GREENE COUNTY BANCORP, INC. Overview of the Company's Activities and Risks
Greene County Bancorp, Inc.'s results of operations depend primarily on its net interest income, which is the difference between the income earned onGreene County Bancorp, Inc.'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 byGreene County Bancorp, Inc.'s provision for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges.Greene County Bancorp, Inc.'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 affectGreene County Bancorp, Inc. To operate successfully, the Company must manage various types of risk, including but not limited to, market or interest rate risk, credit risk, transaction risk, liquidity risk, security risk, strategic risk, reputation risk and compliance risk. While all of these risks are important, the risks of greatest significance to the Company relate to market or interest rate risk and credit risk. Market risk is the risk of loss from adverse changes in market prices and/or interest rates. Since net interest income (the difference between interest earned on loans and investments and interest paid on deposits and borrowings) is the Company's primary source of revenue, interest rate risk is the most significant non-credit related market risk to which the Company is exposed. Net interest income is affected by changes in interest rates as well as fluctuations in the level and duration of the Company's assets and liabilities. Interest rate risk is the exposure of the Company's net interest income to adverse movements in interest rates. In addition to directly impacting net interest income, changes in interest rates can also affect the amount of new loan originations, the ability of borrowers and debt issuers to repay loans and debt securities, the volume of loan repayments and refinancing, and the flow and mix of deposits. Credit risk is the risk to the Company's earnings and shareholders' equity that results from customers, to whom loans have been made and to the issuers of debt securities in which the Company has invested, failing to repay their obligations. The magnitude of risk depends on the capacity and willingness of borrowers and debt issuers to repay and the sufficiency of the value of collateral obtained to secure the loans made or investments purchased. Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes or systems, the misconduct or errors of people, and adverse external events. Operational losses result from internal fraud; external fraud; employment practices and workplace safety, clients, products, and business practices; damage to physical assets; business disruption and system failures; and execution, delivery, and process management. The COVID-19 pandemic continues to impact the economy and the Company's financial results as well as demand for services and products during the remainder for the fiscal year endingJune 30, 2022 . The Company has implemented various plans, strategies, and protocols to protect its employees, customers and other stakeholders in response to the pandemic. The Company imposed business travel restrictions, implemented quarantine and remote work from home protocols, and at times during the pandemic, the Company implemented drive-thru only or by appointment protocols for branches and other operational areas which may be reinstated if needed. Enhanced cleaning, sanitation processes and social distancing measurers were also implemented. The Company also enhanced communications with critical vendors to ensure operational functioning of mission-critical activities. The long-term implications of the COVID-19 crisis, and related government monetary and fiscal stimulus measures on the Company's future operations, revenues, earnings, allowance for loan losses, capital and liquidity are difficult to assess and remain uncertain at this time.
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 includeGreene 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: 33
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(a) changes in general market interest rates,
(b) general economic conditions,
(c) economic or policy changes related to the COVID-19 pandemic,
(d) legislative and regulatory changes,
(e) monetary and fiscal policies of the
(f) changes in the quality or composition of
and investment portfolios,
(g) deposit flows, (h) competition, and
(i) demand for financial services in
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 theSecurities and Exchange Commission (SEC), applies to certainSEC filings, including earnings releases, made by registered companies that contain "non-GAAP financial measures." GAAP is generally accepted accounting principles inthe 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. TheSEC 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 in its periodic reports filed with theSEC , including period-end regulatory capital ratios for itself and its subsidiary banks, and does so without compliance with Regulation G, on the widely-shared assumption that theSEC regards such non-GAAP measures to be exempt from RegulationG. 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 theSEC from RegulationG. 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 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. Allowance for loan losses to total loans receivable: The allowance for loan losses to total loans receivable ratio is calculated by dividing the balance in the allowance for loan losses by the gross loans outstanding at the end of the period. This ratio is utilized to show the historical relationship between the allowance for loan losses and the balances of loans at the end each period presented in conjunction with other financial information related to asset quality such as nonperforming loans, charge-offs, and classified assets to indicate the overall adequacy of the allowance for loan losses. The Company has adjusted the calculation of the allowance for loan losses to total loans receivable to exclude loans that are 100% guaranteed by theSmall Business Administration as these present no credit risk to the Company. With a significant balance in SBA loans atJune 30, 2021 , this adjusted calculation is used to provide a better basis of comparison with other periods presented within the financial statements presented. 34
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Comparison of Financial Condition at
ASSETS
Total assets of the Company were$2.5 billion atMarch 31, 2022 and$2.2 billion atJune 30, 2021 , an increase of$321.4 million , or 14.6%. Securities available-for-sale and held-to-maturity increased$253.4 million , or 28.5%, to$1.1 billion atMarch 31, 2022 as compared to$887.8 million atJune 30, 2021 . Net loans receivable increased$47.6 million , or 4.4%, to$1.1 billion atMarch 31, 2022 from$1.1 billion atJune 30, 2021 .
CASH AND CASH EQUIVALENTS
Total cash and cash equivalents increased$840,000 to$150.6 million atMarch 31, 2022 from$149.8 million atJune 30, 2021 . The level of cash and cash equivalents is a function of the daily account clearing needs and deposit levels as well as activities associated with securities transactions and loan funding. All of these items can cause cash levels to fluctuate significantly on a daily basis. SECURITIES Securities available-for-sale and held-to-maturity increased$253.4 million , or 28.5%, to$1.1 billion atMarch 31, 2022 as compared to$887.8 million atJune 30, 2021 . This increase was the result of utilizing excess cash on hand due to an increase in deposits. Securities purchases totaled$510.5 million during the nine months endedMarch 31, 2022 and consisted of$360.3 million of state and political subdivision securities,$106.1 million of mortgage-backed securities,$22.9 million of corporate securities,$18.2 million ofUS Treasury securities, and$3.0 million of collateralized mortgage obligations. Principal pay-downs and maturities during the nine months amounted to$237.9 million , primarily consisting of$32.4 million of mortgage-backed securities,$203.8 million of state and political subdivision securities, and$1.7 million of collateralized mortgage obligations. AtMarch 31, 2022 , 61.7% of our securities portfolio consisted of state and political subdivision securities to take advantage of tax savings and to promoteGreene County Bancorp, Inc.'s participation in the communities in which it operates. Mortgage-backed securities and asset-backed securities, which represent 29.9% of our securities portfolio atMarch 31, 2022 , do not contain sub-prime loans and are not exposed to the credit risk associated with such lending. March 31, 2022 June 30, 2021 Percentage of Percentage of (Dollars in thousands) Balance portfolio Balance portfolio Securities available-for-sale: U.S. Government sponsored enterprises$ 11,937 1.1 %$ 12,903 1.5 % U.S. Treasury securities 18,981 1.7 19,836 2.2 State and political subdivisions 232,017 20.3 200,656 22.6 Mortgage-backed securities-residential 32,484 2.8 34,981 3.9 Mortgage-backed securities-multifamily 98,589 8.6 119,407 13.4 Corporate debt securities 17,434 1.5 3,107 0.4 Total securities available-for-sale 411,442 36.0 390,890 44.0 Securities held-to-maturity: U.S. treasury securities 28,621 2.5 10,938 1.2 State and political subdivisions 472,018 41.4 341,364 38.5 Mortgage-backed securities-residential 24,171 2.1 28,450 3.2 Mortgage-backed securities-multifamily 186,971 16.4 100,330 11.3 Corporate debt securities 17,904 1.6 9,892 1.1 Other securities 54 0.0 5,940 0.7 Total securities held-to-maturity 729,739 64.0 496,914 56.0 Total securities$ 1,141,181 100.0 %$ 887,804 100.0 % LOANS Net loans receivable increased$47.6 million , or 4.4%, to$1.1 billion atMarch 31, 2022 from$1.1 billion atJune 30, 2021 . The loan growth experienced during the nine months consisted primarily of$62.7 million in commercial real estate loans,$14.5 million in commercial construction loans,$17.0 million in residential real estate loans,$3.8 million in residential construction loans,$9.1 million in multi-family loans, and a$2.6 million net decrease in deferred fees due to the forgiveness of SBA PPP loans. This growth was partially offset by a$60.0 million decrease in commercial loans, driven by the decrease in SBA PPP loans, and a$2.1 million increase in allowance for loan losses. SBA PPP loans decreased$60.7 million to$6.7 million atMarch 31, 2022 from$67.4 million atJune 30, 2021 , due to the receipt of forgiveness proceeds. The Company continues to experience loan growth as a result of continued growth in its customer base and its relationships with other financial institutions in originating loan participations.The Bank of Greene County 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. 35
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March 31, 2022 June 30, 2021
(Dollars in thousands) Percentage of Percentage of
Balance Portfolio Balance Portfolio
Residential real estate $ 342,304 29.6 % $ 325,167 29.3 %
Residential construction and land 14,054 1.2 10,185 0.9
Multi-family 51,100 4.4 41,951 3.8
Commercial real estate 535,603 46.4 472,887 42.7
Commercial construction 77,303 6.7 62,763 5.7
Home equity 18,395 1.6 18,285 1.7
Consumer installment 4,365 0.4 4,942 0.4
Commercial loans 112,275 9.7 172,228 15.5
Total gross loans 1,155,399 100.0 % 1,108,408 100.0 %
Allowance for loan losses (21,739 ) (19,668 )
Deferred fees and costs (140 ) (2,793 )
Total net loans $ 1,133,520 $ 1,085,947
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed
into law on March 27, 2020 , and provided over $2.0 trillion in emergency
economic relief to individuals and businesses impacted by the COVID-19
pandemic. The CARES Act authorized the Small Business Administration ("SBA") to
temporarily guarantee loans under a new 7(a) loan program called the Paycheck
Protection Program ("PPP"). An eligible business could apply for a PPP loan up
to the greater of: (1) 2.5 times its average monthly "payroll costs"; or (2)
$10.0 million . PPP loans have: (a) an interest rate of 1.0%, (b) a 2-5 year
loan term to maturity, and (c) principal and interest payments deferred for nine
months from the date of disbursement. The Consolidated Appropriations Act
("CAA") was signed into law on December 27, 2020 . The CAA, extended the life of
the PPP, creating a second round of PPP loans for eligible businesses. The
Company participated in the CAA's second round of PPP lending. The SBA
guarantees 100% of the PPP loans made to eligible borrowers. The entire
principal amount of the borrower's PPP loan, including any accrued interest, is
eligible to be reduced by the loan forgiveness amount under the PPP so long as
employee and compensation levels of the business are maintained and at least 60%
of the loan proceeds are used for payroll expenses, with the remaining 40%, or
less, of the loan proceeds used for other qualifying expenses. The Company had
99 remaining PPP loans with a total balance of $6.7 million outstanding at March
31, 2022 , compared to 835 PPP loans with a total balance of $67.4 million
outstanding at June 30, 2021 .
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions. Such evaluation, which includes a review of certain identified loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for the loan loss allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically reviewThe Bank of Greene County's allowance for loan losses. Such agencies may requireThe Bank of Greene County to recognize additions to the allowance based on their judgment about information available to them at the time of their examination.The Bank of Greene County disaggregates its loan portfolio as noted in the below allowance for loan losses tables to evaluate for impairment collectively based on historical loss experience.The Bank of Greene County evaluates nonaccrual loans that are over$100 thousand and all trouble debt restructured loans individually for impairment, if it is probable thatThe Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements. Loans that are guaranteed, such as SBA loans, are excluded from the homogeneous pool of loans and no allowance is allocated to this segment of the portfolio. The measurement of impaired loans is generally based on the fair value of the underlying collateral.The Bank of Greene County 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 Bank more than it will receive, and all possible avenues of repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers. Generally, consumer loans and smaller business loans (not secured by real estate) in excess of 90 days are charged-off against the allowance for loan losses, unless equitable arrangements are made. Included within consumer installment loan charge-offs and recoveries are deposit accounts that have been overdrawn in excess of 60 days. With continued growth in the number of deposit accounts, charge-off activity within this category has also grown, as can be seen from the tables below. For loans secured by real estate, a charge-off is recorded when it is determined that the collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries of loans previously charged off and is reduced by charge-offs. 36
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The Bank of Greene County recognizes that depending upon the duration of the COVID-19 pandemic and the adequacy of strategies in place by local and federal governments, borrowers may not have the ability to repay their debts which may ultimately result in losses toThe Bank of Greene County . Management continues to closely monitor credit relationships, particularly those that were on payment deferral or adversely classified.
Analysis of allowance for loan losses activity
At or for the nine months ended
March 31,
(Dollars in thousands) 2022 2021
Balance at the beginning of the period $ 19,668 $ 16,391
Charge-offs:
Residential real estate - 26
Consumer installment 355 247
Commercial loans 107 500
Total loans charged off 462 773
Recoveries:
Residential real estate 10 10
Consumer installment 89 101
Commercial loans 3 -
Total recoveries 102 111
Net charge-offs 360 662
Provisions charged to operations 2,431 3,939
Balance at the end of the period Net charge-offs to average loans outstanding (annualized) 0.04 % 0.09 % Net charge-offs to nonperforming assets (annualized) 12.20 % 31.28 % Allowance for loan losses to nonperforming loans 562.46 % 737.73 % Allowance for loan losses to total loans receivable 1.88 % 1.80 %
Allowance for loan losses to total loans receivable (excluding PPP loans)
1.89 % 1.97 %
Nonaccrual Loans and Nonperforming Assets
Loans are reviewed on a regular basis to assess collectability of all principal
and interest payments due. Management determines that a loan is impaired or
nonperforming when it is probable at least a portion of the principal or
interest will not be collected in accordance with contractual terms of the
note. When a loan is determined to be impaired, the measurement of the loan is
based on present value of estimated future cash flows, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral.
Generally, management places loans on nonaccrual status once the loans have
become 90 days or more delinquent or sooner if there is a significant reason for
management to believe the collectability is questionable and, therefore,
interest on the loan will no longer be recognized on an accrual basis. The
Company identifies impaired loans and measures the impairment in accordance with
FASB ASC subtopic "Receivables - Loan Impairment." Management may consider a
loan impaired once it is classified as nonaccrual and when it is probable that
the borrower will be unable to repay the loan according to the original
contractual terms of the loan agreement or the loan is restructured in a
troubled debt restructuring. A loan does not have to be 90 days delinquent in
order to be classified as nonperforming. Foreclosed real estate is considered
to be a nonperforming asset. For further discussion and detail regarding
impaired loans please refer to Part I, Financial Statements (unaudited), Note 5
Loans and Allowance for Loan Losses of this Report.
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Analysis of Nonaccrual Loans and Nonperforming Assets
(Dollars in thousands) March 31, 2022 June 30, 2021 Nonaccruing loans: Residential real estate $ 2,955 $ 1,324 Residential construction and land 2 - Commercial real estate 251 444 Home equity 190 237 Consumer installment 3 - Commercial 464 296 Total nonaccruing loans $ 3,865 $ 2,301 Foreclosed real estate: Residential real estate 68 64 Total foreclosed real estate 68 64 Total nonperforming assets $
3,933 $ 2,365
Troubled debt restructuring: Nonperforming (included above) $ 315 $ 354 Performing (accruing and excluded above) 4,783 5,050 Total nonperforming assets as a percentage of total assets 0.16 % 0.11 % Total nonperforming loans to net loans 0.34 % 0.21 %
At
Nonperforming assets amounted to$3.9 million and$2.4 million atMarch 31, 2022 andJune 30, 2021 , respectively. Nonaccrual loans consisted primarily of loans secured by real estate atMarch 31, 2022 andJune 30, 2021 . Loans on nonaccrual status totaled$3.9 million atMarch 31, 2022 of which$727,000 were in the process of foreclosure. AtMarch 31, 2022 , there were five residential loans totaling$625,000 and one commercial real estate loan for$102,000 in the process of foreclosure. Included in nonaccrual loans were$2.5 million of loans which were less than 90 days past due atMarch 31, 2022 , but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Loans on nonaccrual status totaled$2.3 million atJune 30, 2021 of which$260,000 were in the process of foreclosure. AtJune 30, 2021 , there were two residential loans in the process of foreclosure totaling$158,000 and one commercial real estate loan totaling$102,000 in the process of foreclosure. Included in nonaccrual loans were$1.2 million of loans which were less than 90 days past due atJune 30, 2021 , but have a recent history of delinquency greater than 90 days past due. In order to assist borrowers through the COVID-19 pandemic,The Bank of Greene County had instituted a loan deferment program whereby deferral of payments were provided. Payment deferrals consisted of either principal deferrals or full payment deferrals. As allowed under the CARES Act, and as amended by Section 541 of the Consolidated Appropriations Act of 2021, the Company did not report these loans as delinquent and Trouble Debt Restructuring disclosures. The Company continued to recognize interest income during the deferral period as long as they are deemed collectible. These loans will be closely monitored to determine collectability and accrual and delinquency status will be updated as deemed appropriate. As ofMarch 31, 2022 , in accordance with the CARES Act and Consolidated Appropriations Act of 2021, the loan deferral program ended, therefore there were no loans that have payments deferred as ofMarch 31, 2022 . For further detail regarding loans that have payments deferred as ofJune 30, 2021 please refer to Part I, Financial Statements (unaudited), Note 5 Loans and Allowance for Loan Losses of this Report.
Impaired Loans
The Company identifies impaired loans and measures the impairment in accordance
with FASB ASC subtopic "Receivables - Loan Impairment." A loan is considered
impaired when it is probable that the borrower will be unable to repay the loan
according to the original contractual terms of the loan agreement or the loan is
restructured in a troubled debt restructuring.
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The table below details additional information on impaired loans at
(In thousands) March 31, 2022 June 30, 2021
Balance of impaired loans, with a valuation allowance $ 9,734 $ 5,325
Allowances relating to impaired loans included in allowance for loan losses 2,123 391
Balance of impaired loans, without a valuation allowance 1,151 970
Total impaired loans 10,885 6,295
For the three months For the nine months
ended March 31, ended March 31,
(In thousands) 2022 2021 2022 2021
Average balance of impaired loans for
the periods ended $ 9,052 $ 3,391 $ 7,694 $ 3,043
Interest income recorded on impaired
loans during the periods ended 126 90 290 171
Residential real estate impaired loans with a valuation allowance amounted to
$3.0 million as of March 31, 2022 , as compared to $1.1 million as of June 30,
2021 , an increase of $1.9 million . The increase in residential real estate
impaired loans was the result of eight relationships continuing to deteriorate
and moving into non-accrual status, and therefore classified as impaired. The
average recorded investment of these new impaired loans was $154,000 as of March
31, 2022 . Commercial real estate impaired loans with a valuation allowance
amounted to $3.8 million as of March 31, 2022 , as compared to $1.2 million as of
June 30, 2021 , an increase of $2.6 million . The increase in commercial real
estate impaired loans was the result of three relationships continuing to
deteriorate and moving into non-accrual status, and therefore classified as
impaired. The average recorded investment of these new impaired loans was
$606,000 as of March 31, 2022 .
DEPOSITS
Deposits totaled$2.3 billion atMarch 31, 2022 and$2.0 billion atJune 30, 2021 , an increase of$286.8 million , or 14.3%. Noninterest-bearing deposits increased$13.9 million , or 8.0%, NOW deposits increased$228.8 million , or 17.0%, savings deposits increased$31.9 million , or 10.6%, and money market deposits increased$12.8 million , or 8.7%, when comparingMarch 31, 2022 andJune 30, 2021 . These increases were offset by a decrease in certificates of deposits of$693,000 , or 2.0%, when comparingMarch 31, 2022 andJune 30, 2021 . Deposits continued to increase during the nine months endedMarch 31, 2022 as a result of an increase in new account relationships, including new corporate cash management deposit relationships, and an increase in municipal deposits atGreene County Commercial Bank , primarily fromNew York State funding and tax collection. Major classifications of deposits atMarch 31, 2022 andJune 30, 2021 are summarized as follows: Percentage Percentage (In thousands) March 31, 2022 of Portfolio June 30, 2021 of Portfolio Noninterest-bearing deposits$ 188,043 8.2 %$ 174,114 8.7 % Certificates of deposit 34,098 1.5 34,791 1.7 Savings deposits 332,965 14.5 301,050 15.0 Money market deposits 158,606 6.9 145,832 7.3 NOW deposits 1,578,158 68.9 1,349,321 67.3 Total deposits$ 2,291,870 100.0 %$ 2,005,108 100.0 % BORROWINGS AtMarch 31, 2022 ,The Bank of Greene County had pledged approximately$430.5 million of its residential and commercial mortgage portfolio as collateral for borrowing and irrevocable stand-by letters of credit at theFederal Home Loan Bank of New York ("FHLB"). The maximum amount of funding available from the FHLB was$315.3 million atMarch 31, 2022 , of which there were no borrowings and no irrevocable stand-by letters of credit outstanding atMarch 31, 2022 . There were no short-term or overnight borrowings atMarch 31, 2022 andJune 30, 2021 .The Bank of Greene County also pledges securities and certificates of deposit as collateral at theFederal Reserve Bank discount window for overnight borrowings. AtMarch 31, 2022 , approximately$18.2 million of collateral was available to be pledged against potential borrowings at theFederal Reserve Bank discount window. There were no balances outstanding with theFederal Reserve Bank atMarch 31, 2022 . 39
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The Bank of Greene County has established unsecured lines of credit withAtlantic Central Bankers Bank for$15.0 million and two other financial institutions for$50.0 million .Greene County Bancorp, Inc. has also established an unsecured line of credit withAtlantic Central Bankers Bank for$7.5 million . The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. AtMarch 31, 2022 ,The Bank of Greene County had no balances outstanding on any of these lines of credit.Greene County Bancorp, Inc. , had no borrowings outstanding withAtlantic Central Bankers Bank atMarch 31, 2022 and had an outstanding balance of$3.0 million atJune 30, 2021 to fund Bank capital. OnSeptember 17, 2020 , the Company entered into Subordinated Note Purchase Agreements with 14 qualified institutional investors, issued at 4.75% Fixed-to-Floating Rate dueSeptember 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 onSeptember 15, 2025 . AtMarch 31, 2022 , there were$19.7 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs. OnSeptember 15, 2021 , the Company entered into Subordinated Note Purchase Agreements with 18 qualified institutional investors, issued at 3.00% Fixed-to-Floating Rate dueSeptember 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 onSeptember 15, 2026 . AtMarch 31, 2022 , there were$29.6 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.
At
EQUITY
Shareholders' equity increased to$156.9 million atMarch 31, 2022 from$149.6 million atJune 30, 2021 , resulting primarily from net income of$21.2 million , partially offset by dividends declared and paid of$1.5 million and an increase in other accumulated comprehensive loss of$12.3 million . OnSeptember 17, 2019 , the Board of Directors of the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 200,000 shares of its common stock. Repurchases will be made at management's discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company's financial performance. For the three and nine months endingMarch 31, 2022 , the Company did not repurchase any shares. Selected Equity Data: March 31, 2022 June 30, 2021 Shareholders' equity to total assets, at end of period 6.22 % 6.80 % Book value per share $ 18.43 $ 17.57 Closing market price of common stock $ 44.70 $ 28.12 For the nine months ended March 31, 2022 2021 Average shareholders' equity to average assets 6.71 % 7.25 % Dividend payout ratio1 15.66 % 18.75 % Actual dividends paid to net income2 7.21 % 12.02 % 1The dividend payout ratio has been calculated based on the dividends declared per share divided by basic earnings per share. No adjustments have been made for dividends waived byGreene 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 endedJune 30, 2021 ;September 30, 2021 ;December 31, 2021 andMarch 31, 2022 . Dividends declared during the three months endedMarch 31, 2021 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 theFederal Reserve Board .
Comparison of Operating Results for the Three and Nine Months Ended
Average Balance Sheet The following table sets forth certain information relating toGreene County Bancorp, Inc. for the three and nine months endedMarch 31, 2022 and 2021. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances were based on daily averages. Average loan balances include nonperforming loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields. 40
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Index
Three months ended March 31,
2022 2021
Average Interest Average Average Interest Average
Outstanding Earned / Yield / Outstanding Earned / Yield /
(Dollars in thousands) Balance Paid Rate Balance Paid Rate
Interest-earning
Assets:
Loans receivable, net1 $ 1,155,078 $ 11,236 3.89 % $ 1,066,451 $ 11,567 4.34 %
Securities2 1,092,695 4,024 1.47 772,319 3,176 1.64
Interest-bearing bank
balances and federal
funds 87,115 33 0.15 126,688 30 0.09
FHLB stock 1,131 12 4.24 993 15 6.04
Total interest-earning
assets 2,336,019 15,305 2.62 % 1,966,451 14,788 3.01 %
Cash and due from banks 16,303 15,421
Allowance for loan
losses (21,731 ) (18,854 )
Other
noninterest-earning
assets 84,785 55,902
Total assets $ 2,415,376 $ 2,018,920
Interest-Bearing
Liabilities:
Savings and money
market deposits $ 476,543 $ 169 0.14 % $ 416,808 $ 225 0.22 %
NOW deposits 1,484,872 512 0.14 1,225,451 639 0.21
Certificates of deposit 34,803 67 0.77 35,039 87 0.99
Borrowings 50,122 470 3.75 22,012 267 4.85
Total interest-bearing
liabilities 2,046,340 1,218 0.24 % 1,699,310 1,218 0.29 %
Noninterest-bearing
deposits 184,229 158,318
Other
noninterest-bearing
liabilities 25,949 22,261
Shareholders' equity 158,858 139,031
Total liabilities and
equity $ 2,415,376 $ 2,018,920
Net interest income $ 14,087 $ 13,570
Net interest rate
spread 2.38 % 2.72 %
Net earnings assets $ 289,679 $ 267,141
Net interest margin 2.41 % 2.76 %
Average
interest-earning assets
to average
interest-bearing
liabilities 114.16 % 115.72 %
--------------------------------------------------------------------------------
1Calculated net of deferred loan fees and costs, loan discounts, and loans in
process.
2Includes tax-free securities, mortgage-backed securities, and asset-backed
securities.
For the three months ended
Taxable-equivalent net interest income and net interest margin March 31,
(Dollars in thousands) 2022 2021
Net interest income (GAAP) $ 14,087 $ 13,570
Tax-equivalent adjustment(1) 865 751
Net interest income (fully taxable-equivalent) $
14,952
Average interest-earning assets$ 2,336,019 $ 1,966,451 Net interest margin (fully taxable-equivalent) 2.56 % 2.91 % 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 andNew York State income taxes yielding the same after-tax income. The rate used for this adjustment was 21% for federal income taxes for the periods endedMarch 31, 2022 and 2021 and 4.44% and 3.98% forNew York State income taxes for the periods endedMarch 31, 2022 and 2021, respectively. 41
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Index
Nine months ended March 31,
2022 2021
Average Interest Average Average Interest Average
Outstanding Earned / Yield / Outstanding Earned / Yield /
(Dollars in thousands) Balance Paid Rate Balance Paid Rate
Interest-earning
Assets:
Loans receivable, net1 $ 1,128,553 $ 35,293 4.17 % $ 1,046,993 $ 33,525 4.27 %
Securities2 1,027,204 11,285 1.46 711,507 9,443 1.77
Interest-bearing bank
balances and federal
funds 96,044 114 0.16 72,802 58 0.11
FHLB stock 1,112 37 4.44 1,163 49 5.62
Total interest-earning
assets 2,252,913 46,729 2.77 % 1,832,465 43,075 3.13 %
Cash and due from banks 13,633 12,905
Allowance for loan
losses (20,796 ) (17,651 )
Other
noninterest-earning
assets 79,900 36,447
Total assets $ 2,325,650 $ 1,864,166
Interest-bearing
Liabilities:
Savings and money
market deposits $ 456,871 $ 575 0.17 % $ 391,061 $ 750 0.26 %
NOW deposits 1,426,483 1,652 0.15 1,107,017 2,349 0.28
Certificates of deposit 34,784 218 0.84 35,157 294 1.11
Borrowings 42,393 1,345 4.23 22,758 687 4.02
Total interest-bearing
liabilities 1,960,531 3,790 0.26 % 1,555,993 4,080 0.35 %
Noninterest-bearing
deposits 185,358 151,422
Other
noninterest-bearing
liabilities 23,633 21,684
Shareholders' equity 156,128 135,067
Total liabilities and
equity $ 2,325,650 $ 1,864,166
Net interest income $ 42,939 $ 38,995
Net interest rate
spread 2.51 % 2.78 %
Net earnings assets $ 292,382 $ 276,472
Net interest margin 2.54 % 2.84 %
Average
interest-earning assets
to average
interest-bearing
liabilities 114.91 % 117.77 %
--------------------------------------------------------------------------------
1Calculated net of deferred loan fees and costs, loan discounts, and loans in
process.
2Includes tax-free securities, mortgage-backed securities, and asset-backed
securities.
Taxable-equivalent net interest income and net interest margin For the nine months ended
March 31,
(Dollars in thousands) 2022 2021
Net interest income (GAAP) $ 42,939 $ 38,995
Tax-equivalent adjustment(1) 2,440 2,207
Net interest income (fully taxable-equivalent) $
45,379
Average interest-earning assets$ 2,252,913 $ 1,832,465 Net interest margin (fully taxable-equivalent)
2.69 % 3.00 %
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 andNew York State income taxes yielding the same after-tax income. The rate used for this adjustment was 21% for federal income taxes for the periods endedMarch 31, 2022 and 2021 and 4.44% and 3.98% forNew York State income taxes for the periods endedMarch 31, 2022 and 2021, respectively. 42
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Index
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 affectedGreene County Bancorp, Inc.'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, Nine Months Ended March 31,
2022 versus 2021 2022 versus 2021
Increase/(Decrease) Total Increase/(Decrease) Total
(Dollars in thousands) Due To Increase/ Due To Increase/
Volume Rate (Decrease) Volume Rate (Decrease)
Interest Earning Assets:
Loans receivable, net1 $ 920 $ (1,251 ) $ (331 ) $ 2,567 $ (799 ) $ 1,768
Securities2 1,204 (356 ) 848 3,693 (1,851 ) 1,842
Interest-bearing bank balances and federal funds (11 ) 14 3 23 33 56
FHLB stock 2 (5 ) (3 ) (2 ) (10 ) (12 )
Total interest-earning assets 2,115 (1,598 ) 517 6,281 (2,627 ) 3,654
Interest-bearing Liabilities:
Savings and money market deposits 31 (87 ) (56 ) 115 (290 ) (175 )
NOW deposits 117 (244 ) (127 ) 560 (1,257 ) (697 )
Certificates of deposit (1 ) (19 ) (20 ) (3 ) (73 ) (76 )
Borrowings 275 (72 ) 203 620 38 658
Total interest-bearing liabilities 422 (422 ) 0 1,292 (1,582 ) (290 )
Net change in net interest income $ 1,693 $
(1,176 )
--------------------------------------------------------------------------------
1 Calculated net of deferred loan fees, loan discounts, and loans in process. 2 Includes tax-free securities, mortgage-backed securities, and asset-backed securities. GENERAL Return on average assets and return on average equity are common methods of measuring operating results. Annualized return on average assets increased to 1.19% for the three months endedMarch 31, 2022 as compared to 1.04% for the three months endedMarch 31, 2021 , and was 1.21% and 1.17% for the nine months endedMarch 31, 2022 and 2021, respectively. Annualized return on average equity increased to 18.10% for the three months and increased to 18.09% for the nine months endedMarch 31, 2022 , as compared to 15.13% for the three months and 16.12% for the nine months endedMarch 31, 2021 . The increase in return on average assets for the three and nine months endedMarch 31, 2022 and the increase of return on average equity for the three and nine months endedMarch 31, 2022 was primarily the result of net income outpacing growth in the balance sheet. The increase in return on average shareholders' equity for the nine months endedMarch 31, 2022 was primarily due to the receipt of$2.8 million in PPP fee income due to forgiveness of funds received on SBA PPP loans. Net income amounted to$7.2 million and$5.3 million for the three months endedMarch 31, 2022 and 2021, respectively, an increase of$1.9 million , or 36.7%, and amounted to$21.2 million and$16.3 million for the nine months endedMarch 31, 2022 and 2021, respectively, an increase of$4.9 million , or 29.7%. Average assets increased$396.5 million , or 19.6%, to$2.4 billion for the three months endedMarch 31, 2022 as compared to$2.0 billion for the three months endedMarch 31, 2021 . Average equity increased$19.8 million , or 14.3%, to$158.9 million for the three months endedMarch 31, 2022 as compared to$139.0 million for the three months endedMarch 31, 2021 . Average assets increased$461.5 million , or 24.8%, to$2.3 billion for the nine months endedMarch 31, 2022 as compared to$1.9 billion for the nine months endedMarch 31, 2021 . Average equity increased$21.1 million , or 15.6%, to$156.1 million for the nine months endedMarch 31, 2022 as compared to$135.1 million for the nine months endedMarch 31, 2021 . 43
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Index
INTEREST INCOME
Interest income amounted to$15.3 million for the three months endedMarch 31, 2022 as compared to$14.8 million for the three months endedMarch 31, 2021 , an increase of$517,000 , or 3.5%. Interest income amounted to$46.7 million for the nine months endedMarch 31, 2022 as compared to$43.1 million for the nine months endedMarch 31, 2021 , an increase of$3.7 million , or 8.5%. The increase in average balances on loans and securities as well as the recognition of PPP fee income due to the forgiveness of SBA PPP loans had the greatest impact on interest income, offset by the decrease in rates on securities. Average loan balances increased$88.6 million and the yield on loans decreased 45 basis points when comparing the three months endedMarch 31, 2022 and 2021, respectively. Average loan balances increased$81.6 million and the yield on loans decreased 10 basis points when comparing the nine months endedMarch 31, 2022 and 2021, respectively. Included in interest-earning assets atMarch 31, 2022 and 2021 were$6.7 million and$90.3 million of SBA Paycheck Protection Program (PPP) loans, respectively, at a rate of 1.00%. The Bank received$366,000 and$1.3 million for the three months ended and$2.8 million for both the nine months endedMarch 31, 2022 and 2021, respectively in SBA PPP fee income, which was realized through a deferred origination fee and recognized within interest income. Average securities increased$320.4 million and$315.7 million , and the yield on such securities decreased 17 basis points and 31 basis points when comparing the three and nine months endedMarch 31, 2022 and 2021, respectively. INTEREST EXPENSE Interest expense remained the same at$1.2 million for the three months endedMarch 31, 2022 andMarch 31, 2021 , respectively. Interest expense amounted to$3.8 million for the nine months endedMarch 31, 2022 as compared to$4.1 million for the nine months endedMarch 31, 2021 , a decrease of$290,000 or 7.1%. As illustrated in the rate/volume table, interest expense on interest-bearing liabilities remained the same when comparing the three months endedMarch 31, 2022 and 2021 due to the increase in borrowings and NOW deposits due to volume, offset by decrease in the rate paid on interest-bearing liabilities. The interest expense on interest-bearing liabilities due to volume increased$422,000 and$1.3 million for the three and nine months endedMarch 31, 2022 and 2021, respectively as the average balance of interest-bearing liabilities increased. The average cost of interest-bearing liabilities decreased 5 and 9 basis points when comparing the three and nine months endedMarch 31, 2022 and 2021, respectively. The cost of NOW deposits decreased 7 and 13 basis points, the cost of savings and money market deposits decreased 8 and 9 basis points, and the cost of certificates of deposit decreased 22 and 27 basis points when comparing the three and nine months endingMarch 31, 2022 , and 2021, respectively. The decrease in cost of interest-bearing liabilities was offset by growth in the average balance of interest-bearing liabilities of$347.0 million and$404.5 million when comparing the three and nine months endedMarch 31, 2022 and 2021, respectively. The increase resulted most notably due to an increase in average NOW deposits of$259.4 million and$319.5 million , an increase in average savings and money market deposits of$59.7 million and$65.8 million , and an increase in average borrowings of$28.1 million and$19.6 million when comparing the three and nine months endedMarch 31, 2022 and 2021, respectively, due to the continued focus on new municipal and large commercial cash management customers. The cost on borrowings decreased 110 basis points and increased 21 basis points when comparing the three and nine months endedMarch 31, 2022 and 2021. The change in cost of borrowings was due to the Company entering into Subordinated Note Purchase Agreements inSeptember 2021 andSeptember 2020 . Yields on interest-earning assets and costs of interest-bearing deposits continued to decline during the quarter endedMarch 31, 2022 , but is expected to stabilize as theFederal Reserve Board started to raise rates during the current quarter. NET INTEREST INCOME Net interest income increased$517,000 to$14.1 million for the three months endedMarch 31, 2022 from$13.6 million for the three months endedMarch 31, 2021 . Net interest income increased$3.9 million to$42.9 million for the nine months endedMarch 31, 2022 from$39.0 million for the nine months endedMarch 31, 2021 . The increase in net interest income was primarily the result of the growth in the average balance of interest-earning assets, which increased$369.6 million and$420.4 million when comparing the three and nine months endedMarch 31, 2022 and 2021, offset by a decrease in the average interest rate on interest-earning assets, which decreased 39 and 36 basis points when comparing the three and nine months endedMarch 31, 2022 and 2021, respectively. Net interest rate spread and margin both decreased when comparing the three and nine months endedMarch 31, 2022 and 2021. Net interest rate spread decreased 34 basis points to 2.38% for the three months endedMarch 31, 2022 compared to 2.72% for the three months endedMarch 31, 2021 . Net interest rate spread decreased 27 basis points to 2.51% for the nine months endedMarch 31, 2022 compared to 2.78% for the nine months endedMarch 31, 2021 . Net interest margin decreased 35 basis points and 30 basis points to 2.41% and 2.54%, respectively, for the three and nine months endedMarch 31, 2022 compared to 2.76% and 2.84%, respectively, for the three and nine months endedMarch 31, 2021 . Decreases in net interest rate spread and net interest margin resulted primarily from lower-yielding securities and loans offset by lower rates on deposits as well as growth in loan and securities balances. 44
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Index
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 andNew York State income taxes yielding the same after-tax income. Tax equivalent net interest margin was 2.56% and 2.91% for the three months endedMarch 31, 2022 and 2021, respectively, and was 2.69% and 3.00% for the nine months endedMarch 31, 2022 and 2021, respectively. Due to the large portion of fixed-rate residential mortgages in the Company's portfolio, the Company closely monitors its interest rate risk, and the Company will continue to monitor and adjust the asset and liability mix as much as possible to take advantage of the benefits and reduce the risks or potential negative effects of changes in interest rates, including in a rising rate environment. 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. TheFederal Reserve Bank has taken a number of measures in an attempt to mitigate the impact of the Coronavirus on the economy. TheFederal Reserve Bank has maintained interest rates near 0.00%-0.25% in recent quarters, which has had an impact to the Company for the three and nine months endedMarch 31, 2022 . TheFederal Reserve Bank raised interest rates in March of 2022 by 0.25%, and indicated they will continue to raise rates in the upcoming meetings, which is expected to have a positive impact to the Company's interest spread and margin, as assets will be invested or repriced at higher yields quicker than deposits rates will be raised. The Company continually monitors its interest rate risk and the impact to net interest income and capital from the interest rate decrease is well within established limits.
PROVISION FOR LOAN LOSSES
Provision for loan losses was$163,000 and$1.4 million the three months endedMarch 31, 2022 and 2021, and was$2.4 million and$3.9 million for the nine months endedMarch 31, 2022 and 2021, respectively. The provision for loan losses for the three months endedMarch 31, 2021 and for the nine months endedMarch 31, 2022 and 2021 was due to the impact of the COVID-19 pandemic as well as growth in gross loans and an increase in loans adversely classified. The Company instituted a loan deferral program in response to the COVID-19 pandemic whereby deferral of principal and/or interest payments have been provided and correspond to the length of the National Emergency as defined under the CARES Act and extended under the Consolidated Appropriations Act which was signed into law onDecember 27, 2020 . AtMarch 31, 2022 , the Company had zero loans on payment deferral compared to eight loans aggregating$8.0 million as ofJune 30, 2021 . Loans classified as substandard or special mention totaled$50.0 million atMarch 31, 2022 , compared to$49.7 million atJune 30, 2021 , an increase of$300,000 , and compared to$43.0 million atMarch 31, 2021 , an increase of$7.0 million . Loans classified as substandard or special mention slightly increased as compared toJune 30, 2021 but remained elevated compared toMarch 31, 2021 , due to insufficient cash flows and revenues related to the COVID-19 pandemic. As a result, reserves on loans classified as substandard or special mention totaled$9.6 million atMarch 31, 2022 compared to$7.8 million atJune 30, 2021 , an increase of$1.8 million . No loans were classified as doubtful or loss atMarch 31, 2022 orJune 30, 2021 . Allowance for loan losses to total loans receivable was 1.88% atMarch 31, 2022 compared to 1.77% atJune 30, 2021 . Total loans receivable included$6.7 million and$67.4 million of SBA Paycheck Protection Program (PPP) loans atMarch 31, 2022 andJune 30, 2021 , respectively. Excluding these SBA guaranteed loans, the allowance for loan losses to total loans receivable would have been 1.89% atMarch 31, 2022 andJune 30, 2021 , respectively. Net charge-offs amounted to$108,000 and$36,000 for the three months endedMarch 31, 2022 and 2021, respectively, an increase of$72,000 . Net charge-offs totaled$360,000 and$662,000 for the nine months endedMarch 31, 2022 and 2021, respectively. The primary net charge off activity was a commercial loan charge off that occurred during the quarter endedDecember 31, 2020 . Nonperforming loans amounted to$3.9 million and$2.3 million atMarch 31, 2022 andJune 30, 2021 , respectively. The increase in nonperforming loans during the period was primarily due to$2.6 million of loans placed into nonperforming status due to delinquency,$920,000 in loan repayments, and$134,000 in charge-offs. AtMarch 31, 2022 nonperforming assets were 0.16% of total assets compared to 0.11% atJune 30, 2021 . Nonperforming loans were 0.34% and 0.21% of net loans atMarch 31, 2022 andJune 30, 2021 , respectively. 45
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Index
NONINTEREST INCOME
For the three months For the nine months
(In thousands) ended March 31, Change from Prior Year ended March 31, Change from Prior Year
Noninterest income: 2022 2021 Amount Percent 2022 2021 Amount Percent
Service charges on deposit accounts
237 29.08 %$ 3,279 $ 2,555 $ 724 28.34 % Debit card fees 1,024 951 73 7.68 3,214 2,761 453 16.41 Investment services 216 174 42 24.14 707 551 156 28.31 E-commerce fees 23 25 (2 ) (8.00 ) 83 82 1 1.22 Bank owned life insurance 323 173 150 86.71 939 173 766 442.77 Other operating income 267 223 44 19.73 850 711 139 19.55 Total noninterest income$ 2,905 $ 2,361 $ 544 23.04 %$ 9,072 $ 6,833 $ 2,239 32.77 % Noninterest income increased$544,000 , or 23.0%, to$2.9 million for the three months endedMarch 31, 2022 compared to$2.4 million for the three months endedMarch 31, 2021 . Noninterest income increased$2.2 million , or 32.8%, to$9.1 million for the nine months endedMarch 31, 2022 compared to$6.8 million for the nine months endedMarch 31, 2021 . The increase was primarily due to an increase in debit card fees resulting from continued growth in the number of checking accounts with debit cards, the income from bank owned life insurance, and increases in service charges on deposit accounts. NONINTEREST EXPENSE For the three months For the nine months (In thousands) ended March 31, Change from Prior Year ended March 31, Change from Prior Year Noninterest expense: 2022 2021 Amount Percent 2022 2021 Amount Percent Salaries and employee benefits$ 5,332 $ 4,788 $ 544 11.36 %$ 15,103 $ 13,966 $ 1,137 8.14 % Occupancy expense 549 605 (56 ) (9.26 ) 1,627 1,584 43 2.71 Equipment and furniture expense 186 168 18 10.71 573 483 90 18.63 Service and data processing fees 649 674 (25 ) (3.71 ) 1,937 1,958 (21 ) (1.07 ) Computer software, supplies and support 356 368 (12 ) (3.26 ) 1,128 1,001 127 12.69 Advertising and promotion 146 108 38 35.19 345 328 17 5.18 FDIC insurance premiums 225 204 21 10.29 646 552 94 17.03 Legal and professional fees 258 386 (128 ) (33.16 ) 1,075 981 94 9.58 Other 613 1,066 (453 ) (42.50 ) 2,178 2,187 (9 ) (0.41 ) Total noninterest expense$ 8,314 $ 8,367 $ (53 ) (0.63 )%$ 24,612 $ 23,040 $ 1,572 6.82 % Noninterest expense decreased$53,000 , or 0.6%, to$8.3 million for the three months endedMarch 31, 2022 compared to$8.4 million for the three months endedMarch 31, 2021 . Noninterest expense increased$1.6 million , or 6.8%, to$24.6 million for the nine months endedMarch 31, 2022 , compared to$23.0 million for the nine months endedMarch 31, 2021 . The increase in noninterest expense during the nine months endedMarch 31, 2022 was primarily due to an increase in salaries and employee benefits expense resulting from creating new positions during the previous fiscal year. The new positions were required to support growth in the bank's lending department, customer service center and finance department. There was also an increase in computer software and professional fees during the current period.
INCOME TAXES
Provision for income taxes reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements. The effective tax rate was 15.6% and 15.2% for the three and nine months endedMarch 31, 2022 and 14.2% and 13.4% for the three and nine months endedMarch 31, 2021 , respectively. The statutory tax rate is impacted by the benefits derived from tax-exempt bond and loan income, the Company's real estate investment trust subsidiary income, income received on the bank owned life insurance, as well as the tax benefits derived from premiums paid to the Company's pooled captive insurance subsidiary to arrive at the effective tax rate. The increase in the current quarter was attributable to the increase in income before taxes forMarch 31, 2022 compared toMarch 31, 2021 .
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.Greene County Bancorp, Inc.'s most significant form of market risk is interest rate risk since the majority ofGreene County Bancorp, Inc.'s assets and liabilities are sensitive to changes in interest rates.Greene County Bancorp, Inc.'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 theFederal Home Loan Bank andAtlantic Central Bankers Bank as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition. The impact of the COVID-19 pandemic has added to the uncertainty regarding the Company's liquidity needs, with reductions in interest and principal payments from loans and changes in deposit activity, estimating cash flow has become more challenging. AtMarch 31, 2022 , the Company had$150.6 million in cash and cash equivalents, representing 6.0% of total assets, and had$406.0 million available in unused lines of credit. 46
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Index
At
Cash equivalents/(deposits plus short term borrowings)
6.57 % (Cash equivalents plus unpledged securities)/(deposits plus short term borrowings)
11.06 % (Cash equivalents plus unpledged securities plus additional borrowing capacity)/(deposits plus short term borrowings)
28.78 %
(In thousands) Unfunded loan commitments$ 132,790 Unused lines of credit 89,489 Standby letters of credit 229 Total commitments$ 222,508 Greene County Bancorp, Inc. anticipates that it will have sufficient funds available to meet current loan commitments based on the level of cash and cash equivalents as well as the available-for-sale investment portfolio and borrowing capacity.
Risk Participation Agreements
Risk participation agreements ("RPAs") are guarantees issued by the Company to
other parties for a fee, whereby the Company agrees to participate in the credit
risk of a derivative customer of the other party. Under the terms of these
agreements, the "participating bank" receives a fee from the "lead bank" in
exchange for the guarantee of reimbursement if the customer defaults on an
interest rate swap. The interest rate swap is transacted such that any and all
exchanges of interest payments (favorable and unfavorable) are made between the
lead bank and the customer. In the event that an early termination of the swap
occurs and the customer is unable to make a required close out payment, the
participating bank assumes that obligation and is required to make this payment.
RPAs in which the Company acts as the lead bank are referred to as
"participations-out," in reference to the credit risk associated with the
customer derivatives being transferred out of the Company. Participations-out
generally occur concurrently with the sale of new customer derivatives. The
Company had no participations-out at March 31, 2022 or June 30, 2021 . RPAs
where the Company acts as the participating bank are referred to as
"participations-in," in reference to the credit risk associated with the
counterparty's derivatives being assumed by the Company. The Company's maximum
credit exposure is based on its proportionate share of the settlement amount of
the referenced interest rate swap. Settlement amounts are generally calculated
based on the fair value of the swap plus outstanding accrued interest
receivables from the customer. The Company's estimate of the credit exposure
associated with its risk participations-in was $424,000 and $2.1 million at
March 31, 2022 and June 30, 2021 , respectively. The current amount of credit
exposure is spread out over three counterparties, and terms range between four
to fifteen years.
Greene County Bancorp, Inc. anticipates that it will have sufficient funds
available to meet current loan commitments based on the level of cash and cash
equivalents as well as the available-for-sale investment portfolio and borrowing
capacity.
47--------------------------------------------------------------------------------
Index
To Be Well
For Capital Capitalized Under
(Dollars in Adequacy Prompt Corrective Capital Conservation
thousands) Actual Purposes Action Provisions Buffer
The Bank of Greene
County Amount Ratio Amount Ratio Amount Ratio Actual Required
As of March 31,
2022:
Total risk-based
capital $ 214,942 16.8 % $ 102,062 8.0 % $ 127,578 10.0 % 8.85 % 2.50 %
Tier 1
risk-based
capital 198,924 15.6 76,547 6.0 102,062 8.0 9.59 2.50
Common equity
tier 1 capital 198,924 15.6 57,410 4.5 82,926 6.5 11.09 2.50
Tier 1 leverage
ratio 198,924 8.2 96,696 4.0 120,870 5.0 4.23 2.50
As of June 30,
2021:
Total risk-based
capital $ 184,063 16.9 % $ 87,384 8.0 % $ 109,230 10.0 % 8.85 % 2.50 %
Tier 1
risk-based
capital 170,335 15.6 65,538 6.0 87,384 8.0 9.59 2.50
Common equity
tier 1 capital 170,335 15.6 49,154 4.5 71,000 6.5 11.09 2.50
Tier 1 leverage
ratio(1) 170,335 8.0 85,382 4.0 106,728 5.0 3.98 2.50
Greene County Commercial
Bank
As of March 31,
2022:
Total risk-based
capital $ 88,090 40.1 % $ 17,558 8.0 % $ 21,947 10.0 % 32.14 % 2.50 %
Tier 1
risk-based
capital 88,090 40.1 13,168 6.0 17,558 8.0 34.14 2.50
Common equity
tier 1 capital 88,090 40.1 9,876 4.5 14,266 6.5 35.64 2.50
Tier 1 leverage
ratio 88,090 8.2 42,976 4.0 53,720 5.0 4.20 2.50
As of June 30,
2021:
Total risk-based
capital $ 68,116 40.2 % $ 13,566 8.0 % $ 16,958 10.0 % 32.17 % 2.50 %
Tier 1
risk-based
capital 68,116 40.2 10,175 6.0 13,566 8.0 34.17 2.50
Common equity
tier 1 capital 68,116 40.2 7,631 4.5 11,023 6.5 35.67 2.50
Tier 1 leverage
ratio 68,116 7.9 34,412 4.0 43,015 5.0 3.92 2.50
(1) Average assets have been adjusted for PPPLF borrowings in calculation of Tier 1 Leverage Ratio.
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