
Securities held-to-maturity:
U.S. Treasury securities		-		-		-		31,267		2,438		8		31,267		2,438		8
State and political subdivisions		40,412		520		448		295,479		30,142		2,018		335,891		30,662		2,466
Mortgage-backed securities-residential		1,982		120		12		31,579		3,505		18		33,561		3,625		30
Mortgage-backed securities-multi-family		5,362		245		2		129,360		20,079		54		134,722		20,324		56
Corporate debt securities		10,236		2,012		9		7,970		1,414		10		18,206		3,426		19
Total securities held-to-maturity		57,992		2,897		471		495,655		57,578		2,108		553,647		60,475		2,579
Total securities	$	64,260	$	3,205		483	$	632,591	$	85,960		2,186	$	696,851	$	89,165		2,669

There were no transfers of securities available-for-sale to held-to-maturity during the three and nine months ended March 31, 2024 and 2023, respectively. During the three and nine months ended March 31, 2024, there were no sales of securities and no gains or losses were recognized. During the three months ended March 31, 2023, there were no sales of securities and no gains or losses were recognized. During the nine months ended March 31, 2023, 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.

The estimated fair values of debt securities at March 31, 2024, 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)

Securities available-for-sale	Amortized cost		Fair value
Within one year	$	198,521	$	198,954
After one year through five years		39,286		36,160
After five years through ten years		8,910		7,273
After ten years		1,500		1,237
Total securities available-for-sale		248,217		243,624
Mortgage-backed and asset-backed securities		123,969		101,895
Total securities available-for-sale		372,186		345,519
Securities held-to-maturity
Within one year		63,451		62,980
After one year through five years		163,298		159,412
After five years through ten years		159,777		148,919
After ten years		135,162		118,312
Total securities held-to-maturity		521,688		489,623
Mortgage-backed securities		179,181		157,881
Total securities held-to-maturity		700,869		647,504
Total securities	$	1,073,055	$	993,023

At March 31, 2024 and June 30, 2023, securities with an aggregate fair value of $905.5 million and $904.8 million, respectively, were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with the Commercial Bank. At March 31, 2024 and June 30, 2023, securities with an aggregate fair value of $40.5 million and $20.8 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window and the Bank Term Funding Program. The Company did not participate in any securities lending programs during the three and nine months ended March 31, 2024 or 2023.

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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. Estimated credit loss 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 credit loss was recorded during the three and nine months ended March 31, 2024 or 2023.

(4)          Loans and Allowance for Credit Losses on Loans

The Company adopted ASU 2016-13 (CECL) effective July 1, 2023. The loan segmentation has been redefined under CECL and therefore prior year tables are presented separately.

With the adoption of CECL, the Company’s revised loan segments at March 31, 2024 are as follows:

(In thousands)	March 31, 2024
Residential real estate	$	411,555
Commercial real estate		924,777
Home equity		27,659
Consumer		4,721
Commercial		108,923
Total gross loans(1)(2)		1,477,635
Allowance for credit losses on loans		(20,382	)
Loans receivable, net	$	1,457,253

(1) Loan balances include net deferred fees/cost of $167 at March 31, 2024.

(2) Loan balances exclude accrued interest receivable of $6.7 million at March 31, 2024, which is included in accrued interest receivable in the consolidated statement of financial condition.

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 $5.6 million at March 31, 2024, of which there were two residential loans totaling $446,000, one commercial loan totaling $1.7 million, and three commercial real estate loans totaling $1.6 million, that were in the process of foreclosure at March 31,2024. Included in nonaccrual loans were $1.7 million of loans which were less than 90 days past due at March 31, 2024, 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 $5.5 million at June 30, 2023, of which three residential real estate loans totaling $625,000 and two commercial real estate loans totaling $1.4 million were in the process of foreclosure. Included in nonaccrual loans were $3.1 million of loans which were less than 90 days past due at June 30, 2023, but have a recent history of delinquency greater than 90 days past due. The activity in nonperforming loans during the nine months ended March 31, 2024, included $482,000 in loan repayments, $93,000 in loans returning to performing status, $182,000 in charge-offs or transfers to foreclosed, and $940,000 of loans placed into nonperforming status.

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The following table sets forth information regarding delinquent and/or nonaccrual loans at March 31, 2024:

(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	$	1,710	$	-	$	1,383	$	3,093	$	408,462	$	411,555	$	2,672
Commercial real estate		631		-		1,247		1,878		922,899		924,777		1,664
Home equity		50		-		13		63		27,596		27,659		48
Consumer		22		7		-		29		4,692		4,721		-
Commercial loans		1		106		1,255		1,362		107,561		108,923		1,255
Total gross loans	$	2,414	$	113	$	3,898	$	6,425	$	1,471,210	$	1,477,635	$	5,639

Allowance for Credit Losses on Loans

The Company’s July 1, 2023 adoption of CECL resulted in a significant change to our methodology for estimating the allowance for credit losses.  The allowance for credit losses for the loan portfolio is established through a provision for credit losses based on the results of life of loan quantitative models, reserves associated with collateral-dependent loans evaluated individually and adjustments for the impact of current economic conditions not accounted for in the quantitative models. The discounted cash flow methodology is used to calculate the CECL reserve for the residential real estate, commercial real estate, home equity and commercial loan segments. The Company uses a four-quarter reasonable and supportable forecast period based on the one year percent change in national GDP and the national unemployment rate, as economic variables. The forecast will revert to long-term economic conditions over a four-quarter reversion period on a straight-line basis. The remaining life method will be utilized to determine the CECL reserve for the consumer loan segment. A qualitative factor framework has been developed to adjust the quantitative loss rates for asset-specific risk characteristics or current conditions at the reporting date. The Company elected to use the practical expedient to evaluate loans individually, if they are collateral dependent loans that are on nonaccrual status with a balance of $250,000 or greater, which is consistent with regulatory requirements. The fair value of the collateral dependent loan less selling expenses will be compared to the loan balance to determine if a CECL reserve is required.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit 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 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 credit losses, unless equitable arrangements are made. Included within consumer loan charge-offs and recoveries are deposit accounts that have been overdrawn in excess of 60 days. 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 credit losses is increased by a provision for credit losses (which results in a charge to expense) and recoveries of loans previously charged off, and is reduced by charge-offs.

The following tables set forth the activity and allocation of the allowance for credit losses on loans by segment:

	Activity for the three months ended March 31, 2024
(In thousands)	Residential real estate		Commercial real estate			Home equity		Consumer			Commercial			Total
Balance at December 31, 2023	$	4,010	$	12,523		$	192	$	486		$	3,098		$	20,309
Charge-offs		-		-			-		(117	)		(143	)		(260	)
Recoveries		-		1			-		46			9			56
Provision		128		(28	)		7		87			83			277
Balance at March 31, 2024	$	4,138	$	12,496		$	199	$	502		$	3,047		$	20,382

	Activity for the nine months ended March 31, 2024
(In thousands)	Residential real estate		Commercial real estate			Home equity		Consumer			Commercial			Total
Balance at June 30, 2023	$	2,794	$	14,839		$	46	$	332		$	3,201		$	21,212
Adoption of ASU No. 2016-13		1,182		(2,889	)		117		137			121			(1,332	)
Charge-offs		-		-			-		(393	)		(156	)		(549	)
Recoveries		-		2			-		100			27			129
Provision		162		544			36		326			(146	)		922
Balance at March 31, 2024	$	4,138	$	12,496		$	199	$	502		$	3,047		$	20,382

The allowance for credit losses on unfunded commitments as of March 31, 2024 was $1.3 million.

17

Credit monitoring process

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. For the commercial real estate and commercial loans, 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 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.” Residential real estate, home equity and consumer loans are graded as either nonperforming or performing. Nonperforming loans are loans that are generally over 90 days past due or on nonaccrual status.

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 loan repayments to a degree, are 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. 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.

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 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.

18

The following tables illustrate the Company’s credit quality by loan class by vintage:

	At March 31, 2024
(In thousands)	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Residential real estate
By payment activity status:
Performing	$	42,113	$	62,176	$	94,349	$	81,621	$	33,397	$	95,202	$	-	$	25	$	408,883
Non-performing		-		-		-		185		170		2,317		-		-		2,672
Total residential real estate		42,113		62,176		94,349		81,806		33,567		97,519		-		25		411,555
Current period gross charge-offs		-		-		-		-		-		-		-		-		-
Commercial real estate
By internally assigned grade:
Pass		78,939		214,833		244,311		127,603		77,506		141,954		5,189		367		890,702
Special mention		-		946		2,482		303		436		5,114		-		-		9,281
Substandard		330		1,692		3,205		598		4,617		14,352		-		-		24,794
Total commercial real estate		79,269		217,471		249,998		128,504		82,559		161,420		5,189		367		924,777
Current period gross charge-offs		-		-		-		-		-		-		-		-		-
Home equity
By payment activity status:
Performing		4,716		2,964		349		454		291		1,361		17,476		-		27,611
Non-performing		-		-		-		-		-		1		47		-		48
Total home equity		4,716		2,964		349		454		291		1,362		17,523		-		27,659
Current period gross charge-offs		-		-		-		-		-		-		-		-		-
Consumer
By payment activity status:
Performing		1,921		1,407		799		324		124		73		73		-		4,721
Non-performing		-		-		-		-		-		-		-		-		-
Total Consumer		1,921		1,407		799		324		124		73		73		-		4,721
Current period gross charge-offs		318		13		49		4		1		-		8		-		393
Commercial
By internally assigned grade:
Pass		6,308		11,015		14,019		15,287		5,606		18,469		26,810		456		97,970
Special mention		-		55		86		-		36		877		3,879		-		4,933
Substandard		-		-		1,719		1,272		76		210		2,743		-		6,020
Total Commercial	$	6,308	$	11,070	$	15,824	$	16,559	$	5,718	$	19,556	$	33,432	$	456	$	108,923
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	137	$	19	$	-	$	156

The Company had no loans classified doubtful or loss at March 31, 2024.

Individually Evaluated Loans

As of March 31, 2024, loans evaluated individually had an amortized cost basis of $5.7 million, with an allowance for credit losses on loans of $1.9 million.

19

Loan Modifications to Borrowers Experiencing Financial Difficulties

On July 1, 2023, the Company adopted ASU 2022-02, which eliminated the recognition and measurement of TDRs and enhanced the disclosure requirements for certain loan modifications for borrowers experiencing financial difficulty. Refer to Note 2 for recently adopted accounting standards.

With the adoption of ASU 2022-02 loan modifications require enhanced reporting on the type of modifications granted and the financial magnitude of the concessions granted. When the Company modifies a loan for borrowers experiencing financial difficulty, such modifications generally include one or a combination of the following: an extension of the maturity date; a stated rate of interest not at the market rate for new debt with similar risk; a change in the scheduled payment amount; or principal forgiveness. The Company works with loan customers experiencing financial difficulty and may enter into loan modifications to achieve the best mutual outcome given the financial circumstances of the borrower.

The following tables present the amortized cost basis of the loans modified to borrowers experiencing financial difficulty by type of concession granted:

	For the three and nine months ended March 31, 2024
	Term extension					Term extension and interest rate reduction
(Dollars in thousands)	Amortized cost		Percentage of total class			Amortized cost		Percentage of total class
Commercial real estate	$	3,948		0.427	%	$	130		0.014	%
Total	$	3,948				$	130

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty:

	For the three and nine months ended March 31, 2024
Loan type	Term extension	Interest rate reduction
Commercial real estate	Added a weighted-average 9 months to the life of the loans	Interest rates were reduced by an average of 1.75%

The Company closely monitors the performance of loans that are modified in accordance with ASU 2022-02. Loans modified during the three and nine months ended March 31, 2024 are performing within their modified terms.

20

Prior to the adoption of ASU 2016-13 (CECL)

Prior to July 1, 2023, the Company calculated the allowance for loan losses using the incurred loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.

Loan segments and classes at June 30, 2023 are summarized as follows:

(In thousands)	June 30, 2023
Residential real estate:
Residential real estate	$	372,443
Residential construction and land		19,072
Multi-family		66,496
Commercial real estate:
Commercial real estate		693,436
Commercial construction		121,958
Consumer loan:
Home equity		22,752
Consumer installment		4,612
Commercial loans		108,022
Total gross loans(1)		1,408,791
Allowance for loan losses		(21,212	)
Deferred fees and cost, net		75
Loans receivable, net	$	1,387,654

(1) Loan balances exclude accrued interest receivable of $5.5 million at June 30, 2023, which is included in accrued interest receivable in the consolidated statement of financial condition.

Loan balances by internal credit quality indicator at June 30, 2023:

(In thousands)	Performing		Special mention		Substandard		Total
Residential real estate	$	366,403	$	2,305	$	3,735	$	372,443
Residential construction and land		19,072		-		-		19,072
Multi-family		66,410		86		-		66,496
Commercial real estate		665,548		11,671		16,217		693,436
Commercial construction		121,958		-		-		121,958
Home equity		22,698		-		54		22,752
Consumer installment		4,530		-		82		4,612
Commercial loans		100,225		2,352		5,445		108,022
Total gross loans	$	1,366,844	$	16,414	$	25,533	$	1,408,791

The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2023:

(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	$	-	$	504	$	1,604	$	2,108	$	370,335	$	372,443	$	2,747
Residential construction and land		-		-		-		-		19,072		19,072		-
Multi-family		-		-		-		-		66,496		66,496		-
Commercial real estate		-		235		652		887		692,549		693,436		1,318
Commercial construction		-		-		-		-		121,958		121,958		-
Home equity		48		-		13		61		22,691		22,752		54
Consumer installment		63		1		63		127		4,485		4,612		63
Commercial loans		-		-		19		19		108,003		108,022		1,276
Total gross loans	$	111	$	740	$	2,351	$	3,202	$	1,405,589	$	1,408,791	$	5,458

The Company had no accruing loans delinquent 90 days or more at June 30, 2023.  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.

21

Impaired Loan Analysis

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

	At June 30, 2023						For the three months ended March 31, 2023				For the nine months ended March 31, 2023
(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	$	1,020	$	1,020	$	-	$	775	$	-	$	895	$	2
Commercial real estate		1,518		1,518		-		755		17		369		25
Home equity		-		-		-		43		-		100		-
Consumer Installment		-		-		-		4		-		4		1
Commercial loans		334		334		-		338		4		341		12
Impaired loans with no allowance		2,872		2,872		-		1,915		21		1,709		40
With an allowance recorded:
Residential real estate		2,086		2,086		597		2,421		7		2,221		14
Commercial real estate		3,777		3,777		245		3,851		48		3,696		121
Home equity		-		-		-		-		-		107		4
Commercial loans		1,572		1,572		1,171		1,839		5		2,479		32
Impaired loans with allowance		7,435		7,435		2,013		8,111		60		8,503		171
Total impaired:
Residential real estate		3,106		3,106		597		3,196		7		3,116		16
Commercial real estate		5,295		5,295		245		4,606		65		4,065		146
Home equity		-		-		-		43		-		207		4
Consumer Installment		-		-		-		4		-		4		1
Commercial loans		1,906		1,906		1,171		2,177		9		2,820		44
Total impaired loans	$	10,307	$	10,307	$	2,013	$	10,026	$	81	$	10,212	$	211

Prior to the adoption of ASU 2022-02 on July 1, 2023, the Company accounted for loan modifications to borrowers experiencing financial difficulty when concessions were granted as TDRs. The following tables are disclosures related to TDRs in prior periods.

The table below details loans that have been modified as a troubled debt restructuring during the year ended June 30, 2023.

(Dollars in thousands)	Number of contracts		Pre-Modification outstanding recorded investment		Post-Modification outstanding recorded investment		Current outstanding recorded investment
For the year ended June 30, 2023
Residential real estate		2	$	778	$	778	$	778
Commercial real estate		3	$	1,428	$	1,480	$	1,470
Commercial loans		1	$	379	$	379	$	-

There was one commercial loan in the amount of $379,000 that had been modified as a troubled debt restructuring during the three months ended September 30, 2022 that subsequently defaulted during the quarter ended March 31, 2023. There were no other 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 twelve months ended June 30, 2023 or 2022.

22

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 March 31, 2023
(In thousands)	Balance at December 31, 2022		Charge-offs		Recoveries		Provision			Balance at March 31, 2023
Residential real estate	$	2,492	$	-	$	-	$	146		$	2,638
Residential construction and land		193		-		-		(21	)		172
Multi-family		167		-		-		32			199
Commercial real estate		15,450		9		-		(1,869	)		13,572
Commercial construction		1,100		-		-		380			1,480
Home equity		38		-		-		11			49
Consumer installment		284		117		27		51			245
Commercial loans		2,565		103		12		326			2,800
Total	$	22,289	$	229	$	39	$	(944	)	$	21,155

	Activity for the nine months ended March 31, 2023
(In thousands)	Balance at June 30, 2022		Charge-offs		Recoveries		Provision			Balance at March 31, 2023
Residential real estate	$	2,373	$	-	$	5	$	260		$	2,638
Residential construction and land		141		-		-		31			172
Multi-family		119		-		-		80			199
Commercial real estate		16,221		9		-		(2,640	)		13,572
Commercial construction		1,114		-		-		366			1,480
Home equity		89		-		-		(40	)		49
Consumer installment		349		421		102		215			245
Commercial loans		2,355		114		30		529			2,800
Total	$	22,761	$	544	$	137	$	(1,199	)	$	21,155

	Allowance for loan losses				Loans receivable
	Ending balance June 30, 2023 Impairment analysis				Ending balance June 30, 2023 Impairment analysis
(In thousands)	Individually evaluated		Collectively evaluated		Individually evaluated		Collectively evaluated
Residential real estate	$	597	$	2,016	$	3,106	$	369,337
Residential construction and land		-		181		-		19,072
Multi-family		-		197		-		66,496
Commercial real estate		245		12,775		5,295		688,141
Commercial construction		-		1,622		-		121,958
Home equity		-		46		-		22,752
Consumer installment		-		332		-		4,612
Commercial loans		1,171		2,030		1,906		106,116
Total	$	2,013	$	19,199	$	10,307	$	1,398,484

Foreclosed real estate

Foreclosed real estate (“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)	March 31, 2024		June 30, 2023
Commercial loans	$	302	$	302
Total foreclosed real estate	$	302	$	302

23

(5)          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 March 31, 2024 and June 30, 2023 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.

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)	March 31, 2024		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. government sponsored enterprises	$	10,950	$	-	$	10,950	$	-
U.S. Treasury securities		43,133		-		43,133		-
State and political subdivisions		170,976		-		170,976		-
Mortgage-backed securities-residential		29,378		-		29,378		-
Mortgage-backed securities-multi-family		72,517		-		72,517		-
Corporate debt securities		18,565		-		18,565		-
Securities available-for-sale		345,519		-		345,519		-
Equity securities		343		343		-		-
Interest rate swaps		591		-		591		-
Total	$	346,453	$	343	$	346,110	$	-
Liabilities:
Interest rate swaps	$	591	$	-	$	591	$	-
Total	$	591	$	-	$	591	$	-

24

			Fair value measurements using
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(In thousands)	June 30, 2023		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. government sponsored enterprises	$	10,823	$	-	$	10,823	$	-
U.S. Treasury securities		16,500		-		16,500		-
State and political subdivisions		138,011		-		138,011		-
Mortgage-backed securities-residential		25,601		-		25,601		-
Mortgage-backed securities-multi-family		72,086		-		72,086		-
Corporate debt securities		18,112		-		18,112		-
Securities available-for-sale		281,133		-		281,133		-
Equity securities		306		306		-		-
Total	$	281,439	$	306	$	281,133	$	-

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 collateral dependent loans evaluated individually for expected credit losses in the period in which a re-measurement at fair value is performed. The Company uses the fair value of underlying collateral, less costs to sell, to estimate the allowance for credit losses for individually evaluated collateral dependent loans. Management may modify the appraised values, for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 40%. Such modifications to the appraised values could result in lower valuations of such collateral. Based on the valuation techniques used, the fair value measurements for collateral dependent loans evaluated individually are classified as Level 3.

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 credit losses. Values are derived from appraisals, similar to collateral dependent loans evaluated individually, of underlying collateral. 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 may modify the appraised values, for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 60%. Such modifications to the appraised values could result in lower valuations of such collateral. Based on the valuation techniques used, the fair value measurements for foreclosed real estate are classified as Level 3.

			March 31, 2024				June 30, 2023
(In thousands)	Fair value hierarchy		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Collateral dependent evaluated loans		3	$	5,656	$	3,765	$	7,578	$	5,565
Foreclosed real estate		3	$	302	$	302	$	302	$	302

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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. Fair value for interest rate swaps include any accrued interest and are valued using the present value of cash flows discounted using observable forward rate assumptions.

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

	March 31, 2024				Fair value measurements using
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	255,823	$	255,823	$	255,823	$	-	$	-
Long term certificates of deposit		3,083		3,004		-		3,004		-
Securities available-for-sale		345,519		345,519		-		345,519		-
Securities held-to-maturity		700,371		647,504		-		647,504		-
Equity securities		343		343		343		-		-
Federal Home Loan Bank stock		2,219		2,219		-		2,219		-
Net loans receivable		1,457,253		1,359,969		-		-		1,359,969
Accrued interest receivable		16,762		16,762		-		16,762		-
Interest rate swaps asset		591		591		-		591		-
Deposits		2,557,107		2,556,046		-		2,556,046		-
Borrowings		36,156		36,133		-		36,133		-
Subordinated notes payable, net		49,635		46,320		-		46,320		-
Accrued interest payable		793		793		-		793		-
Interest rate swaps liability		591		591		-		591		-

	June 30, 2023				Fair value measurements using
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	196,445	$	196,445	$	196,445	$	-	$	-
Long term certificate of deposit		4,576		4,383		-		4,383		-
Securities available-for-sale		281,133		281,133		-		281,133		-
Securities held-to-maturity		726,363		671,066		-		671,066		-
Equity securities		306		306		306		-		-
Federal Home Loan Bank stock		1,682		1,682		-		1,682		-
Net loans receivable		1,387,654		1,272,361		-		-		1,272,361
Accrued interest receivable		12,249		12,249		-		12,249		-
Deposits		2,437,161		2,437,357		-		2,437,357		-
Subordinated notes payable, net		49,495		47,669		-		47,669		-
Accrued interest payable		936		936		-		936		-

(6)           Derivative Instruments

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities. The Company has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

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Derivatives Not Designated as Hedging Instruments

The Company enters into interest rate swap agreements with its commercial customers to provide them with a long-term fixed rate, while simultaneously entering into offsetting interest rate swap agreements with a counterparty to swap the fixed rate to a variable rate to manage interest rate exposure. These interest rate swap agreements are not designated as hedges for accounting purposes. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not present any material exposure to the Company’s consolidated statements of income. The Company records its interest rate swap agreements at fair value and are presented within other assets and other liabilities on the consolidated statements of financial condition. Changes in the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statements of income. Under terms of the agreements with the third-party counterparties, the Company provides cash collateral to the counterparty, when required, for the initial trade. Subsequent to the trade, the margin is exchanged in either direction, based upon the estimated fair value of the underlying contracts. Cash collateral represents the amount that is exchanged under master netting agreements that allows the Company to offset the derivative position with the related collateral. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

The following table present the notional amount and fair values of interest rate derivative positions:

	At  March 31, 2024
	Asset derivatives							Liability derivatives
(In thousands)		Statement of financial condition  location	Notional amount		Fair value				Statement of financial condition   location	Notional amount		Fair value
Interest rate derivatives		Other assets	$	38,777		$	591		Other liabilities	$	38,777		$	591
Less cash collateral							-		Other liabilities					(450	)
Total after netting						$	591						$	141

There were no interest rate swap agreements for the Company at June 30, 2023.

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. At March 31, 2024, the Company’s exposure was reduced due to participations-outs in the amount of $164,000, with a notional amount of $8.0 million. There were no participations-outs at June 30, 2023.

RPAs in which 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. The credit exposure associated with risk participations-ins was $397,000 and zero as of March 31, 2024 and June 30, 2023, respectively. The RPAs participations-ins are spread out over four financial institution counterparties and terms range between 4 to 13 years. At March 31, 2024 and June 30, 2023, the Company held RPAs with a notional amount of $109.8 million and $82.0 million, respectively.

(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 nine months ended March 31, 2024 and 2023.

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	For the three months ended March 31,				For the nine months ended March 31,
	2024		2023		2024		2023
Net Income	$	5,861,000	$	8,091,000	$	18,037,000	$	24,325,000
Weighted average shares – basic		17,026,828		17,026,828		17,026,828		17,026,828
Weighted average shares - diluted		17,026,828		17,026,828		17,026,828		17,026,828
Earnings per share - basic	$	0.34	$	0.48	$	1.06	$	1.43
Earnings per share - diluted	$	0.34	$	0.48	$	1.06	$	1.43

(8)    Dividends

On January 17, 2024, the Company announced that its Board of Directors has approved a quarterly cash dividend of $0.08 per share on the Company’s common stock. The dividend reflects an annual cash dividend rate of $0.32 per share which is the same rate as the dividend declared during the previous quarter. The dividend was payable to stockholders of record as of February 15, 2024, and was paid on February 28, 2024. Greene County Bancorp, MHC waived its right to receive this dividend.

(9)        Employee Benefit Plans

Defined Benefit Plan

The components of net periodic pension cost related to the defined benefit pension plan for the three and nine months ended March 31, 2024 and 2023 were as follows:

	Three months ended March 31,						Nine months ended March 31,
(In thousands)	2024			2023			2024			2023
Interest cost	$	52		$	50		$	156		$	150
Expected return on plan assets		(55	)		(55	)		(165	)		(165	)
Amortization of net loss		19			27			57			81
Net periodic pension cost	$	16		$	22		$	48		$	66

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 2024.

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, 2023.

The net periodic pension costs related to the SERP for the three and nine months ended March 31, 2024 was $507,000 and $1.5 million, respectively, included within salaries and benefits expense on the consolidated statements of income. The total liability for the SERP was $14.3 million at March 31, 2024 and $12.3 million at June 30, 2023, 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.

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(10)         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.  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, 2023.

A summary of the Company’s phantom stock option activity and related information were as follows:

	Three months ended March 31,					Nine months ended March 31,
	2024		2023			2024			2023
Number of options outstanding, beginning of period		2,317,535		2,614,840			2,535,840			2,959,040
Options granted		-		-			672,095			807,200
Options paid in cash		-		(70,000	)		(890,400	)		(1,221,400	)
Number of options outstanding, end of period		2,317,535		2,544,840			2,317,535			2,544,840

	Three months ended March 31,				Nine months ended March 31,
(In thousands)	2024		2023		2024		2023
Cash paid out on options vested	$	-	$	184	$	4,051	$	4,288
Compensation costs recognized	$	908	$	1,239	$	2,302	$	3,233

The total liability for the Plan was $4.5 million and $6.3 million at March 31, 2024 and June 30, 2023, respectively, and is included in accrued expenses and other liabilities on the consolidated statements of financial condition.

(11)        Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are presented as follows:

Activity for the three months ended March 31, 2024 and 2023

(In thousands)	Unrealized losses on securities available-for- sale			Pension benefits			Total
Balance – December 31, 2022	$	(21,911	)	$	(1,115	)	$	(23,026	)
Other comprehensive income before reclassification		2,927			-			2,927
Other comprehensive income for the three months ended March 31, 2023		2,927			-			2,927
Balance – March 31, 2023	$	(18,984	)	$	(1,115	)	$	(20,099	)
Balance – December 31, 2023	$	(18,193	)	$	(877	)	$	(19,070	)
Other comprehensive loss before reclassification		(1,347	)		-			(1,347	)
Other comprehensive loss for the three months ended March 31, 2024		(1,347	)		-			(1,347	)
Balance – March 31, 2024	$	(19,540	)	$	(877	)	$	(20,417	)

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Activity for the nine months ended March 31, 2024 and 2023

(In thousands)	Unrealized losses on securities available-for- sale			Pension benefits			Total
Balance – June 30, 2022	$	(17,268	)	$	(1,115	)	$	(18,383	)
Other comprehensive loss before reclassification		(1,900	)		-			(1,900	)
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 nine months ended March 31, 2023		(1,716	)		-			(1,716	)
Balance – March 31, 2023	$	(18,984	)	$	(1,115	)	$	(20,099	)
Balance – June 30, 2023	$	(20,531	)	$	(877	)	$	(21,408	)
Other comprehensive income before reclassification		991			-			991
Other comprehensive income for the nine months ended March 31, 2024		991			-			991
Balance – March 31, 2024	$	(19,540	)	$	(877	)	$	(20,417	)

(12)        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.

The following includes quantitative data related to the Company’s operating leases as March 31, 2024 and June 30, 2023, and for the three and nine months ended March 31, 2024 and 2023:

(In thousands)
Operating lease amounts:	March 31, 2024		June 30, 2023
Right-of-use assets	$	2,178	$	2,188
Lease liabilities	$	2,267	$	2,277

	For the three months ended March 31,
(In thousands)	2024		2023
Other information:
Operating outgoing cash flows from operating leases	$	118	$	90
Right-of-use assets obtained in exchange for new operating lease liabilities	$	251	$	561
Lease costs:
Operating lease cost	$	105	$	87
Variable lease cost	$	11	$	12

	For the nine months ended March 31,
(In thousands)	2024		2023
Other information:
Operating outgoing cash flows from operating leases	$	346	$	269
Right-of-use assets obtained in exchange for new operating lease liabilities	$	251	$	561
Lease costs:
Operating lease cost	$	313	$	250
Variable lease cost	$	33	$	32

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The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, as of March 31, 2024:

(In thousands, except weighted-average information)
Within the twelve months ended March 31,
2024	$	498
2025		490
2026		464
2027		383
2028		265
Thereafter		364
Total undiscounted cash flow		2,464
Less net present value adjustment		(197	)
Lease Liability	$	2,267
Weighted-average remaining lease term (Years)		5.42
Weighted-average discount rate		3.01	%

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.

(13)        Commitments and Contingent Liabilities

Credit-Related Financial Instruments

In the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, standby letters of credit, and lines of credit, which involve, to varying degrees, elements of credit risk.

The table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:

(In thousands)	March 31, 2024		June 30, 2023
Unfunded loan commitments	$	108,186	$	124,498
Unused lines of credit		94,768		94,898
Standby letters of credit		429		179
Total credit-related financial instruments with off-balance sheet risk	$	203,383	$	219,575

The Company enters into contractual commitments to extend credit to its customers in the form of loan commitments and lines of credit, generally with fixed expiration dates and other termination clauses, and may require payment of a fee. Substantially all of the Company’s commitments to extend credit are contingent upon its customers maintaining specific credit standards at the time of loan funding, and are often secured by real estate collateral. Since the majority of the Company’s commitments typically expire without being funded, the total contractual amount does not necessarily represent the Company’s future payment 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.

Allowance for Credit Losses on Unfunded Commitments

The Company estimates expected credit losses over the contractual period in which the Company has exposure to a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments exposure is recognized in other liabilities and is adjusted as an expense in other noninterest expense. At March 31, 2024, the allowance for credit losses on unfunded commitments totaled $1.3 million.

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(14)        Subsequent events

On April 17, 2024, the Board of Directors announced a cash dividend for the quarter ended March 31, 2024 of $0.08 per share on the Company’s common stock. The dividend reflects an annual cash dividend rate of $0.32 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 May 15, 2024, and is expected to be paid on May 30, 2024. Greene County Bancorp, MHC intends to waive its receipt of this dividend.

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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 credit 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.

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. 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 most significant market risk affecting the Company. It 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.

Liquidity risk is the risk the Company may not be able to satisfy current or future financial commitments or may become unduly reliant on alternate funding sources. The Company’s objective is to fund balance sheet growth while meeting the cash flow requirements of depositors. Management is responsible for liquidity monitoring and has available different sources of liquidity as requirements and demands change. These demands include loan growth and repayments, security purchases and maturities, deposit inflows and outflows, and payments on borrowings.  Management continually monitors trends to identify patterns that might improve the predictability and timing of the Company’s liquidity position.

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 including cybersecurity risks; 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.

33

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.

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

Critical accounting estimates as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. The more significant of these policies are summarized in Note 1 to the consolidated financial statements presented in our Annual Report on Form 10-K for the Fiscal Year Ended June 30, 2023.  Refer to Note 2 in this Quarterly Report on Form 10-Q for recently adopted accounting standards. Not all significant accounting policies require management to make difficult, subjective or complex judgments. The allowance for credit losses on loans and unfunded commitments policies noted below are deemed the Company’s critical accounting estimate.

The allowance for credit losses consists of the allowance for credit losses for loans and unfunded commitments. Effective July 1, 2023, the measurement of Current Expensed Credit Losses (“CECL”) on financial instruments requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. The allowance for credit losses for loans, as reported in our consolidated statements of financial condition, are adjusted by a provision (expense) for credit losses, which is recognized in earnings, and reduced by the charge-off of loans, net of recoveries. The allowance for credit losses on unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws, and is included in accrued expenses and other liabilities on the Company’s consolidated statements of financial condition.

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Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting estimate given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolios. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolios, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to our reported earnings. This critical accounting policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

The Company’s policies on the CECL method for allowance for credit losses are disclosed in Note 1 to the consolidated financial statements presented in this Quarterly Report on Form 10-Q. Refer to Note 2 to the consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards.

Comparison of Financial Condition at March 31, 2024 and June 30, 2023

ASSETS

Total assets of the Company were $2.9 billion at March 31, 2024 and $2.7 billion at June 30, 2023, an increase of $173.2 million or 6.4%. Securities available-for-sale and held-to-maturity for the Company were $1.0 billion at March 31, 2024 and June 30, 2023. Net loans receivable for the Company increased $69.6 million, or 5.0%, to $1.5 billion at March 31, 2024 from $1.4 billion at June 30, 2023.

CASH AND CASH EQUIVALENTS

Total cash and cash equivalents for the Company were $255.8 million at March 31, 2024 and $196.4 million at June 30, 2023. 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. The Company has continued to maintain strong capital and liquidity positions as of March 31, 2024.

SECURITIES

Securities available-for-sale and held-to-maturity for the Company were $1.0 billion at March 31, 2024 and June 30, 2023. Securities purchases totaled $194.5 million during the nine months ended March 31, 2024 and consisted primarily of $158.4 million of state and political subdivision securities, $26.5 million of U.S. Treasury securities, $6.0 million of mortgage-backed securities and $3.6 million of corporate debt securities. Principal pay-downs and maturities during the nine months ended March 31, 2024 amounted to $156.4 million, primarily consisting of $141.1 million of state and political subdivision securities, $13.3 million of mortgage-backed securities, and $2.0 million of collateralized mortgage obligations. At March 31, 2024, 60.6% of our securities portfolio consisted of 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, which represent 26.9% of our securities portfolio at March 31, 2024, do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

The Company adopted ASU 2016-13 (CECL) as of July 1, 2023. For periods subsequent to adoption, the allowance for credit losses (ACL) is calculated under the CECL methodology and the resulting provision for credit losses includes expected credit losses on securities held-to-maturity. The periods prior to adoption did not have an allowance for credit losses under applicable Generally Accepted Accounting Principles (GAAP) for those periods.

U.S. Treasury and mortgage-backed securities are issued by U.S. government entities and agencies. These securities are either explicitly and/or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of zero credit losses. Therefore, the Company determined a zero credit loss assumption, and did not calculate or record an allowance for credit loss for these securities. An allowance for credit losses on investment securities held-to-maturity has been recorded for certain municipal securities issued by state and political subdivisions and corporate debt securities to account for expected lifetime credit loss using the CECL methodology.

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The following table summarizes the securities portfolio by classification as a percentage of the portfolio. The values are reported at the balance sheet carrying value as of March 31, 2024 and June 30, 2023. Refer to financial statements Note 3 Securities for the complete fair value of securities.

	March 31, 2024					June 30, 2023
(Dollars in thousands)	Balance		Percentage of portfolio			Balance		Percentage of portfolio
Securities available-for-sale:
U.S. Government sponsored enterprises	$	10,950		1.0	%	$	10,823		1.1	%
U.S. Treasury securities		43,133		4.1			16,500		1.6
State and political subdivisions		170,976		16.4			138,011		13.7
Mortgage-backed securities-residential		29,378		2.8			25,601		2.5
Mortgage-backed securities-multifamily		72,517		6.9			72,086		7.2
Corporate debt securities		18,565		1.8			18,112		1.8
Total securities available-for-sale		345,519		33.0			281,133		27.9
Securities held-to-maturity:
U.S. treasury securities		33,767		3.2			33,705		3.4
State and political subdivisions		462,598		44.2			478,756		47.5
Mortgage-backed securities-residential		33,947		3.3			37,186		3.7
Mortgage-backed securities-multifamily		145,234		13.9			155,046		15.4
Corporate debt securities		24,794		2.4			21,632		2.1
Other securities		31		0.0			38		0.0
Total securities held-to-maturity		700,371		67.0			726,363		72.1
Total securities (at carrying value)	$	1,045,890		100.0	%	$	1,007,496		100.0	%

There was no ACL recorded on available-for-sale securities as of either period presented as each of the securities in the portfolio are investment grade, current as to principal and interest and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences.

Securities held-to-maturity are evaluated for credit losses on a quarterly basis under the CECL methodology. At March 31, 2024, the ACL on securities held-to-maturity was $498,000.

LOANS

Net loans receivable increased $69.6 million, or 5.0%, to $1.5 billion at March 31, 2024 from $1.4 billion at June 30, 2023.  The loan growth experienced during the nine months consisted primarily of $42.4 million in commercial real estate loans, $20.6 million in residential real estate loans, and $4.8 million in home equity 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.

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	March 31, 2024						June 30, 2023
(Dollars in thousands)	Balance			Percentage of portfolio			Balance			Percentage of portfolio
Residential real estate	$	411,555			27.8	%	$	390,944			27.8	%
Commercial real estate		924,777			62.6			882,388			62.6
Home equity		27,659			1.9			22,887			1.6
Consumer		4,721			0.3			4,646			0.3
Commercial loans		108,923			7.4			108,001			7.7
Total gross loans(1)(2)		1,477,635			100.0	%		1,408,866			100.0	%
Allowance for credit losses on loans		(20,382	)					(21,212	)
Total net loans	$	1,457,253					$	1,387,654

(1) Loan balances include net deferred fees/cost of $167 and $75,000 at March 31, 2024 and at June 30, 2023, respectively.

(2) Loan balances exclude accrued interest receivable of $6.7 million and $5.5 million at March 31, 2024 and at June 30, 2023, respectively, which is included in accrued interest receivable in the consolidated statement of financial condition.

The following table presents commercial real estate loans by concentrations:

	At March 31, 2024
(Dollars in thousands)	Balance		Percentage of total
Owner occupied:
Warehouse	$	36,123		3.9	%
Mixed use real estate		33,685		3.6
Retail		18,796		2.0
Office building		17,408		1.9
Firehouse		14,307		1.5
Other		50,895		5.6
Total owner occupied		171,214		18.5
Non-owner occupied:
Apartment		153,994		16.7
Construction		115,635		12.5
Retail plaza		81,706		8.8
Mixed use real estate		79,981		8.6
Multi-family		68,779		7.4
Office building		53,576		5.8
Motel/Hotel		52,968		5.7
Warehouse		48,917		5.3
Other		98,007		10.7
Total non-owner occupied		753,563		81.5
Total commercial real estate	$	924,777		100.0	%

Commercial real estate loans include loans secured by both owner and non-owner occupied real estate. These loans are generally secured by commercial, residential investment or industrial property types. Commercial real estate loans are primarily made within our market area in Greene, Columbia, Albany, Ulster and Rensselaer Counties of New York State. The Company actively monitors and manages our commercial real estate portfolio concentrations to mitigate its credit risk exposure.

As of March 31, 2024, the company’s largest commercial real estate concentration was non-owner occupied apartment. These loans provide much needed housing for the residents located in our market area, and have historically performed well with strong credit metrics. Also as of period end, the Company’s outstanding balance of non-owner occupied, commercial real estate office loans was $53.6 million, or 3.7% of total loans, which are primarily low-rise, non-metropolitan buildings, located within our geographic footprint.

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ALLOWANCE FOR CREDIT LOSSES ON LOANS

The allowance for credit losses on loans (the “ACL”) is established through a provision made periodically by charges or benefits to the provision for credit losses. This is necessary to maintain the ACL at a level which management believes is reasonably reflective of the overall loss expected over the contractual life of the loan portfolio. Management has an established ACL policy to govern the use of judgments exercised in evaluating the ACL required to estimate the expected credit losses over the expected contractual life of the loan portfolios and the material effect that such judgments can have on the consolidated financial statements. While management uses available information to recognize losses on loans, additions or reductions to the allowance may fluctuate from one reporting period to another. These fluctuations are reflective of changes in the reasonable and supportable forecast, analysis of loans evaluated individually, and/or changes in management’s assessment of factors.

The ACL is based on the results of life of loan quantitative models, reserves associated with collateral-dependent loans evaluated individually and adjustments for the impact of current economic conditions not accounted for in the quantitative models. The discounted cash flow methodology is used to calculate the CECL reserve for the residential real estate, commercial real estate, home equity and commercial loan segments. The remaining life method is utilized to determine the CECL reserve for the consumer loan segment. The Company elected to use the practical expedient to evaluate loans individually, if they are collateral dependent loans that are on nonaccrual status with a balance of $250,000 or greater, which is consistent with regulatory requirements. The fair value of collateral for collateral dependent loans less selling expenses will be compared to the loan balance to determine if a CECL reserve is required. A qualitative factor framework has been developed to adjust the quantitative loss rates for asset-specific risk characteristics or current conditions at the reporting date.

The Company charges loans off against the ACL 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 ACL, 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. 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 ACL is increased by a provision for credit losses (which results in a charge to expense) and recoveries of loans previously charged off, and is reduced by charge-offs.

Additional information about the ACL is included in Note 4 to the consolidated financial statements. Management considers the ACL to be appropriate based on evaluation and analysis of the loan portfolio.

The ACL totaled $20.4 million at March 31, 2024, compared to $21.2 million at June 30, 2023 and $19.9 million at July 1, 2023. The ACL to total loans receivable was 1.38% at March 31, 2024 compared to 1.51% at June 30, 2023 and 1.42% at day-one CECL adoption (July 1, 2023). The ACL as of March 31, 2024 is consistent with the July 1, 2023 day-one ACL. The decrease in the ACL from June 30, 2023 to March 31, 2024 was primarily due to the CECL adoption.

The allowance for credit losses on unfunded commitments as of March 31, 2024 was $1.3 million.

Nonaccrual Loans and Nonperforming Assets

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loans that have modifications, foreclosed real estate and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become 90 days past due, unless the loan is well secured and in the process of collection. 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, and may be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. The threshold for evaluating classified and nonperforming loans specifically evaluated for individual credit loss is $250,000. Foreclosed real estate represents property acquired through foreclosure and is vale lower of the carrying amount or fair value, less any estimated disposal costs.

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Analysis of Nonaccrual Loans and Nonperforming Assets

(Dollars in thousands)	March 31, 2024			June 30, 2023
Nonaccrual loans:
Residential real estate	$	2,672		$	2,747
Commercial real estate		1,664			1,318
Home equity		48			54
Consumer installment		-			63
Commercial		1,255			1,276
Total nonaccrual loans	$	5,639		$	5,458
Foreclosed real estate:
Commercial		302			302
Total foreclosed real estate		302			302
Total nonperforming assets	$	5,941		$	5,760
Total nonperforming assets of total assets		0.21	%		0.21	%
Total nonperforming loans to net loans		0.39	%		0.39	%
Allowance for credit losses on loans to nonperforming loans		361.45	%		388.64	%
Allowance for credit losses on loans to total loans receivable		1.38	%		1.51	%

At March 31, 2024 and June 30, 2023, there were no loans greater than 90 days and accruing.

Nonperforming assets amounted to $5.9 million and $5.8 million at March 31, 2024 and June 30, 2023, respectively.  Loans on nonaccrual status totaled $5.6 million at March 31, 2024, of which there were two residential loans totaling $446,000, one commercial loan totaling $1.7 million, and three commercial real estate loans totaling $1.6 million, that were in the process of foreclosure at March 31, 2024. Included in nonaccrual loans were $1.7 million of loans which were less than 90 days past due at March 31, 2024, 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 $5.5 million at June 30, 2023, of which three residential real estate loans totaling $625,000 and two commercial real estate loans totaling $1.4 million in the process of foreclosure. Included in nonaccrual loans were $3.1 million of loans which were less than 90 days past due at June 30, 2023, but have a recent history of delinquency greater than 90 days past due.

DEPOSITS

Deposit flow is influenced by general economic conditions, changes in prevailing interest rates and competition. The diversity of deposit accounts offered allows the Company to be competitive in obtaining funds and responding to changes in consumer demand. The Company’s emphasis is placed on acquiring locally, stable, low-cost deposits to fund high-quality loans without taking on unnecessary interest rate risk. The ability to attract and maintain deposits and the rates paid on these deposits are and will continue to be affected by market conditions.

Deposits totaled $2.6 billion at March 31, 2024 and $2.4 billion at June 30, 2023, an increase of $119.9 million, or 4.9%. NOW deposits increased $194.4 million, or 11.2%, and money market deposits increased $1.0 million, or 0.9%, when comparing March 31, 2024 and June 30, 2023. Savings deposits decreased $43.3 million, or 14.5%, noninterest-bearing deposits decreased $27.6 million, or 17.3%, and certificates of deposits decreased $4.6 million, or 3.6%, when comparing March 31, 2024 and June 30, 2023. As of March 31, 2024, the brokered deposit balance amounted to $120.0 million, which was included in NOW deposits. As of June 30, 2023, the brokered deposit balance amounted to $60.0 million, which was included in certificates of deposits. The Company maintains an increased level of brokered deposits from several available sources as an alternative to borrowed funds, and uses the funds to support loan growth, overall liquidity and a higher cash position.

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The following table summarizes deposits by major categories:

(Dollars in thousands)	March 31, 2024		Percentage of portfolio			June 30, 2023		Percentage of portfolio
Noninterest-bearing deposits	$	131,452		5.2	%	$	159,039		6.5	%
Certificates of deposit		123,461		4.8			128,077		5.3
Savings deposits		255,761		10.0			299,038		12.3
Money market deposits		116,094		4.5			115,029		4.7
NOW deposits		1,930,339		75.5			1,735,978		71.2
Total deposits	$	2,557,107		100.0	%	$	2,437,161		100.0	%

The following table summarizes deposits by depositor type:

(Dollars in thousands)	March 31, 2024		Percentage of portfolio			June 30, 2023		Percentage of portfolio
Business deposits	$	437,241		17.1	%	$	487,477		20.0	%
Retail deposits		838,665		32.8			856,079		35.1
Municipal deposits		1,161,108		45.4			1,033,605		42.4
Brokered deposits		120,093		4.7			60,000		2.5
Total deposits	$	2,557,107		100.0	%	$	2,437,161		100.0	%

The Company’s deposit base and liquidity position continues to be strong, and the deposit base is well diversified across segments to meet the transactional and investment needs of our customers. Municipal deposits are primarily from local New York State government entities, such as counties, cities, villages and towns, as well as school districts and fire departments. There is a seasonal component to municipal deposits levels associated with annual tax collections and fiscal spending patterns. In general, municipal balances increase at the end of the first and third quarters of our fiscal year. Municipal deposits above the FDIC insured limit are required to be collateralized by irrevocable municipal letters of credit issued by the Federal Home Loan Bank, municipal bonds, US Treasuries or government agency securities. Additionally, the Company offers large retail, business and municipal customers the ability to enhance FDIC insurance coverage, by electing to participate their deposit balance into a national deposit network.

The Company has many long-standing relationships with municipal entities throughout its market areas and their deposits have provided a stable funding source for the company. The Company has a separate municipal department for the retention, management, and monitoring of municipal relationships.

Uninsured deposits represents the portion of deposit accounts that exceed the FDIC insurance limit. The Company calculates its uninsured deposit balances based on the methodologies and assumptions used for regulatory reporting requirements, which includes affiliate deposits and collateralized deposits.

The following table estimates uninsured deposits after certain exclusions:

(Dollars in thousands)	At March 31, 2024
Uninsured deposits, per regulatory requirements	$	1,360,126
Less: Affiliate deposits		(29,606	)
Collateralized deposits		(1,060,931	)
Uninsured deposits, after exclusions	$	269,588
Immediately available liquidity(1)	$	425,797
Uninsured deposits coverage		157.9	%

(1) Reflects $255.8 million of cash and cash equivalents, $149.7 million and $20.3 million of remaining borrowing capacity from the Federal Home Loan Bank and the Federal Reserve Bank, as of March 31, 2024.

Uninsured deposits after exclusions, represents 10.5% of total deposits as of March 31, 2024. The Company believes that this presentation provides a more accurate view of deposits at risk, given that affiliate deposits are not customer facing and therefore are eliminated upon consolidation, and collateralized deposits are fully secured by investments and municipal letters of credits. The Company continually monitors the level and composition of uninsured deposits.

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BORROWINGS

At March 31, 2024, the Bank had pledged approximately $588.6 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 $368.9 million at March 31, 2024, of which there were $9.2 million long-term fixed rate borrowings, $210.0 million irrevocable municipal letters of credit and zero overnight borrowings outstanding at March 31, 2024.  At June 30, 2023, the Bank had zero overnight or long-term borrowings outstanding and $110.0 million in irrevocable municipal letters of credit at the FHLB. Interest rates on overnight borrowings are determined at the time of borrowing. The 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 FHLB term borrowings include long-term fixed rate borrowings from the “FHLB 0% Development Advance (ZDA) Program.” The Company receives a corresponding credit related to the FHLB term fixed rate borrowings, which effectively reduces the interest rate paid to zero percent. At March 31, 2024, the Bank had a FHLB long-term fixed rate borrowing of $4.4 million at a stated rate of 5.7%, maturing September 2024, and a FHLB long-term fixed rate borrowing of $4.8 million at a stated rate of 5.2%, maturing March 2025.

The Bank also pledges securities and certificates of deposit as collateral at the Federal Reserve Bank discount window for overnight borrowings and the “Bank Term Funding Program” (BTFP). The BTFP was established by the Federal Reserve Bank to provide additional funding to eligible depository institutions to meet the needs of their depositors. At March 31, 2024, approximately $40.5 million of collateral was available to be pledged against potential borrowings at the Federal Reserve Bank discount window and the BTFP, of which there were zero overnight borrowings outstanding with the discount window and $27.0 million outstanding with the BTFP. At June 30, 2023, there were zero overnight borrowings outstanding with the discount window and zero outstanding with the BTFP.

At March 31, 2024, the BTFP consisted of a $2.0 million short-term borrowing at a stated rate of 4.8%, maturing in April 2024, and a $25.0 million long-term borrowing at a stated rate of 4.8%, maturing in January 2025.

The Bank has established unsecured lines of credit with Atlantic Community Bankers Bank for $15.0 million and three other financial institutions for $75.0 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 the Bank at March 31, 2024 and June 30, 2023.

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 March 31, 2024, there were $19.9 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 March 31, 2024, there were $29.8 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

At March 31, 2024, there were no other long-term borrowings and therefore no scheduled maturities of long-term borrowings.

EQUITY

Shareholders’ equity increased to $199.2 million at March 31, 2024 from $183.3 million at June 30, 2023, resulting primarily from net income of $18.0 million and a decrease in accumulated other comprehensive loss of $991,000, partially offset by dividends declared and paid of $2.6 million and the day-one CECL adoption impact of $510,000.

The Federal Reserve raised its target benchmark interest rate in 2022 and into the third quarter of calendar year 2023, resulting in subsequent prime lending rate increases of 525 basis points, and a significant increase in market rates between March 2022 and December 2023. If market interest rates rise, the fair value of the fixed income bond portfolio will decrease, resulting in additional unrealized losses, and depending on the extent of the rise in interest rates, the increase in unrealized losses could be significant. The non-credit portion of unrealized losses are recorded to Accumulated Other Comprehensive Income, a component of Shareholders' Equity. A significant increase in market rates may have a negative impact on book value per share. The Company's bond portfolio is expected to mature at par and therefore the unrealized losses in the portfolio that result from higher market interest rates will decrease as the bonds become closer to maturity. However, if the Company were required to sell investment securities with an unrealized loss for any reason, including liquidity needs, the unrealized loss would become realized and reduce both net income for the reported period and regulatory capital, which as currently reported, excludes unrealized losses on investment securities.

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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 400,000 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 nine months ended March 31, 2024, the Company did not repurchase any shares.

Selected Equity Data:
	At March 31, 2024			At June 30, 2023
Shareholders’ equity to total assets, at end of period		6.94	%		6.79	%
Book value per share	$	11.70		$	10.76
Closing market price of common stock	$	28.79		$	29.80
	For the nine months ended March 31,
		2024			2023
Average shareholders’ equity to average assets		7.16	%		6.48	%
Dividend payout ratio1		22.64	%		14.69	%
Actual dividends paid to net income2		14.50	%		6.76	%

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 (“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 September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023, December 31, 2023 and March 31, 2024. Dividends declared during the three months ended June 30, 2022 and September 30, 2023 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 Nine Months Ended March 31, 2024 and 2023

Average Balance Sheet

The following table sets forth certain information relating to the Company for the three and nine months ended March 31, 2024 and 2023. 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.

42

	Three months ended March 31,
	2024								2023
(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	$	1,467,100		$	18,063		4.92	%	$	1,400,351		$	15,676		4.48	%
Securities non-taxable		629,287			4,426		2.81			671,917			3,836		2.28
Securities taxable		414,311			2,682		2.59			405,648			2,091		2.06
Interest-bearing bank balances and federal funds		70,437			841		4.78			21,126			277		5.24
FHLB stock		2,136			59		11.05			3,760			53		5.64
Total interest-earning assets		2,583,271			26,071		4.04	%		2,502,802			21,933		3.51	%
Cash and due from banks		14,300								14,566
Allowance for credit losses on loans		(20,392	)							(21,572	)
Allowance for credit losses on securities held-to-maturity		(486	)							-
Other noninterest-earning assets		101,311								96,057
Total assets	$	2,678,004							$	2,591,853
Interest-Bearing Liabilities:
Savings and money market deposits	$	362,939		$	422		0.47	%	$	458,036		$	233		0.20	%
NOW deposits		1,748,528			11,225		2.57			1,614,497			5,058		1.25
Certificates of deposit		124,542			1,297		4.17			51,308			268		2.09
Borrowings		80,730			832		4.12			103,373			1,148		4.44
Total interest-bearing liabilities		2,316,739			13,776		2.38	%		2,227,214			6,707		1.20	%
Noninterest-bearing deposits		134,675								165,208
Other noninterest-bearing liabilities		29,847								25,485
Shareholders' equity		196,743								173,946
Total liabilities and equity	$	2,678,004							$	2,591,853
Net interest income				$	12,295							$	15,226
Net interest rate spread							1.66	%							2.31	%
Net earnings assets	$	266,532							$	275,588
Net interest margin							1.90	%							2.43	%
Average interest-earning assets to average interest-bearing liabilities		111.50	%							112.37	%

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 March 31,
(Dollars in thousands)	2024			2023
Net interest income (GAAP)	$	12,295		$	15,226
Tax-equivalent adjustment(1)		1,897			1,400
Net interest income (fully taxable-equivalent)	$	14,192		$	16,626
Average interest-earning assets	$	2,583,271		$	2,502,802
Net interest margin (fully taxable-equivalent)		2.20	%		2.66	%

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 March 31, 2024 and 2023, respectively.

43

	Nine months ended March 31,
	2024								2023
(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	$	1,448,636		$	53,044		4.88	%	$	1,360,446		$	43,859		4.30	%
Securities non-taxable		631,016			13,050		2.76			684,541			10,417		2.03
Securities taxable		400,432			7,235		2.41			415,768			6,209		1.99
Interest-bearing bank balances and federal funds		74,168			2,862		5.15			15,892			473		3.97
FHLB stock		2,189			145		8.83			3,272			143		5.83
Total interest-earning assets		2,556,441			76,336		3.98	%		2,479,919			61,101		3.29	%
Cash and due from banks		12,673								13,077
Allowance for credit losses on loans		(20,207	)							(22,334	)
Allowance for credit losses on securities held-to-maturity		(492	)							-
Other noninterest-earning assets		99,956								93,941
Total assets	$	2,648,371							$	2,564,603
Interest-Bearing Liabilities:
Savings and money market deposits	$	376,317		$	1,004		0.36	%	$	478,274		$	642		0.18	%
NOW deposits		1,730,371			31,876		2.46			1,565,536			9,846		0.84
Certificates of deposit		109,333			3,229		3.94			61,194			819		1.78
Borrowings		67,729			2,105		4.14			93,112			2,811		4.03
Total interest-bearing liabilities		2,283,750			38,214		2.23	%		2,198,116			14,118		0.86	%
Noninterest-bearing deposits		145,824								175,009
Other noninterest-bearing liabilities		29,231								25,253
Shareholders' equity		189,566								166,225
Total liabilities and equity	$	2,648,371							$	2,564,603
Net interest income				$	38,122							$	46,983
Net interest rate spread							1.75	%							2.43	%
Net earnings assets	$	272,691							$	281,803
Net interest margin							1.99	%							2.53	%
Average interest-earning assets to average interest-bearing liabilities		111.94	%							112.82	%

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 nine months ended March 31,
(Dollars in thousands)	2024			2023
Net interest income (GAAP)	$	38,122		$	46,983
Tax-equivalent adjustment(1)		5,051			3,808
Net interest income (fully taxable-equivalent)	$	43,173		$	50,791
Average interest-earning assets	$	2,556,441		$	2,479,919
Net interest margin (fully taxable-equivalent)		2.25	%		2.73	%

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 March 31, 2024 and 2023, respectively.

44

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 March 31, 2024 versus 2023									Nine months ended March 31, 2024 versus 2023
	Increase/(decrease) Due to						Total Increase/			Increase/(decrease) Due to						Total Increase/
(Dollars in thousands)	Volume			Rate			(decrease)			Volume			Rate			(decrease)
Interest Earning Assets:
Loans receivable, net1	$	780		$	1,607		$	2,387		$	2,981		$	6,204		$	9,185
Securities non-taxable		(255	)		845			590			(868	)		3,501			2,633
Securities taxable		45			546			591			(237	)		1,263			1,026
Interest-bearing bank balances and federal funds		590			(26	)		564			2,210			179			2,389
FHLB stock		(30	)		36			6			(57	)		59			2
Total interest-earning assets		1,130			3,008			4,138			4,029			11,206			15,235
Interest-Bearing Liabilities:
Savings and money market deposits		(57	)		246			189			(163	)		525			362
NOW deposits		449			5,718			6,167			1,140			20,890			22,030
Certificates of deposit		606			423			1,029			948			1,462			2,410
Borrowings		(238	)		(78	)		(316	)		(781	)		75			(706	)
Total interest-bearing liabilities		760			6,309			7,069			1,144			22,952			24,096
Net change in net interest income	$	370		$	(3,301	)	$	(2,931	)	$	2,885		$	(11,746	)	$	(8,861	)

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 0.88% from 1.25% for the three months ended March 31, 2024 and 2023, respectively, and decreased to 0.91% from 1.26% for the nine months ended March 31, 2024 and 2023, respectively. Annualized return on average equity decreased to 11.92% and 12.69% for the three and nine months ended March 31, 2024 as compared to 18.61% and 19.51% for the three and nine months ended March 31, 2023.  The decrease in return on average assets and return on average equity for the three and nine months ended March 31, 2024, was primarily the result of repricing deposits faster than management was able to repricing assets into the higher interest rate environment.  Net income amounted to $5.9 million and $8.1 million for the three months ended March 31, 2024 and 2023, respectively, a decrease of $2.2 million, or 27.6%, as compared to $18.0 million and $24.3 million for the nine months ended March 31, 2024 and 2023, respectively, a decrease of $6.3 million, or 25.8%. Average assets increased $86.2 million, or 3.3%, to $2.68 billion for the three months ended March 31, 2024 as compared to $2.59 billion for the three months ended March 31, 2023. Average equity increased $22.8 million, or 13.1%, to $196.7 million for the three months ended March 31, 2024 as compared to $173.9 million for the three months ended March 31, 2023. Average assets increased $83.8 million, or 3.3%, to $2.65 billion for the nine months ended March 31, 2024 as compared to $2.56 billion for the nine months ended March 31, 2023. Average equity increased $23.3 million, or 14.0%, to $189.6 million for the nine months ended March 31, 2024 as compared to $166.2 million for the nine months ended March 31, 2023.

INTEREST INCOME

Interest income amounted to $26.1 million for the three months ended March 31, 2024 as compared to $21.9 million for the three months ended March 31, 2023, an increase of $4.1 million, or 18.9%.  Interest income amounted to $76.3 million for the nine months ended March 31, 2024 as compared to $61.1 million for the nine months ended March 31, 2023, an increase of $15.2 million, or 24.9%. The increase in yields earned on loans and securities had the greatest impact on the increases in interest income when comparing the 2024 and 2023 periods. The average balances of loans also increased during the comparative periods contributing to higher interest income.

45

Average loan balances increased $66.7 million and $88.2 million and the yield on loans increased 44 and 58 basis points when comparing the three and nine months ended March 31, 2024 and 2023, respectively. Average securities decreased $34.0 million and $68.9 million and the yield on such securities increased 18 and 61 basis points when comparing the three and nine months ended March 31, 2024 and 2023, respectively. Average interest-bearing bank balances and federal funds increased $49.3 million and $58.3 million and the yield decreased 46 basis points and increased 118 basis points when comparing the three and nine months ended March 31, 2024 and 2023, respectively.

INTEREST EXPENSE

Interest expense amounted to $13.8 million for the three months ended March 31, 2024 as compared to $6.7 million for the three months ended March 31, 2023, an increase of $7.1 million, or 105.4%. Interest expense amounted to $38.2 million for the nine months ended March 31, 2024 as compared to $14.1 million for the nine months ended March 31, 2023, an increase of $24.1 million, or 170.7%. The increases during the three and nine months ended March 31, 2024 were primarily due to the increases in the cost of funds on NOW deposits and insured cash sweep (“ICS”) deposits which had the greatest impact on interest expense reflecting higher market interest rates when comparing 2024 and 2023 the periods.

The cost of NOW deposits increased 132 and 162 basis points, the cost of certificates of deposit increased 208 and 216 basis points, and the cost of savings and money market deposits increased 27 and 18 basis points when comparing the three and nine months ended March 31, 2024 and 2023, respectively. The increase in the cost of interest-bearing liabilities was partly due to growth in the average balances of interest-bearing liabilities of $89.5 million and $85.6 million when comparing the three and nine months ended March 31, 2024 and 2023, respectively. This was due to an increase in NOW deposits of $134.0 million and $164.8 million and an increase in average certificates of deposits of $73.2 million and $48.1 million, partially offset by a decrease in average savings and money market deposits of $95.1 million and $102.0 million and a decrease in average borrowings of $22.6 million and $25.4 million when comparing the three and nine months ended March 31, 2024 and 2023, respectively. Yields on interest-earning assets and costs of interest-bearing deposits increased for the three and nine months ended March 31, 2024, as the Company continues to reprice assets and deposits into the higher interest rate environment.  The Company determines interest rates offered on deposit accounts based on current and future economic conditions, competition, liquidity needs and the asset-liability position of the Company, while growing the retention of relationships.

NET INTEREST INCOME

Net interest income decreased $2.9 million to $12.3 million for the three months ended March 31, 2024 from $15.2 million for the three months ended March 31, 2023. Net interest income decreased $8.9 million to $38.1 million for the nine months ended March 31, 2024 from $47.0 million for the nine months ended March 31, 2023. The decrease in net interest income was due to an increase in the average balance of interest-bearing liabilities, which increased $89.5 million and $85.6 million when comparing the three and nine months ended March 31, 2024 and 2023, respectively, and increases in rates paid on interest-bearing liabilities, which increased 118 and 137 basis points when comparing the three and nine months ended March 31, 2024 and 2023, respectively. The decrease in net interest income was partially offset by increases in the average balance of interest-earning assets, which increased $80.5 million and $76.5 million when comparing the three and nine months ended March 31, 2024 and 2023, respectively, and increases in average yields on interest-earning assets, which increased 53 and 69 basis points when comparing the three and nine months ended March 31, 2024 and 2023, respectively.

Net interest rate spread and margin both decreased when comparing the three and nine months ended March 31, 2024 and 2023. Net interest rate spread decreased 65 and 68 basis points to 1.66% and 1.75% for the three and nine months ended March 31, 2024, as compared to 2.31% and 2.43% for the three and nine months ended March 31, 2023, respectively. Net interest margin decreased 53 and 54 basis points to 1.90% and 1.99% for the three and nine months ended March 31, 2024, as compared to 2.43% and 2.53% for the three and nine months ended March 31, 2023, respectively. The decrease was due to the higher interest rate environment, which caused competitive pressure to increase rates paid on deposits, resulting in higher interest expense. This was partially offset by increases in interest income on loans and securities, as they reprice at higher yields and the interest rates earned on new balances were higher than the low levels from the prior period.

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 2.20% and 2.66% for the three months ended March 31, 2024 and 2023, respectively, and was 2.25% and 2.73% for the nine months ended March 31, 2024 and 2023, respectively.

The Company closely monitors its interest rate risk, and the Company will continue to monitor and prudently manage the asset and liability mix to address 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.

46

PROVISION FOR CREDIT LOSSES ON LOANS

Provision for credit losses on loans amounted to $277,000 for the three months ended March 31, 2024 and a benefit of $944,000 for the three month ended March 31, 2023. Provision for credit losses on loans amounted to $922,000 for the nine months ended March 31, 2024 and a benefit of $1.2 million for the nine months ended March 31, 2023. The loan provision for the nine months ended March 31, 2024 was primarily due to the growth in gross loans, offset by improvements in the economic forecasts. The allowance for credit losses on loans to total loans receivable was 1.38% at March 31, 2024 compared to 1.51% at June 30, 2023 and 1.42% at day-one CECL adoption (July 1, 2023).

Loans classified as substandard and special mention totaled $51.6 million at March 31, 2024 and $41.9 million at June 30, 2023, an increase of $9.7 million. There were no loans classified as doubtful or loss at March 31, 2024 or June 30, 2023.

Net charge-offs on loans amounted to $204,000 and $190,000 for the three months ended March 31, 2024 and 2023, respectively, an increase of $14,000. Net charge-offs on loans totaled $420,000 and $407,000 for the nine months ended March 31, 2024 and 2023, respectively. There were no significant charge offs in any loan segment during the three and nine months ended March 31, 2024.

NONINTEREST INCOME

(In thousands)	For the three months ended March 31,				Change from prior year						For the nine months ended March 31,					Change from prior year
Noninterest income:	2024		2023		Amount			Percent			2024		2023			Amount			Percent
Service charges on deposit accounts	$	1,011	$	1,132	$	(121	)		(10.69	)%	$	3,468	$	3,583		$	(115	)		(3.21	)%
Debit card fees		1,120		1,082		38			3.51			3,373		3,362			11			0.33
Investment services		265		213		52			24.41			714		591			123			20.81
E-commerce fees		24		26		(2	)		(7.69	)		83		81			2			2.47
Bank-owned life insurance		615		340		275			80.88			1,551		1,020			531			52.06
Net loss on available-for-sale securities		-		-		-			-			-		(251	)		251			(100.00	)
Other operating income		377		266		111			41.73			1,000		666			334			50.15
Total noninterest income	$	3,412	$	3,059	$	353			11.54	%	$	10,189	$	9,052		$	1,137			12.56	%

Noninterest income increased $353,000, or 11.5%, to $3.4 million for the three months ended March 31, 2024 compared to $3.1 million for the three months ended March 31, 2023. Noninterest income increased $1.1 million, or 12.6%, to $10.2 million for the nine months ended March 31, 2024 compared to $9.1 million for the nine months ended March 31, 2023. The increase during the three and nine months ended March 31, 2024 was primarily due to an increase in fee income earned on customer interest rate swap contracts and income from bank owned life insurance.

NONINTEREST EXPENSE

(In thousands)	For the three months ended March 31,				Change from prior year						For the nine months ended March 31,				Change from prior year
Noninterest expense:	2024		2023		Amount			Percent			2024		2023		Amount			Percent
Salaries and employee benefits	$	6,102	$	6,193	$	(91	)		(1.47	)%	$	17,247	$	17,070	$	177			1.04	%
Occupancy expense		688		617		71			11.51			1,818		1,654		164			9.92
Equipment and furniture expense		151		150		1			0.67			527		529		(2	)		(0.38	)
Service and data processing fees		661		674		(13	)		(1.93	)		1,866		2,040		(174	)		(8.53	)
Computer software, supplies and support		319		407		(88	)		(21.62	)		1,301		1,157		144			12.45
Advertising and promotion		122		115		7			6.09			321		336		(15	)		(4.46	)
FDIC insurance premiums		326		191		135			70.68			952		638		314			49.22
Legal and professional fees		319		507		(188	)		(37.08	)		1,119		2,655		(1,536	)		(57.85	)
Other		546		1,002		(456	)		(45.51	)		2,254		2,525		(271	)		(10.73	)
Total noninterest expense	$	9,234	$	9,856	$	(622	)		(6.31	)%	$	27,405	$	28,604	$	(1,199	)		(4.19	)%

Noninterest expense decreased $622,000, or 6.3%, to $9.2 million for the three months ended March 31, 2024 compared to $9.9 million for the three months ended March 31, 2023. Noninterest expense decreased $1.2 million, or 4.2%, to $27.4 million for the nine months ended March 31, 2024, compared to $28.6 million for the nine months ended March 31, 2023. The decrease during the three and nine months ended March 31, 2024 was primarily due to a decrease in legal and professional fees, and a benefit from reducing the reserve for unfunded loan commitments included in other expense, as compared to the three and nine months ended March 31, 2023. This was partially offset by the increase in FDIC insurance premiums as compared to the three and nine months ended March 31, 2023.

47

INCOME TAXES

Provision for income taxes reflects the expected tax associated with the pre-tax income generated for the given period and certain regulatory requirements. The effective tax rate was 5.2% and 9.8% for the three and nine months ended March 31, 2024 and 13.7% and 15.0% for the three and nine months ended March 31, 2023. 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, and income received on the bank owned life insurance, to arrive at the effective tax rate. The decrease in the current quarter’s effective tax rate primarily reflected a higher mix of tax-exempt income from municipal bonds, tax advantage loans and bank-owned life insurance in proportion to pre-tax income.

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 the 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, Atlantic Community Bankers Bank and two other financial institutions, 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 March 31, 2024, the Company had $255.8 million in cash and cash equivalents, representing 8.9% of total assets, and had $260.0 million available in unused lines of credit.

In response to liquidity concerns in the banking system, the Federal Reserve Board created the Bank Term Funding Program (BTFP). The program made additional funding available to eligible depository institutions to help assure the institutions can meet the needs of their depositors. Eligible institutions could obtain liquidity against a wide range of collateral. BTFP advances could be requested through March 11, 2024. As of March 31, 2024, the Company has $27.0 million outstanding through the BTFP.

In efforts to enhance strong levels of liquidity and to fund loan demand, the Bank and Commercial Bank (the “Banks”) accepts brokered deposits, generally in denominations of less than $250,000, from national brokerage networks, custodial deposit networks or through IntraFi’s one-way CDARS and ICS products, including IntraFi’s Insured Network Deposits (“IND”). The Banks combined can place and obtain brokered deposits up to 20% of total deposits, in the amount of $511.4 million based on policy. Additionally, both Banks participate in the IntraFi reciprocal (“two-way”) CDARS and the ICS products, which provides for reciprocal two-way transactions among other institutions, facilitated by IntraFi, for the purpose of maximizing FDIC insurance for depositors.

As of March 31, 2024, the overall brokered deposits balance amounted to $120.0 million, which was included in NOW deposits. As of June 30, 2023, the overall brokered deposit balance amounted to $60.0 million, which was included in certificates of deposits. The Company maintained an increased level of brokered deposits from several available sources as an alternative to borrowed funds, and uses the funds to support loan growth, overall liquidity and a higher cash position.

  At March 31, 2024, liquidity measures were as follows:

Cash equivalents/(deposits plus short term borrowings)	9.86	%
(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)	21.02	%

The Company’s off-balance sheet credit exposures at March 31, 2024:

(In thousands)
Unfunded loan commitments	$	108,186
Unused lines of credit		94,768
Standby letters of credit		429
Total commitments	$	203,383

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

48

The Bank of Greene County and its wholly-owned subsidiary, Greene County Commercial Bank, met all applicable regulatory capital requirements at March 31, 2024 and June 30, 2023.

											To be well
						For capital					capitalized under
						adequacy					prompt corrective					Capital conservation
(Dollars in thousands)	Actual					purposes					action provisions					buffer
The Bank of Greene County	Amount		Ratio			Amount		Ratio			Amount		Ratio			Actual			Required
As of March 31, 2024:
Total risk-based capital	$	274,001		17.3	%	$	126,672		8.0	%	$	158,340		10.0	%		9.31	%		2.50	%
Tier 1 risk-based capital		254,180		16.1			95,004		6.0			126,672		8.0			10.05			2.50
Common equity tier 1 capital		254,180		16.1			71,253		4.5			102,921		6.5			11.55			2.50
Tier 1 leverage ratio		254,180		9.4			108,168		4.0			135,210		5.0			5.40			2.50
As of June 30, 2023:
Total risk-based capital	$	249,165		16.5	%	$	121,020		8.0	%	$	151,275		10.0	%		8.47	%		2.50	%
Tier 1 risk-based capital		230,228		15.2			90,765		6.0			121,020		8.0			9.22			2.50
Common equity tier 1 capital		230,228		15.2			68,074		4.5			98,328		6.5			10.72			2.50
Tier 1 leverage ratio		230,228		8.7			106,141		4.0			132,676		5.0			4.68			2.50

Greene County Commercial Bank
As of March 31, 2024:
Total risk-based capital	$	108,599	44.6	%	$	19,488	8.0	%	$	24,360	10.0	%	36.58	%	2.50	%
Tier 1 risk-based capital		108,599	44.6			14,616	6.0			19,488	8.0		38.58		2.50
Common equity tier 1 capital		108,599	44.6			10,962	4.5			15,834	6.5		40.08		2.50
Tier 1 leverage ratio		108,599	8.9			48,571	4.0			60,714	5.0		4.94		2.50
As of June 30, 2023:
Total risk-based capital	$	104,781	46.6	%	$	17,975	8.0	%	$	22,469	10.0	%	38.63	%	2.50	%
Tier 1 risk-based capital		104,781	46.6			13,481	6.0			17,975	8.0		40.63		2.50
Common equity tier 1 capital		104,781	46.6			10,111	4.5			14,605	6.5		42.13		2.50
Tier 1 leverage ratio		104,781	9.1			45,958	4.0			57,447	5.0		5.12		2.50

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.

On July 1, 2023, the Company implemented the new CECL accounting policies, procedures, and controls as part of its adoption of ASU No. 2016-13 and subsequent ASU’s issued to amend ASC Topic 326. There were no other changes 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.

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Part II. Other Information

Item 1. Legal Proceedings

There are no pending legal proceedings to which the Company is a party or which any of its property is the subject, other than ordinary litigation incidental to its banking business, none of which, in the opinion of management, is material to the Company’s consolidated operations or financial condition.

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 400,000 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 March 31, 2024.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarter ended March 31, 2024, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

Item 6. Exhibits

Exhibits
31.1	Certification of Chief Executive Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a)
31.2	Certification of Chief Financial Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a)
32.1	Statement of Chief Executive Officer, furnished pursuant to U.S.C. Section 1350
32.2	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 March 31, 2024, 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).

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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:May 10, 2024

By:/s/ Donald E. Gibson

Donald E. Gibson

President and Chief Executive Officer

Date:May 10, 2024

By:/s/ Michelle M. Plummer

Michelle M. Plummer, CPA, CGMA

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

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