U.S. 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 SEPTEMBER 30, 2021

OR

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

GREENE COUNTY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Commission file number  0-25165

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

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

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

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

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

Securities Registered Pursuant to Section 12(g) of the Act:

None

(Title of Class)

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

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

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

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

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

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

As of November 9, 2021, the registrant had 8,513,414 shares of common stock outstanding at $0.10 par value per share.

GREENE COUNTY BANCORP, INC.

INDEX

PART I.	FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	*  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	8-28
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29-42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
	Signatures	45

2

Greene County Bancorp, Inc.

Consolidated Statements of Financial Condition

At September 30, 2021 and June 30, 2021

(Unaudited)

(In thousands, except share and per share amounts)

ASSETS	September 30, 2021			June 30, 2021
Cash and due from banks	$	113,319		$	149,765
Federal funds sold		10			10
Total cash and cash equivalents		113,329			149,775
Long term certificates of deposit		4,367			4,553
Securities available-for-sale, at fair value		412,375			390,890
Securities held-to-maturity, at amortized cost (fair value $595,152 at September 30, 2021; $519,042 at June 30, 2021)		575,898			496,914
Equity securities, at fair value		297			307
Federal Home Loan Bank stock, at cost		1,091			1,091
Loans		1,118,784			1,108,408
Allowance for loan losses		(20,493	)		(19,668	)
Unearned origination fees and costs, net		(1,475	)		(2,793	)
Net loans receivable		1,096,816			1,085,947
Premises and equipment, net		14,161			14,137
Bank owned life insurance		47,726			40,425
Accrued interest receivable		8,305			7,781
Foreclosed real estate		64			64
Prepaid expenses and other assets		8,371			8,451
Total assets	$	2,282,800		$	2,200,335
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	194,566		$	174,114
Interest-bearing deposits		1,861,896			1,830,994
Total deposits		2,056,462			2,005,108
Borrowings from other banks, short-term		-			3,000
Subordinated notes payable, net		49,170			19,644
Accrued expenses and other liabilities		22,332			22,999
Total liabilities		2,127,964			2,050,751
SHAREHOLDERS’ EQUITY
Preferred stock, Authorized - 1,000,000 shares; Issued - None		-			-
Common stock, par value $0.10 per share; Authorized - 12,000,000 shares; Issued – 8,611,340; Outstanding – 8,513,414 shares at September 30, 2021, and June 30, 2021		861			861
Additional paid-in capital		11,017			11,017
Retained earnings		146,381			139,775
Accumulated other comprehensive loss		(2,515	)		(1,161	)
Treasury stock, at cost 97,926 shares at September 30, 2021, and June 30, 2021		(908	)		(908	)
Total shareholders’ equity		154,836			149,584
Total liabilities and shareholders’ equity	$	2,282,800		$	2,200,335

See notes to consolidated financial statements

3

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Three Months Ended September 30, 2021 and 2020

(Unaudited)

(In thousands, except share and per share amounts)

	2021		2020
Interest income:
Loans	$	12,067	$	10,192
Investment securities - taxable		343		144
Mortgage-backed securities		1,070		1,020
Investment securities - tax exempt		2,091		1,975
Interest-bearing deposits and federal funds sold		42		7
Total interest income		15,613		13,338
Interest expense:
Interest on deposits		848		1,389
Interest on borrowings		366		133
Total interest expense		1,214		1,522
Net interest income		14,399		11,816
Provision for loan losses		988		1,243
Net interest income after provision for loan losses		13,411		10,573
Noninterest income:
Service charges on deposit accounts		1,069		806
Debit card fees		1,083		893
Investment services		213		161
E-commerce fees		33		29
Bank owned life insurance		301		-
Other operating income		230		189
Total noninterest income		2,929		2,078
Noninterest expense:
Salaries and employee benefits		4,737		4,407
Occupancy expense		505		515
Equipment and furniture expense		156		151
Service and data processing fees		638		613
Computer software, supplies and support		378		306
Advertising and promotion		101		111
FDIC insurance premiums		220		174
Legal and professional fees		396		276
Other		830		580
Total noninterest expense		7,961		7,133
Income before provision for income taxes		8,379		5,518
Provision for income taxes		1,265		643
Net income	$	7,114	$	4,875
Basic and diluted earnings per share	$	0.84	$	0.57
Basic and diluted average shares outstanding		8,513,414		8,513,414
Dividends per share	$	0.13	$	0.12

See notes to consolidated financial statements

4

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended September 30, 2021 and 2020

(Unaudited)

(In thousands)

	2021			2020
Net Income	$	7,114		$	4,875
Other comprehensive loss:
Unrealized holding losses on available-for-sale securities, gross		(1,848	)		(257	)
Tax effect		(494	)		(67	)
Unrealized holding losses on available-for-sale securities, net		(1,354	)		(190	)
Total other comprehensive loss, net of taxes		(1,354	)		(190	)
Comprehensive income	$	5,760		$	4,685

See notes to consolidated financial statements.

5

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended September 30, 2021 and 2020

(Unaudited)

(In thousands)

	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
Balance at June 30, 2020	$	861	$	11,017	$	118,263		$	(428	)	$	(908	)	$	128,805
Dividends declared						(468	)								(468	)
Net income						4,875									4,875
Other comprehensive loss, net of taxes									(190	)					(190	)
Balance at September 30, 2020	$	861	$	11,017	$	122,670		$	(618	)	$	(908	)	$	133,022

	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
Balance at June 30, 2021	$	861	$	11,017	$	139,775		$	(1,161	)	$	(908	)	$	149,584
Dividends declared						(508	)								(508	)
Net income						7,114									7,114
Other comprehensive loss, net of taxes									(1,354	)					(1,354	)
Balance at September 30, 2021	$	861	$	11,017	$	146,381		$	(2,515	)	$	(908	)	$	154,836

See notes to consolidated financial statements.

6

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2021 and 2020

(Unaudited)

(In thousands)

	2021			2020
Cash flows from operating activities:
Net Income	$	7,114		$	4,875
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		205			172
Deferred income tax benefit		(355	)		(722	)
Net amortization of investment premiums and discounts		860			664
Net (accretion) amortization of deferred loan costs and fees		(1,388	)		89
Amortization of subordinated debt issuance costs		25			3
Provision for loan losses		988			1,243
Bank owned life insurance income		(301	)		-
Net loss (gain) on equity securities		10			(6	)
Net increase in accrued income taxes		239			36
Net increase in accrued interest receivable		(524	)		(188	)
Net decrease (increase) in prepaid expenses and other assets		776			(583	)
Net decrease in other liabilities		(752	)		(84	)
Net cash provided by operating activities		6,897			5,499
Cash flows from investing activities:
Securities available-for-sale:
Proceeds from maturities		71,939			58,292
Purchases of securities		(102,400	)		(103,878	)
Principal payments on securities		6,646			2,131
Securities held-to-maturity:
Proceeds from maturities		9,322			8,046
Purchases of securities		(95,756	)		(28,822	)
Principal payments on securities		7,077			13,899
Net redemption of Federal Home Loan Bank Stock		-			68
Maturity of long term certificates of deposit		180			245
Purchase of long term certificates of deposit		-			(269	)
Purchase of bank owned life insurance		(7,000	)		-
Net increase in loans receivable		(10,469	)		(36,592	)
Purchases of premises and equipment		(229	)		(611	)
Net cash used by investing activities		(120,690	)		(87,491	)
Cash flows from financing activities
Net decrease in short-term advances other banks		(3,000	)		(17,884	)
Repayment of long-term FHLB advances		-			(1,500	)
Net proceeds from subordinated notes payable		29,501			19,630
Payment of cash dividends		(508	)		(468	)
Net increase in deposits		51,354			117,918
Net cash provided by financing activities		77,347			117,696
Net (decrease) increase in cash and cash equivalents		(36,446	)		35,704
Cash and cash equivalents at beginning of period		149,775			40,463
Cash and cash equivalents at end of period	$	113,329		$	76,167
Cash paid during period for:
Interest	$	1,374		$	1,511
Income taxes	$	1,381		$	1,329

See notes to consolidated financial statements

7

Greene County Bancorp, Inc.

Notes to Consolidated Financial Statements

At and for the Three Months Ended September 30, 2021 and 2020

(1)          Basis of Presentation

Within the accompanying unaudited consolidated statement of financial condition, and related notes to the consolidated financial statements, June 30, 2021 data was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, The Bank of Greene County (the “Bank”) and Greene Risk Management, Inc., and the Bank’s wholly owned subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd. The consolidated financial statements at and for the three months ended September 30, 2021 and 2020 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, 2021, such information and notes have not been duplicated herein. In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included. The Company had no material reclassifications from amounts in the prior year’s consolidated financial statements to conform to the current year’s presentation.  All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three months ended September 30, 2021 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2022. 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.

CRITICAL ACCOUNTING POLICIES

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

(2)          Nature of Operations

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its subsidiaries, The Bank of Greene County and Greene Risk Management, Inc.  The Bank of Greene County has 17 full-service offices and an operations center and lending center located in its market area within the Hudson Valley and Capital District Regions of New York State.  The Bank of Greene County is primarily engaged in the business of attracting deposits from the general public in The Bank of Greene County’s market area, and investing such deposits, together with other sources of funds, in loans and investment securities. Greene County 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 of Greene County are transferred and beneficially owned by Greene Property Holdings, Ltd.  The Bank of Greene County continues to service these loans.  Greene Risk Management, Inc. was formed in December 2014 as a pooled captive insurance company subsidiary of Greene County Bancorp, Inc., incorporated in the State of Nevada.  The purpose of this company is to provide additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.

8

(3)          Use of Estimates

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

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

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

9

(4)          Securities

Securities at September 30, 2021 consisted of the following:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	13,076	$	9	$	243	$	12,842
U.S. treasury securities		19,647		101		6		19,742
State and political subdivisions		225,770		143		-		225,913
Mortgage-backed securities-residential		36,642		292		121		36,813
Mortgage-backed securities-multi-family		115,606		626		2,243		113,989
Corporate debt securities		3,007		111		42		3,076
Total securities available-for-sale		413,748		1,282		2,655		412,375
Securities held-to-maturity:
U.S. treasury securities		10,941		5		18		10,928
State and political subdivisions		376,886		16,140		1,128		391,898
Mortgage-backed securities-residential		25,473		594		52		26,015
Mortgage-backed securities-multi-family		126,085		4,077		298		129,864
Corporate debt securities		12,389		111		75		12,425
Other securities		24,124		76		178		24,022
Total securities held-to-maturity		575,898		21,003		1,749		595,152
Total securities	$	989,646	$	22,285	$	4,404	$	1,007,527

Securities at June 30, 2021 consisted of the following:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	13,079	$	36	$	212	$	12,903
U.S. treasury securities		19,672		165		1		19,836
State and political subdivisions		200,436		220		-		200,656
Mortgage-backed securities-residential		34,861		287		167		34,981
Mortgage-backed securities-multi-family		119,359		1,042		994		119,407
Corporate debt securities		3,008		129		30		3,107
Total securities available-for-sale		390,415		1,879		1,404		390,890
Securities held-to-maturity:
U.S. treasury securities		10,938		28		2		10,964
State and political subdivisions		341,364		17,184		303		358,245
Mortgage-backed securities-residential		28,450		584		90		28,944
Mortgage-backed securities-multi-family		100,330		4,635		12		104,953
Corporate debt securities		9,892		111		65		9,938
Other securities		5,940		58		-		5,998
Total securities held-to-maturity		496,914		22,600		472		519,042
Total securities	$	887,329	$	24,479	$	1,876	$	909,932

Greene County Bancorp, Inc.’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. At September 30, 2021, 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.

10

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

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2021.

	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	$	-	$	-		-	$	6,757	$	243		2	$	6,757	$	243		2
U.S. treasury securities		1,966		6		1		-		-		-		1,966		6		1
State and political subdivisions		4,115		-		4		-		-		-		4,115		-		4
Mortgage-backed securities-residential		23,218		121		5		-		-		-		23,218		121		5
Mortgage-backed securities-multi-family		64,095		1,690		24		13,371		553		5		77,466		2,243		29
Corporate debt securities		958		42		1		-		-		-		958		42		1
Total securities available-for-sale		94,352		1,859		35		20,128		796		7		114,480		2,655		42
Securities held-to-maturity:
U.S. treasury securities		6,975		18		1		-		-		-		6,975		18		1
State and political subdivisions		81,594		1,120		144		226		8		1		81,820		1,128		145
Mortgage-backed securities-residential		12,228		52		2		-		-		-		12,228		52		2
Mortgage-backed securities-multi-family		28,918		298		8		-		-		-		28,918		298		8
Corporate debt securities		1,786		3		2		1,928		72		2		3,714		75		4
Other securities		8,231		178		9		-		-		-		8,231		178		9
Total securities held-to-maturity		139,732		1,669		166		2,154		80		3		141,886		1,749		169
Total securities	$	234,084	$	3,528		201	$	22,282	$	876		10	$	256,366	$	4,404		211

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, 2021.

	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	$	6,787	$	212		2	$	-	$	-		-	$	6,787	$	212		2
U.S. treasury securities		1,970		1		1		-		-		-		1,970		1		1
Mortgage-backed securities-residential		19,071		167		4		-		-		-		19,071		167		4
Mortgage-backed securities-multi-family		59,176		933		21		2,469		61		1		61,645		994		22
Corporate debt securities		970		30		1		-		-		-		970		30		1
Total securities available-for-sale		87,974		1,343		29		2,469		61		1		90,443		1,404		30
Securities held-to-maturity:
U.S. treasury securities		1,991		2		1		-		-		-		1,991		2		1
State and political subdivisions		42,751		303		76		-		-		-		42,751		303		76
Mortgage-backed securities-residential		12,839		90		2		-		-		-		12,839		90		2
Mortgage-backed securities-multi-family		3,890		12		3		-		-		-		3,890		12		3
Corporate debt securities		2,506		36		2		471		29		1		2,977		65		3
Total securities held-to-maturity		63,977		443		84		471		29		1		64,448		472		85
Total securities	$	151,951	$	1,786		113	$	2,940	$	90		2	$	154,891	$	1,876		115

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

11

For debt securities, OTTI is considered to have occurred if (1) the Company intends to sell the security before recovery of its amortized cost basis, (2) it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, or (3) if the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.  In determining the present value of expected cash flows, the Company discounts the expected cash flows at the effective interest rate implicit in the security at the date of acquisition. In estimating cash flows expected to be collected, the Company uses available information with respect to security prepayment speeds, default rates and severity. In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

For debt securities, credit-related OTTI is recognized in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“OCI”). Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis. Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized.  For securities classified as held-to-maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods. For equity securities, the entire amount of OTTI is recognized in earnings. Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2021.

There were no transfers of securities available-for-sale to held-to-maturity during the three months ended September 30, 2021 or 2020. During the three months ended September 30, 2021 and 2020, there were no sales of securities and no gains or losses were recognized.  There was no other-than-temporary impairment loss recognized during the three months ended September 30, 2021 and 2020.

The estimated fair values of debt securities at September 30, 2021, by contractual maturity are shown below. Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)

Available-for-sale debt securities	Amortized Cost		Fair Value
Within one year	$	225,666	$	225,805
After one year through five years		8,798		8,905
After five years through ten years		25,536		25,401
After ten years		1,500		1,462
Total available-for-sale debt securities		261,500		261,573
Mortgage-backed securities		152,248		150,802
Total available-for-sale securities		413,748		412,375
Held-to-maturity debt securities
Within one year		53,797		54,546
After one year through five years		121,956		126,656
After five years through ten years		103,780		108,914
After ten years		144,807		149,157
Total held-to-maturity debt securities		424,340		439,273
Mortgage-backed securities		151,558		155,879
Total held-to-maturity securities		575,898		595,152
Total debt securities	$	989,646	$	1,007,527

At September 30, 2021 and June 30, 2021, respectively, securities with an aggregate fair value of $938.5 million and $892.1 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. At September 30, 2021 and June 30, 2021, securities with an aggregate fair value of $3.9 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. Greene County Bancorp, Inc. did not participate in any securities lending programs during the three months ended September 30, 2021 or 2020, respectively.

12

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is carried at cost. FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value.  Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position. After evaluating these considerations, Greene County Bancorp, Inc. concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no other-than-temporary impairment charge was recorded during the three months ended September 30, 2021 or 2020.

(5)          Loans and Allowance for Loan Losses

Loan segments and classes at September 30, 2021 and June 30, 2021 are summarized as follows:

(In thousands)	September 30, 2021			June 30, 2021
Residential real estate:
Residential real estate	$	326,274		$	325,167
Residential construction and land		12,645			10,185
Multi-family		43,530			41,951
Commercial real estate:
Commercial real estate		511,117			472,887
Commercial construction		61,698			62,763
Consumer loan:
Home equity		18,736			18,285
Consumer installment		4,897			4,942
Commercial loans		139,887			172,228
Total gross loans		1,118,784			1,108,408
Allowance for loan losses		(20,493	)		(19,668	)
Unearned origination fees and costs, net		(1,475	)		(2,793	)
Loans receivable, net	$	1,096,816		$	1,085,947

The Bank of Greene County continues working with borrowers through the current pandemic. The Company instituted a loan deferment program in response to the COVID-19 pandemic whereby deferral of principal payments or principal and 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 on December 27, 2020.

Under Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), loans less than 30 days past due as of March 31, 2020 will be considered current for COVID-19 modifications. Provisions under Section 4013 of the CARES Act were extended as part of the Consolidated Appropriations Act signed into law on December 27, 2020. A financial institution can suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs. Lastly, prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.  The Company has worked with customers following the guidance and standards set forth in the various federal and state laws and regulatory guidance issued in response to the global pandemic.

13

The CARES Act and the Consolidated Appropriations Act also 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 six 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 407 remaining PPP loans with a total balance of $37.4 million outstanding at September 30, 2021, compared to 835 PPP loans with a total balance of $67.4 million outstanding at June 30, 2021.  The Company received fees from the SBA for originating these loans.  These fees have been deferred and will be recognized in income on a level-yield basis as the loans are repaid or forgiven by the SBA.  As of the quarter ended September 30, 2021 and 2020, the Company recognized $1.5 million and $16,000 in fee income, respectively.

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

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

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

Residential mortgage loans, including home equity loans, which are collateralized by residences are generally made in amounts up to 85.0% of the appraised value of the property.  In the event of default by the borrower, The Bank of Greene County will acquire and liquidate the underlying collateral. By originating the loan at a loan-to-value ratio of 85.0% or less, The Bank of Greene County 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 Bank of Greene County does not hold the first mortgage. The Bank of Greene County may stand in a secondary position in the event of collateral liquidation resulting in a greater chance of insufficiency to meet all obligations.

Construction lending generally involves a greater degree of risk than other residential mortgage lending. The repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of the construction of the subject property within specified cost limits. The Bank of Greene County completes inspections during the construction phase prior to any disbursements. The Bank of Greene County 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.

14

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

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

Commercial lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate mortgage lending. Real estate lending is generally considered to be collateral-based, with loan amounts based on fixed loan-to-collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment. The Bank of Greene County 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 Bank of Greene County 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.

Loan balances by internal credit quality indicator at September 30, 2021 are shown below.

(In thousands)	Performing		Special Mention		Substandard		Total
Residential real estate	$	323,215	$	-	$	3,059	$	326,274
Residential construction and land		12,645		-		-		12,645
Multi-family		43,530		-		-		43,530
Commercial real estate		474,284		12,819		24,014		511,117
Commercial construction		60,798		-		900		61,698
Home equity		18,275		-		461		18,736
Consumer installment		4,897		-		-		4,897
Commercial loans		133,534		821		5,532		139,887
Total gross loans	$	1,071,178	$	13,640	$	33,966	$	1,118,784

Loan balances by internal credit quality indicator at June 30, 2021 are shown below.

(In thousands)	Performing		Special Mention		Substandard		Total
Residential real estate	$	321,826	$	88	$	3,253	$	325,167
Residential construction and land		10,185		-		-		10,185
Multi-family		41,589		-		362		41,951
Commercial real estate		441,004		9,690		22,193		472,887
Commercial construction		55,819		5,944		1,000		62,763
Home equity		17,727		-		558		18,285
Consumer installment		4,942		-		-		4,942
Commercial loans		165,649		963		5,616		172,228
Total gross loans	$	1,058,741	$	16,685	$	32,982	$	1,108,408

15

The Company had no loans classified doubtful or loss at September 30, 2021 or June 30, 2021. During the quarter ended September 30, 2021, the Company further downgraded commercial real estate and commercial loans from pass and special mention to substandard due to deterioration in borrower cash flows, delinquent payments and further financial deterioration or not improving financial performance.  Management continues to monitor these loan relationships closely. In total there were 2 commercial real estate loan relationships, 1 commercial loan relationship that have been downgraded to substandard. This was offset by paydowns of classified loans and upgrades during the quarter.  At September 30, 2021, these loans were all performing. Management continues to monitor these loan relationships closely.

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent. A nonaccrual loan is defined as a loan in which collectability is questionable and therefore interest on the loan will no longer be recognized on an accrual basis. A loan is not placed back on accrual status until the borrower has demonstrated the ability and willingness to make timely payments on the loan.  A loan does not have to be 90 days delinquent in order to be classified as nonaccrual. Nonaccrual loans consisted primarily of loans secured by real estate at September 30, 2021 and June 30, 2021. Loans on nonaccrual status totaled $1.9 million at September 30, 2021 of which $260,000 were in the process of foreclosure. At September 30, 2021, there were two residential loans totaling $158,000 and one commercial real estate loan for $102,000 in the process of foreclosure. Included in nonaccrual loans were $1.4 million of loans which were less than 90 days past due at September 30, 2021, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Loans on nonaccrual status totaled $2.3 million at June 30, 2021 of which $260,000 were in the process of foreclosure. At June 30, 2021, there were two residential loans in the process of foreclosure totaling $158,000 and one commercial real estate loan for $102,000 in the process of foreclosure. Included in nonaccrual loans were $1.2 million of loans which were less than 90 days past due at June 30, 2021, but have a recent history of delinquency greater than 90 days past due. The decrease in nonaccrual loans during the three months ended September 30, 2021, was primarily due to $304,000 in loan repayments and $97,000 in charge-offs.

The following table sets forth information regarding delinquent and/or nonaccrual loans at September 30, 2021:

(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	$	-	$	1,799	$	226	$	2,025	$	324,249	$	326,274	$	1,150
Residential construction and land		-		-		-		-		12,645		12,645		-
Multi-family		-		-		-		-		43,530		43,530		-
Commercial real estate		-		5,543		123		5,666		505,451		511,117		428
Commercial construction		-		-		-		-		61,698		61,698		-
Home equity		32		-		128		160		18,576		18,736		140
Consumer installment		34		6		-		40		4,857		4,897		-
Commercial loans		-		553		23		576		139,311		139,887		182
Total gross loans	$	66	$	7,901	$	500	$	8,467	$	1,110,317	$	1,118,784	$	1,900

The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2021:

(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	$	-	$	630	$	650	$	1,280	$	323,887	$	325,167	$	1,324
Residential construction and land		-		-		-		-		10,185		10,185		-
Multi-family		-		-		-		-		41,951		41,951		-
Commercial real estate		-		5,266		123		5,389		467,498		472,887		444
Commercial construction		-		-		-		-		62,763		62,763		-
Home equity		33		40		224		297		17,988		18,285		237
Consumer installment		26		13		-		39		4,903		4,942		-
Commercial loans		-		230		117		347		171,881		172,228		296
Total gross loans	$	59	$	6,179	$	1,114	$	7,352	$	1,101,056	$	1,108,408	$	2,301

16

The Bank of Greene County had no accruing loans delinquent 90 days or more at September 30, 2021 and June 30, 2021.  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.

The table below details additional information related to nonaccrual loans for the three months ended September 30:

(In thousands)	2021		2020
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	50	$	135
Interest income that was recorded on nonaccrual loans		22		38

Impaired Loan Analysis

The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment.”  Management may consider a loan impaired once it is classified as nonaccrual and when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring.  It should be noted that management does not evaluate all loans individually for impairment.  Generally, The Bank of Greene County considers residential mortgages, home equity loans and installment loans as small, homogeneous loans, which are evaluated for impairment collectively based on historical loan experience and other factors.  In contrast, large commercial mortgage, construction, multi-family, business loans and select larger balance residential mortgage loans or nonaccrual loans that are over $100,000 and all trouble debt restructured loans are reviewed individually and considered impaired if it is probable that The 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 agreement.  The measurement of impaired loans is generally based on the fair value of the underlying collateral.  The majority of The Bank of Greene County loans, including most nonaccrual loans, are small homogeneous loan types adequately supported by collateral.  Management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors.  Based on this evaluation, a delinquent loan’s risk rating may be downgraded to either pass-watch, special mention, or substandard, and the allocation of the allowance for loan loss is based upon the risk associated with such designation.

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

	At September 30, 2021						For the three months ended September 30, 2021
(In thousands)	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential real estate	$	236	$	236	$	-	$	221	$	-
Commercial real estate		783		783		-		445		3
Home equity		128		128		-		128		-
Commercial loans		109		109		-		98		-
Total impaired loans with no allowance		1,256		1,256		-		892		3
With an allowance recorded:
Residential real estate		716		716		102		718		5
Commercial real estate		450		450		54		780		10
Commercial construction		102		102		1		102		-
Home equity		321		321		45		321		3
Commercial loans		3,225		3,225		208		3,228		40
Total impaired loans with allowance		4,814		4,814		410		5,149		58
Total impaired:
Residential real estate		952		952		102		939		5
Commercial real estate		1,233		1,233		54		1,225		13
Commercial construction		102		102		1		102		-
Home equity		449		449		45		449		3
Commercial loans		3,334		3,334		208		3,326		40
Total impaired loans	$	6,070	$	6,070	$	410	$	6,041	$	61

17

	As of June 30, 2021						For the three months ended September 30, 2020
(In thousands)	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential real estate	$	370	$	370	$	-	$	402	$	5
Multi-family		-		-		-		121		-
Commercial real estate		281		281		-		335		1
Home equity		224		224		-		128		-
Commercial loans		95		95		-		277		-
Impaired loans with no allowance		970		970		-		1,263		6
With an allowance recorded:
Residential real estate		723		723		103		1,385		5
Commercial real estate		945		945		58		-		-
Commercial construction		102		102		1		102		-
Home equity		321		321		73		430		4
Commercial Loans		3,234		3,234		156		-		-
Impaired loans with allowance		5,325		5,325		391		1,917		9
Total impaired:
Residential real estate		1,093		1,093		103		1,787		10
Multi-family		-		-		-		121		-
Commercial real estate		1,226		1,226		58		335		1
Commercial construction		102		102		1		102		-
Home equity		545		545		73		558		4
Commercial loans		3,329		3,329		156		277		-
Total impaired loans	$	6,295	$	6,295	$	391	$	3,180	$	15

The table below detail loans that have been modified as a troubled debt restructuring during the year ended June 30, 2021.

(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 30,2021
Commercial loans		5	$	3,001	$	2,903	$	2,896
Commercial real estate		3		1,325		1,287		1,284
Residential		1		70		70		69

There were no loans that had been modified as a troubled debt restructuring during the three months ended September 30, 2021 or 2020. There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to June 30, 2021 or 2020, which have subsequently defaulted during the three months ended September 30, 2021 or 2020, respectively.

18

In order to assist borrowers through the COVID-19 pandemic, The Bank of Greene County has 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 will not report these loans as delinquent and Trouble Debt Restructuring disclosures. The Company will continue 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. The following table details loans that have payments deferred as of September 30, 2021.

	Full Payment Deferral				Principal Payment Deferral				Total Deferral
(Dollars in thousands)	Balance		Number of Loans		Balance		Number of Loans		Balance		Number of Loans
Commercial real estate		6,043		1		418		2		6,461		3
Commercial loans		509		1		-		-		509		1
Residential		44		1		127		1		171		2
Total	$	6,596		3	$	545		3	$	7,141		6

The following table details loans that have payments deferred at June 30, 2021.

	Full Payment Deferral				Principal Payment Deferral				Total Deferral
(Dollars in thousands)	Balance		Number of Loans		Balance		Number of Loans		Balance		Number of Loans
Commercial real estate		6,119		3		1,346		3		7,465		6
Commercial loans		572		2		-		-		572		2
Total	$	6,691		5	$	1,346		3	$	8,037		8

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions.  Such evaluation, which includes a review of certain identified loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for the loan loss allowance.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review The Bank of Greene County’s allowance for loan losses.  Such agencies may require The 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 that The 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.

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 to The Bank of Greene County.  Management continues to closely monitor credit relationships, particularly those on payment deferral or adversely classified.

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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 September 30, 2021
(In thousands)	Balance at June 30, 2021		Charge-offs		Recoveries		Provision			Balance at September 30, 2021
Residential real estate	$	2,012	$	-	$	-	$	(15	)	$	1,997
Residential construction and land		106		-		-		14			120
Multi-family		186		-		-		(86	)		100
Commercial real estate		13,049		-		-		1,249			14,298
Commercial construction		1,535		-		-		(337	)		1,198
Home equity		165		-		-		(25	)		140
Consumer installment		267		104		37		90			290
Commercial loans		2,348		97		1		98			2,350
Total	$	19,668	$	201	$	38	$	988		$	20,493

	Allowance for Loan Losses				Loans Receivable
	Ending Balance At September 30, 2021 Impairment Analysis				Ending Balance At September 30, 2021 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	102	$	1,895	$	952	$	325,322
Residential construction and land		-		120		-		12,645
Multi-family		-		100		-		43,530
Commercial real estate		54		14,244		1,233		509,884
Commercial construction		1		1,197		102		61,596
Home equity		45		95		449		18,287
Consumer installment		-		290		-		4,897
Commercial loans		208		2,142		3,334		136,553
Total	$	410	$	20,083	$	6,070	$	1,112,714

	Activity for the three months ended September 30, 2020
(In thousands)	Balance at June 30, 2020		Charge-offs		Recoveries		Provision			Balance at September 30, 2020
Residential real estate	$	2,091	$	-	$	3	$	(631	)	$	1,463
Residential construction and land		141		-		-		(23	)		118
Multi-family		176		-		-		4			180
Commercial real estate		8,634		-		-		750			9,384
Commercial construction		2,053		-		-		(92	)		1,961
Home equity		295		-		-		(23	)		272
Consumer installment		197		61		20		194			350
Commercial loans		2,804		-		-		1,064			3,868
Total	$	16,391	$	61	$	23	$	1,243		$	17,596

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	Allowance for Loan Losses				Loans Receivable
	Ending Balance June 30, 2021 Impairment Analysis				Ending Balance June 30, 2021 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	103	$	1,909	$	1,093	$	324,074
Residential construction and land		-		106		-		10,185
Multi-family		-		186		-		41,951
Commercial real estate		58		12,991		1,226		471,661
Commercial construction		1		1,534		102		62,661
Home equity		73		92		545		17,740
Consumer installment		-		267		-		4,942
Commercial loans		156		2,192		3,329		168,899
Total	$	391	$	19,277	$	6,295	$	1,102,113

Foreclosed real estate (FRE)

FRE consists of properties acquired through mortgage loan foreclosure proceedings or in full or partial satisfaction of loans. The following table sets forth information regarding FRE at September 30, 2021 and June 30, 2021:

(in thousands)	September 30, 2021		June 30, 2021
Residential real estate	$	64	$	64
Total foreclosed real estate	$	64	$	64

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

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated.  The estimated fair value amounts have been measured as of September 30, 2021 and 2020 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.

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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)	September 30, 2021		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Government sponsored enterprises	$	12,842	$	-	$	12,842	$	-
U.S. Treasury securities		19,742		-		19,742		-
State and political subdivisions		225,913		-		225,913		-
Mortgage-backed securities-residential		36,813		-		36,813		-
Mortgage-backed securities-multi-family		113,989		-		113,989		-
Corporate debt securities		3,076		-		3,076		-
Securities available-for-sale	$	412,375	$	-	$	412,375	$	-
Equity securities		297		297		-		-
Total securities measured at fair value	$	412,672	$	297	$	412,375	$	-

			Fair Value Measurements Using
			Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	June 30, 2021		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Government sponsored enterprises	$	12,903	$	-	$	12,903	$	-
U.S. Treasury securities		19,836		-		19,836		-
State and political subdivisions		200,656		-		200,656		-
Mortgage-backed securities-residential		34,981		-		34,981		-
Mortgage-backed securities-multi-family		119,407		-		119,407		-
Corporate debt securities		3,107		-		3,107		-
Securities available-for-sale	$	390,890	$	-	$	390,890	$	-
Equity securities		307		307		-		-
Total securities measured at fair value	$	391,197	$	307	$	390,890	$	-

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

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

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

							Fair Value Measurements Using
(In thousands)	Recorded Investment		Related Allowance		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2021
Impaired loans	$	4,998	$	410	$	4,588	$	-	$	-	$	4,588
Foreclosed real estate		64		-		64		-		-		64
June 30, 2021
Impaired loans	$	5,449	$	391	$	5,058	$	-	$	-	$	5,058
Foreclosed real estate		64		-		64		-		-		64

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

(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
September 30, 2021
Impaired Loans	$	561	Appraisal of collateral(1)	Appraisal adjustments(2)		7.06%-33.73	%		26.17	%
				Liquidation expenses(3)		3.98%-5.58	%		4.43	%
		4,027	Discounted cash flow	Discount rate		4.19%-7.49	%		6.67	%
Foreclosed real estate		64	Appraisal of collateral(1)	Appraisal adjustments(2)		0.00	%		0.00	%
				Liquidation expenses(3)		8.70	%		8.70	%
June 30, 2021
Impaired loans	$	473	Appraisal of collateral(1)	Appraisal adjustments(2)		7.06%-33.73	%		24.94	%
				Liquidation expenses(3)		3.98%-5.58	%		4.50	%
		4,585	Discounted cash flow	Discount rate		4.19%-7.49	%		5.99	%
Foreclosed real estate		64	Appraisal of collateral(1)	Appraisal adjustments(2)		0.00%-0.00	%		0.00	%
				Liquidation expenses(3)		8.70	%		8.70	%

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

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

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

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

The carrying amounts reported in the statements of financial condition for cash and cash equivalents, long term certificate of deposits, 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 value 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.

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The fair value of commitments to extend credit is estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the credit-worthiness of the potential borrowers. At September 30, 2021 and June 30, 2021, the estimated fair values of these off-balance sheet financial instruments were immaterial, and are therefore excluded from the table below.

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

(In thousands)	September 30, 2021				Fair Value Measurements Using
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	113,329	$	113,329	$	113,329	$	-	$	-
Long term certificate of deposit		4,367		4,481		-		4,481		-
Securities available-for-sale		412,375		412,375		-		412,375		-
Securities held-to-maturity		575,898		595,152		-		595,152		-
Equity securities		297		297		297		-		-
Federal Home Loan Bank stock		1,091		1,091		-		1,091		-
Net loans receivable		1,096,816		1,091,038		-		-		1,091,038
Accrued interest receivable		8,305		8,305		-		8,305		-
Deposits		2,056,462		2,056,786		-		2,056,786		-
Subordinated notes payable, net		49,170		50,037		-		50,037		-
Accrued interest payable		186		186		-		186		-

(In thousands)	June 30, 2021				Fair Value Measurements Using
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	149,775	$	149,775	$	149,775	$	-	$	-
Long term certificate of deposit		4,553		4,719		-		4,719		-
Securities available-for-sale		390,890		390,890		-		390,890		-
Securities held-to-maturity		496,914		519,042		-		519,042		-
Equity securities		307		307		307		-		-
Federal Home Loan Bank stock		1,091		1,091		-		1,091		-
Net loans receivable		1,085,947		1,081,669		-		-		1,081,669
Accrued interest receivable		7,781		7,781		-		7,781		-
Deposits		2,005,108		2,005,483		-		2,005,483		-
Borrowings		3,000		3,005		-		3,005		-
Subordinated notes payable, net		19,644		19,858		-		19,858		-
Accrued interest payable		346		346		-		346		-

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(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 months ended September 30, 2021 and 2020.

	For the three months ended September 30,
	2021		2020
Net Income	$	7,114,000	$	4,875,000
Weighted Average Shares – Basic		8,513,414		8,513,414
Weighted Average Shares - Diluted		8,513,414		8,513,414
Earnings per share - Basic	$	0.84	$	0.57
Earnings per share - Diluted	$	0.84	$	0.57

(8)          Dividends

On July 21, 2021, Greene County Bancorp, Inc. (NASDAQ-GCBC) announced that its Board of Directors has approved a quarterly cash dividend of $0.13 per share on the Company’s common stock. The dividend reflects an annual cash dividend rate of $0.52 per share, which represents an 8.3% increase from the previous annual cash dividend rate of $0.48 per share. The dividend was payable to stockholders of record as of August 16, 2021, and was paid on August 31, 2021. Greene County Bancorp, MHC waived its right to receive this dividend.

(9)          Impact of Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In October 2020, the FASB issued an Update (ASU 2020-08), Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. The amendments affect the guidance in ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in that Update shortened the amortization period for certain purchased callable debt securities held at a premium by requiring that entities amortize the premium associated with those callable debt securities within the scope of paragraph 310-20-25-33 to the earliest call date. The Board noted in paragraph BC21 of Update 2017-08 that if the security contained additional future call dates, an entity should consider whether the amortized cost basis exceeded the amount repayable by the issuer at the next call date. If so, the excess should be amortized to the next call date. The amendments in ASU 2020-08 clarified the Board’s intent that an entity should reevaluate whether a callable debt security that has multiple call dates is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of this guidance did not have a material impact on our consolidated results of operations or financial position.

Accounting Pronouncements to be adopted in future periods

In June 2016, the FASB issued an Update (ASU 2016-13) to its guidance on “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above. Further, the ASU made certain targeted amendments to the existing impairment model for available-for-sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.  An entity will apply the amendments in this Update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which aligns the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements and clarifies the scope of the guidance in the amendments in ASU 2016-13.  In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments to Topic 326 and other topics in  ASU 2019-04 include items related to the amendments in 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. The Company is currently evaluating the potential impact on our consolidated results of operations or financial position. The initial adjustment will not be reported in earnings and therefore will not have any material impact on our consolidated results of operations, but it is expected that it will have an impact on our consolidated financial position at the date of adoption.  At this time, we have not calculated the estimated impact that this Update will have on our allowance for credit losses, however, we anticipate it will have a significant impact on the methodology process we utilize to calculate the allowance. A vendor has been selected and alternative methodologies are currently being considered.  Data requirements and integrity are being reviewed and enhancements incorporated into standard processes. 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.

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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 expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.  The Company’s initial evaluation of LIBOR exposure appears to be minimal and limited to a couple of participation loans or risk participation agreements. The Company is working with the other lead lenders to determine if any potential contract modifications are needed.

(10)        Employee Benefit Plans

Defined Benefit Plan

The components of net periodic pension cost related to the defined benefit pension plan for the three months ended September 30, 2021 and 2020 were as follows:

	Three months ended September 30,
(In thousands)	2021			2020
Interest cost	$	42		$	41
Expected return on plan assets		(70	)		(64	)
Amortization of net loss		32			52
Net periodic pension cost	$	4		$	29

The Company does not anticipate that it will make any additional contributions to the defined benefit pension plan during fiscal 2022.

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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 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 and notes thereto for the year ended June 30, 2021.

The net periodic pension costs related to the SERP for the three months ended September 30, 2021 and 2020 were $314,000 and $256,000, respectively. The total liability for the SERP was $8.8 million at September 30, 2021 and $8.2 million at June 30, 2021, respectively, and is included in accrued expenses and other liabilities. The total liability for the SERP includes both accumulated net periodic pension costs and participant contributions.

(11)         Stock-Based Compensation

Phantom Stock Option Plan and Long-term Incentive Plan

The Greene County Bancorp, Inc. 2011 Phantom Stock Option and Long-term Incentive Plan (the “Plan”) was adopted effective July 1, 2011, to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s shareholders. The Plan is intended to provide benefits to employees and directors of the Company or any subsidiary as designated by the Compensation Committee of the Board of Directors of the Company (“Committee”).  A phantom stock option represents the right to receive a cash payment on the date the award vests. The Plan is more fully described in Note 10 of the consolidated financial statements and notes thereto for the year ended June 30, 2021.

A summary of the Company’s phantom stock option activity and related information for the Plan for the three months ended September 30, 2021 and 2020 were as follows:

	2021		2020
Number of options outstanding at beginning of year		1,507,600		1,765,100
Options granted		475,120		523,700
Options forfeited		-		-
Number of options outstanding at period end		1,982,720		2,288,800

(In thousands)	2021		2020
Cash paid out on options vested		-		-
Compensation expense recognized	$	810	$	635

The total liability for the Plan was $5.8 million and $5.0 million at September 30, 2021 and June 30, 2021, respectively, and is included in accrued expenses and other liabilities.

(12)        Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss at September 30, 2021 and 2020 are presented as follows:

(In thousands)	Unrealized gain (losses) on securities available-for- sale			Pension benefits			Total
Balance - June 30, 2020	$	1,750		$	(2,178	)	$	(428	)
Other comprehensive loss before reclassification		(190	)		-			(190	)
Other comprehensive loss for the three months ended September 30, 2020		(190	)		-			(190	)
Balance - September 30, 2020	$	1,560		$	(2,178	)	$	(618	)
Balance – June 30, 2021	$	348		$	(1,509	)	$	(1,161	)
Other comprehensive loss before reclassification		(1,354	)		-			(1,354	)
Other comprehensive loss for the three months ended September 30, 2021		(1,354	)		-			(1,354	)
Balance - September 30, 2021	$	(1,006	)	$	(1,509	)	$	(2,515	)

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(13)        Operating leases

The Company leases certain branch properties under long-term, operating lease agreements. The Company’s operating lease agreements contain lease components, which are generally 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 of September 30, 2021 and June 30, 2021, and for the three months ended September 30, 2021 and 2020:

(In thousands, except weighted-average information).
Operating lease amounts:	September 30, 2021		June 30, 2021
Right-of-use assets	$	1,807	$	1,887
Lease liabilities	$	1,844	$	1,921

	For the three months ended September 30,
	2021		2020
(In thousands)
Other information:
Operating outgoing cash flows from operating leases	$	87	$	88
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	625
Lease costs:
Operating lease cost	$	80	$	80
Variable lease cost	$	10	$	10

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding common area maintenance charges and real estate taxes, as of September 30, 2021:

(in thousands)
Within the twelve months ended September 30,
2022	$	310
2023		270
2024		283
2025		280
2026		252
Thereafter		596
Total undiscounted cash flow		1,991
Less net present value adjustment		(147	)
Lease Liability	$	1,844
Weighted-average remaining lease term (Years)		5.56
Weighted-average discount rate		2.24	%

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 statement of condition.

(14)        Subsequent events

On October 20, 2021, the Board of Directors declared a cash dividend for the quarter ended September 30, 2021 of $0.13 per share on Greene County Bancorp, Inc.’s common stock.  The dividend reflects an annual cash dividend rate of $0.52 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 November 15, 2021, and will be paid on November 30, 2021.  The 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

Greene County Bancorp, Inc.’s results of operations depend primarily on its net interest income, which is the difference between the income earned on Greene 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 by Greene 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 affect Greene 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.

COVID-19 is expected to continue 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 ending June 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.

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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) economic or policy changes related to the COVID-19 pandemic,

(d) legislative and regulatory changes,

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

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

(g) deposit flows,

(h) competition, and

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

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

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 in its periodic reports filed with the SEC, 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 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 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 the Small Business Administration as these present no credit risk to the Company. With a significant balance in SBA loans at June 30, 2021 and September 30, 2021, this adjusted calculation is used to provide a better basis of comparison with other periods presented within the financial statements presented.

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Comparison of Financial Condition at September 30, 2021 and June 30, 2021

ASSETS

Total assets of the Company were $2.3 billion at September 30, 2021 and $2.2 billion at June 30, 2021, an increase of $82.5 million, or 3.8%. Securities available-for-sale and held-to-maturity increased $100.5 million, or 11.3%, to $988.3 million at September 30, 2021 as compared to $887.8 million at June 30, 2021.  Net loans receivable increased $10.9 million, or 1.0%, to $1.1 billion at September 30, 2021 from $1.1 billion at June 30, 2021.

CASH AND CASH EQUIVALENTS

Total cash and cash equivalents decreased $36.5 million to $113.3 million at September 30, 2021 from $149.8 million at June 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 $100.5 million, or 11.3%, to $988.3 million at September 30, 2021 as compared to $887.8 million at June 30, 2021. This increase was the result of utilizing excess cash on hand due to an increase in deposits. Securities purchases totaled $198.2 million during the three months ended September 30, 2021 and consisted of $142.3 million of state and political subdivision securities, $33.5 million of mortgage-backed securities, $2.5 million of corporate securities, and $19.9 million of other securities. Principal pay-downs and maturities during the three months amounted to $95.0 million, primarily consisting of $11.1 million of mortgage-backed securities, $81.3 million of state and political subdivision securities, $867,000 of collateralized mortgage obligations, and $1.7 million of other securities.  At September 30, 2021, 61.0% of our securities portfolio consisted of state and political subdivision securities to take advantage of tax savings and to promote Greene County Bancorp, Inc.’s participation in the communities in which it operates. Mortgage-backed securities and asset-backed securities held within the portfolio do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

	September 30, 2021					June 30, 2021
(Dollars in thousands)	Balance		Percentage of portfolio			Balance		Percentage of portfolio
Securities available-for-sale:
U.S. Government sponsored enterprises	$	12,842		1.3	%	$	12,903		1.5	%
U.S. Treasury securities		19,742		2.0			19,836		2.2
State and political subdivisions		225,913		22.9			200,656		22.6
Mortgage-backed securities-residential		36,813		3.7			34,981		3.9
Mortgage-backed securities-multifamily		113,989		11.5			119,407		13.4
Corporate debt securities		3,076		0.3			3,107		0.4
Total securities available-for-sale		412,375		41.7			390,890		44.0
Securities held-to-maturity:
U.S. treasury securities		10,941		1.1			10,938		1.2
State and political subdivisions		376,886		38.1			341,364		38.5
Mortgage-backed securities-residential		25,473		2.6			28,450		3.2
Mortgage-backed securities-multifamily		126,085		12.8			100,330		11.3
Corporate debt securities		12,389		1.3			9,892		1.1
Other securities		24,124		2.4			5,940		0.7
Total securities held-to-maturity		575,898		58.3			496,914		56.0
Total securities	$	988,273		100.0	%	$	887,804		100.0	%

LOANS

Net loans receivable increased $10.9 million, or 1.0%, to $1.1 billion at September 30, 2021 from $1.1 billion at June 30, 2021.  Net loans receivable at September 30, 2021 included $37.4 million in SBA Paycheck Protection Program loans. The loan growth experienced during the three months consisted primarily of $38.2 million in commercial real estate loans, $1.1 million in residential real estate loans, $2.5 million in residential construction, $1.6 million in multi-family loans, and a $1.3 million net decrease in deferred fees due to the forgiveness of SBA PPP loans. This growth was partially offset by a $1.1 million decrease in commercial construction loans, $32.3 million decrease in commercial loans and an $825,000 increase in allowance for loan losses.  SBA PPP loans decreased $30.0 million to $37.4 million at September 30, 2021 from $67.4 million at June 30, 2021, due to the receipt of forgiveness proceeds.  The Company continues to experience loan growth as a result of continued growth in its customer base and its relationships with other financial institutions in originating loan participations.  We believe that customer satisfaction continued to grow through our participation in the PPP loan program and our quick response to customer needs during the pandemic, which has enhanced loan growth.  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.

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(Dollars in thousands)	September 30, 2021						June 30, 2021
	Balance			Percentage of Portfolio			Balance			Percentage of Portfolio
Residential real estate	$	326,274			29.2	%	$	325,167			29.3	%
Residential construction and land		12,645			1.1			10,185			0.9
Multi-family		43,530			3.9			41,951			3.8
Commercial real estate		511,117			45.7			472,887			42.7
Commercial construction		61,698			5.5			62,763			5.7
Home equity		18,736			1.7			18,285			1.6
Consumer installment		4,897			0.4			4,942			0.5
Commercial loans		139,887			12.5			172,228			15.5
Total gross loans		1,118,784			100.0	%		1,108,408			100.0	%
Allowance for loan losses		(20,493	)					(19,668	)
Deferred fees and costs		(1,475	)					(2,793	)
Total net loans	$	1,096,816					$	1,085,947

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides 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 six 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 407 remaining PPP loans with a total balance of $37.4 million outstanding at September 30, 2021, 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 review The Bank of Greene County’s allowance for loan losses.  Such agencies may require The 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 that The 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.

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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 to The Bank of Greene County.  Management continues to closely monitor credit relationships, particularly those on payment deferral or adversely classified.

Analysis of allowance for loan losses activity

	At or for the three months ended September 30,
(Dollars in thousands)	2021			2020
Balance at the beginning of the period	$	19,668		$	16,391
Charge-offs:
Consumer installment		104			61
Commercial loans		97			-
Total loans charged off		201			61
Recoveries:
Residential real estate		-			3
Consumer installment		37			20
Commercial loans		1			-
Total recoveries		38			23
Net charge-offs		163			38
Provisions charged to operations		988			1,243
Balance at the end of the period	$	20,493		$	17,596
Net charge-offs to average loans outstanding (annualized)		0.06	%		0.02	%
Net charge-offs to nonperforming assets (annualized)		33.20	%		3.50	%
Allowance for loan losses to nonperforming loans		1078.58	%		404.78	%
Allowance for loan losses to total loans receivable		1.83	%		1.68	%
Allowance for loan losses to total loans receivable (excluding PPP loans)		1.90	%		1.85	%

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)	September 30, 2021			June 30, 2021
Nonaccruing loans:
Residential real estate	$	1,150		$	1,324
Commercial real estate		428			444
Home equity		140			237
Commercial		182			296
Total nonaccruing loans	$	1,900		$	2,301
Foreclosed real estate:
Residential real estate		64			64
Total foreclosed real estate		64			64
Total nonperforming assets	$	1,964		$	2,365
Troubled debt restructuring:
Nonperforming (included above)	$	340		$	354
Performing (accruing and excluded above)		5,039			5,050
Total nonperforming assets as a percentage of total assets		0.09	%		0.11	%
Total nonperforming loans to net loans		0.17	%		0.21	%

At September 30, 2021 and June 30, 2021, there were no loans greater than 90 days and accruing.

The table below details additional information related to nonaccrual loans for the three months ended September 30:

(In thousands)	2021		2020
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	50	$	135
Interest income that was recorded on nonaccrual loans		22		38

Nonperforming assets amounted to $2.0 million and $2.4 million at September 30, 2021 and June 30, 2021, respectively. Nonaccrual loans consisted primarily of loans secured by real estate at September 30, 2021 and June 30, 2021. Loans on nonaccrual status totaled $1.9 million at September 30, 2021 of which $260,000 were in the process of foreclosure. At September 30, 2021, there were two residential loans in the process of foreclosure totaling $158,000 and one commercial real estate loan for $102,000 in the process of foreclosure. Included in nonaccrual loans were $1.4 million of loans which were less than 90 days past due at September 30, 2021, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Loans on nonaccrual status totaled $2.3 million at June 30, 2021 of which $260,000 were in the process of foreclosure. At June 30, 2021, there were two residential 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 at June 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 has 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 will not report these loans as delinquent and Trouble Debt Restructuring disclosures. The Company will continue 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.  The following table details loans that have payments deferred as of September 30, 2021.  For further detail regarding loans that have payments deferred as of September 30, 2021 and June 30, 2021 please refer to Part I, Financial Statements (unaudited), Note 5 Loans and Allowance for Loan Losses of this Report.

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Impaired Loans

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

The table below details additional information on impaired loans at September 30, 2021 and June 30, 2020:

(In thousands)	September 30, 2021		June 30, 2021
Balance of impaired loans, with a valuation allowance	$	4,814	$	5,325
Allowances relating to impaired loans included in allowance for loan losses		410		391
Balance of impaired loans, without a valuation allowance		1,256		970
Total impaired loans		6,070		6,295

	For the three months ended September 30,
(In thousands)	2021		2020
Average balance of impaired loans for the periods ended	$	6,041	$	3,180
Interest income recorded on impaired loans during the periods ended		61		15

DEPOSITS

Deposits totaled $2.1 billion at September 30, 2021 and $2.0 billion at June 30, 2021, an increase of $51.4 million, or 2.6%. Noninterest-bearing deposits increased $20.5 million, or 11.8%, and NOW deposits increased $36.4 million, or 2.7%, when comparing September 30, 2021 and June 30, 2021.  These increases were offset by decreases in certificates of deposits of $84,000, or 0.2%, money market deposits decreased $5.0 million, or 3.4%, and savings deposits decreased $410,000, or 0.1%, when comparing September 30, 2021 and June 30, 2021. Deposits increased during the three months ended September 30, 2021 as a result of an increase in municipal deposits at Greene County Commercial Bank, primarily from tax collection, and new account relationships.

Major classifications of deposits at September 30, 2021 and 2020 are summarized as follows:

(In thousands)	September 30, 2021		Percentage of Portfolio			June 30, 2021		Percentage of Portfolio
Noninterest-bearing deposits	$	194,566		9.5	%	$	174,114		8.7	%
Certificates of deposit		34,707		1.7			34,791		1.7
Savings deposits		300,640		14.6			301,050		15.0
Money market deposits		140,812		6.8			145,832		7.3
NOW deposits		1,385,737		67.4			1,349,321		67.3
Total deposits	$	2,056,462		100.0	%	$	2,005,108		100.0	%

BORROWINGS

At September 30, 2021, The Bank of Greene County had pledged approximately $419.1 million of its residential and commercial mortgage portfolio as collateral for borrowing and irrevocable stand-by letters of credit at the Federal Home Loan Bank of New York (“FHLB”). The maximum amount of funding available from the FHLB was $307.3 million at September 30, 2021, of which there were no borrowings outstanding at September 30, 2021.  There were no short-term or overnight borrowings outstanding at September 30, 2021.  There were no irrevocable stand-by letters of credit outstanding at September 30, 2021.

The Bank of Greene County also pledges securities and certificates of deposit as collateral at the Federal Reserve Bank discount window for overnight borrowings. At September 30, 2021, approximately $3.9 million of collateral was available to be pledged against potential borrowings at the Federal Reserve Bank discount window. There were no balances outstanding with the Federal Reserve Bank at September 30, 2021.

The Bank of Greene County has established unsecured lines of credit with Atlantic Central Bankers Bank for $10.0 million and three other financial institutions for $64.5 million. Greene County Bancorp, Inc. has also established an unsecured line of credit with Atlantic Central Bankers Bank for $7.5 million. The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. At September 30, 2021, The Bank of Greene County had no balances outstanding on any of these lines of credit.  Greene County Bancorp, Inc., had no borrowings outstanding with Atlantic Central Bankers Bank at September 30, 2021 and had an outstanding balance of $3.0 million at June 30, 2021 to fund Bank capital.

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On September 17, 2020, the Company entered into Subordinated Note Purchase Agreements with 14 qualified institutional investors, issued at 4.75% Fixed-to-Floating Rate due September 15, 2030, in the aggregate principal amount of $20.0 million, carried net of issuance costs of $424,000 amortized over a period of 60 months.  These notes are callable on September 15, 2025.  At September 30, 2021, there were $19.7 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

On September 15, 2021, the Company entered into Subordinated Note Purchase Agreements with 18 qualified institutional investors, issued at 3.00% Fixed-to-Floating Rate due September 15, 2031, in the aggregate principal amount of $30.0 million, carried net of issuance costs of $499,000 amortized over a period of 60 months.  These notes are callable on September 15, 2026. At September 30, 2021, there were $29.5 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

At September 30, 2021, there were no long-term borrowings and therefore no scheduled maturities of long-term borrowings.

EQUITY

Shareholders’ equity increased to $154.8 million at September 30, 2021 from $149.6 million at June 30, 2021, resulting primarily from net income of $7.1 million, partially offset by dividends declared and paid of $508,000 and a decrease in other accumulated comprehensive loss of $1.4 million.

On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 200,000 shares of its common stock. Repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance.  For the three months ending September 30, 2021, the Company did not repurchase any shares.

Selected Equity Data:
	September 30, 2021			June 30, 2021
Shareholders’ equity to total assets, at end of period		6.78	%		6.80	%
Book value per share	$	18.19		$	17.57
Closing market price of common stock	$	36.21		$	28.12
	For the three months ended September 30,
		2021			2020
Average shareholders’ equity to average assets		6.88	%		7.63	%
Dividend payout ratio1		15.48	%		21.05	%
Actual dividends paid to net income2		7.14	%		9.60	%

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 ended March 31, 2020; June 30, 2020; September 30, 2020; December 31, 2020; June 30, 2021; and September 30, 2021. Dividends declared during the three months ended December 31, 2019 and March 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 the Federal Reserve Board.

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Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020

Average Balance Sheet

The following table sets forth certain information relating to Greene County Bancorp, Inc. for the three months ended September 30, 2021 and 2020. 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.

	Three months ended September 30,
	2021								2020
(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	$	1,104,588		$	12,067		4.37	%	$	1,029,808		$	10,192		3.96	%
Securities2		947,086			3,492		1.47			642,528			3,122		1.94
Interest-bearing bank balances and federal funds		103,211			42		0.16			21,840			7		0.13
FHLB stock		1,091			12		4.40			1,306			17		5.21
Total interest-earning assets		2,155,976			15,613		2.90	%		1,695,482			13,338		3.15	%
Cash and due from banks		12,160								11,529
Allowance for loan losses		(19,725	)							(16,548	)
Other noninterest-earning assets		74,896								26,064
Total assets	$	2,223,307							$	1,716,527
Interest-Bearing Liabilities:
Savings and money market deposits	$	447,543		$	206		0.18	%	$	378,367		$	299		0.32	%
NOW deposits		1,355,499			565		0.17			984,823			982		0.40
Certificates of deposit		34,738			77		0.89			35,300			108		1.22
Borrowings		27,526			366		5.32			19,896			133		2.67
Total interest-bearing liabilities		1,865,306			1,214		0.26	%		1,418,386			1,522		0.43	%
Noninterest-bearing deposits		181,990								145,022
Other noninterest-bearing liabilities		23,027								22,128
Shareholders’ equity		152,984								130,991
Total liabilities and equity	$	2,223,307							$	1,716,527
Net interest income				$	14,399							$	11,816
Net interest rate spread							2.64	%							2.72	%
Net earnings assets	$	290,670							$	277,096
Net interest margin							2.67	%							2.79	%
Average interest-earning assets to average interest-bearing liabilities		115.58	%							119.54	%

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

² Includes tax-free securities, mortgage-backed securities, and asset-backed securities.

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Taxable-equivalent net interest income and net interest margin	For the three months ended September 30,
(Dollars in thousands)	2021			2020
Net interest income (GAAP)	$	14,399		$	11,816
Tax-equivalent adjustment(1)		766			812
Net interest income (fully taxable-equivalent)	$	15,165		$	12,628
Average interest-earning assets	$	2,155,976		$	1,695,482
Net interest margin (fully taxable-equivalent)		2.81	%		2.98	%

¹ Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. The rate used for this adjustment was 21% for federal income taxes taxes for the periods ended September 30, 2021 and 2020, 4.44% and 3.98% for New York State income taxes for the periods ended September 30, 2021 and 2020, respectively.

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 Greene 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 September 30, 2021 versus 2020
	Increase/(Decrease) Due To						Total Increase/
(Dollars in thousands)	Volume			Rate			(Decrease)
Interest-earning Assets:
Loans receivable, net1	$	773		$	1,102		$	1,875
Securities2		1,244			(874	)		370
Interest-bearing bank balances and federal funds		33			2			35
FHLB stock		(3	)		(2	)		(5	)
Total interest-earning assets		2,047			228			2,275
Interest-Bearing Liabilities:
Savings and money market deposits		51			(144	)		(93	)
NOW deposits		283			(700	)		(417	)
Certificates of deposit		(2	)		(29	)		(31	)
Borrowings		65			168			233
Total interest-bearing liabilities		397			(705	)		(308	)
Net change in net interest income	$	1,650		$	933		$	2,583

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 1.28% from 1.14% for the three months ended September 30, 2021 and 2020, respectively.  Annualized return on average equity increased to 18.60% for the three months ended September 30, 2021 as compared to 14.89% for the three months ended September 30, 2020.  The increase in return on average assets and average equity was primarily the result of net income growth outpacing balance sheet growth, offset by decreases in interest yields on interest earning assets.  Net income amounted to $7.1 million and $4.9 million for the three months ended September 30, 2021 and 2020, respectively.  Average assets increased $506.8 million, or 29.5%, to $2.2 billion for the three months ended September 30, 2021 as compared to $1.7 billion for the three months ended September 30, 2020.  Average equity increased $22.0 million, or 16.8%, to $153.0 million for the three months ended September 30, 2021 as compared to $131.0 million for the three months ended September 30, 2020.

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INTEREST INCOME

Interest income amounted to $15.6 million for the three months ended September 30, 2021 as compared to $13.3 million for the three months ended September 30, 2020, an increase of $2.3 million, or 17.1%. 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 $74.8 million and the yield on loans increased 41 basis points when comparing the three months ended September 30, 2021 and 2020, respectively.  Included in interest-earning assets at September 30, 2021 and 2020 were $37.4 million and $100.5 million of SBA Paycheck Protection Program (PPP) loans, respectively, at a rate of 1.00%.  The Bank received $1.5 million and $16,000 in SBA PPP fee income for the three months ended September 30, 2021 and 2020, respectively, which was realized through a deferred origination fee and recognized within interest income.  Average securities balances increased $304.6 million and the yield on securities decreased 47 basis points when comparing the three months ended September 30, 2021 and 2020, respectively

INTEREST EXPENSE

Interest expense amounted to $1.2 million for the three months ended September 30, 2021 as compared to $1.5 million for the three months ended September 30, 2020, a decrease of $308,000, or 20.2%.  As illustrated in the rate/volume table, interest expense decreased $308,000 when comparing the three months ended September 30, 2021 and 2020 due to the decrease in the rate paid on interest-bearing liabilities.  Decreases in the rate paid on interest-bearing liabilities was offset by an increase in interest expense of $397,000 when comparing these same periods due to the increased average balances.

The average cost of interest-bearing liabilities decreased 17 basis points to 0.26% for the 2021 quarter from 0.43% for the 2020 quarter.  The cost of NOW deposits decreased 23 basis points, the cost of savings and money market deposits decreased 14 basis points, and the cost of certificates of deposit decreased 33 basis points when comparing the three months ended September 30, 2021, and 2020, respectively.  The decrease in cost of interest-bearing liabilities was offset by growth in the average balance of interest-bearing liabilities of $446.9 million, most notably due to an increase in NOW deposits of $370.7 million, an increase in average savings and money market deposits of $69.2 million, and an increase in borrowings of $7.6 million when comparing the three months ended September 30, 2021 and 2020, respectively. The cost of borrowings increased 265 basis points when comparing the three months ended September 30, 2021 and 2020.  The increase in cost of borrowings was due to the Company entering into Subordinated Note Purchase Agreements in September 2021.  Yields on interest-earning assets and costs of interest-bearing deposits continue to remain low as a result of the low interest rate environment brought on by Federal Reserve Board interest rate decreases during fiscal 2020 and its stance to continue the low interest rate environment to support an economic recovery as the pandemic continues.

NET INTEREST INCOME

Net interest income increased $2.6 million to $14.4 million for the three months ended September 30, 2021 from $11.8 million for the three months ended September 30, 2020. The increase in net interest income was primarily the result of the growth in the average balance of interest-earning assets, which increased $460.5 million when comparing the three months ended September 30, 2021 and 2020, offset by a decrease in the average interest rate on interest-earning assets, which decreased 25 basis points when comparing the three months ended September 30, 2021 and 2020.

Net interest rate spread and margin both decreased when comparing the three months ended September 30, 2021 and 2020. Net interest rate spread decreased eight basis points to 2.64% for the three months ended September 30, 2021 compared to 2.72% for the three months ended September 30, 2020. Net interest margin decreased 12 basis points to 2.67% for the three months ended September 30, 2021 compared to 2.79% for the three months ended September 30, 2020. 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.

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 2.81% and 2.98% for the three months ended September 30, 2021 and 2020, 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.

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The Federal Reserve Bank has taken a number of measures in an attempt to mitigate the impact of the Coronavirus on the economy. The Federal Reserve Bank has maintained interest rates near 0.00%-0.25% which has had an impact to the Company for the three months ended September 30, 2021.  It is anticipated that the low interest rate environment will continue to have a negative impact on the Company’s interest spread and margin during the fiscal year ended June 30, 2022. 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 amounted to $988,000 and $1.2 million for the three months ended September 30, 2021 and 2020, respectively. The provision for loan losses for the three months ended September 30, 2021 and 2020 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 on December 27, 2020.   At September 30, 2021, the Company had $7.1 million, consisting of six loans, on payment deferral as a result of the pandemic, which is a decrease from $8.0 million, consisting of eight loans, at June 30, 2021.  Management continues to monitor these loans, and it remains uncertain whether all of these loans will continue to perform as agreed once they reach the end of the deferral period. Loans classified as substandard or special mention totaled $47.6 million at September 30, 2021, compared to $49.7 million at June 30, 2021, a decrease of $2.1 million, and compared to $38.9 million at September 30, 2020, an increase of $8.7 million.  Loans classified as substandard or special mention decreased slightly as compared to June 30, 2021 but remained elevated as compared to September 30, 2020, due to insufficient cash flows and revenues related to the COVID-19 pandemic.  Reserves on loans classified as substandard or special mention totaled $8.0 million at September 30, 2021 compared to $7.8 million at June 30, 2021, an increase of $200,000. No loans were classified as doubtful or loss at September 30, 2021 or June 30, 2021. Allowance for loan losses to total loans receivable was 1.83% at September 30, 2021 compared to 1.77% at June 30, 2021.  Total loans receivable included $37.4 million and $67.4 million of SBA Paycheck Protection Program (PPP) loans at September 30, 2021 and June 30, 2021, respectively.  Excluding these SBA guaranteed loans, the allowance for loan losses to total loans receivable would have been 1.90% and 1.89% at September 30, 2021 and June 30, 2021, respectively.

Net charge-offs amounted to $163,000 and $38,000 for the three months ended September 30, 2021 and 2020, respectively, an increase of $125,000. The primary net charge off activity was in the consumer loans and one commercial loan charge off that occurred during the quarter ended September 30, 2021.

Nonperforming loans amounted to $1.9 million and $2.3 million at September 30, 2021 and June 30, 2021, respectively. The decrease in nonperforming loans during the period was primarily due to $304,000 in loan repayments, and $97,000 in charge-offs. At September 30, 2021 nonperforming assets were 0.09% of total assets compared to 0.11% at June 30, 2021. Nonperforming loans were 0.17% and 0.21% of net loans at September 30, 2021 and June 30, 2021, respectively.  Nonperforming assets to total assets were 0.24% and nonperforming loans to net loans were 0.42% at September 30, 2020.  The Company has not been an originator of “no documentation” mortgage loans, and the loan portfolio does not include any mortgage loans that the Company classifies as sub-prime.

NONINTEREST INCOME

(Dollars in thousands)	For the three months ended September 30,				Change from Prior Year
Noninterest income:	2021		2020		Amount		Percent
Service charges on deposit accounts	$	1,069	$	806	$	263		32.6	%
Debit card fees		1,083		893		190		21.3
Investment services		213		161		52		32.3
E-commerce fees		33		29		4		13.8
Bank owned life insurance		301		-		301		100.0
Other operating income		230		189		41		21.7
Total noninterest income	$	2,929	$	2,078	$	851		41.0	%

Noninterest income increased $851,000, or 41.0%, and totaled $2.9 million and $2.1 million for the three months ended September 30, 2021 and 2020, respectively. 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, increases in service charges on deposit accounts and the income from bank owned life insurance, which was purchased in quarter ended March 31, 2021. During the quarter ended September 30, 2021, the Bank purchased $7.0 million in additional bank owned life insurance.

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NONINTEREST EXPENSE

(Dollars in thousands)	For the three months ended September 30,				Change from Prior Year
Noninterest expense:	2021		2020		Amount			Percent
Salaries and employee benefits	$	4,737	$	4,407	$	330			7.5	%
Occupancy expense		505		515		(10	)		(1.9	)
Equipment and furniture expense		156		151		5			3.3
Service and data processing fees		638		613		25			4.1
Computer software, supplies and support		378		306		72			23.5
Advertising and promotion		101		111		(10	)		(9.0	)
FDIC insurance premiums		220		174		46			26.4
Legal and professional fees		396		276		120			43.5
Other		830		580		250			43.1
Total noninterest expense	$	7,961	$	7,133	$	828			11.6	%

Noninterest expense increased $828,000, or 11.6%, to $8.0 million for the three months ended September 30, 2021 compared to $7.1 million for the three months ended September 30, 2020. The increase in noninterest expense during the three months ended September 30, 2021 was primarily due to an increase in salaries and employee benefits expense resulting from creating 13 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 other non-interest expense as the bank made a charitable donation to The Bank of Greene County Charitable Foundation during the three months ended September 30, 2021.

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 15.1% for the three months ended September 30, 2021 and 11.7% for the three months ended September 30, 2020, 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 the New York State tax rate and the increase in income before taxes for September 30, 2021 compared to September 30, 2020.

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 of Greene 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 the Federal Home Loan Bank and Atlantic Central Bankers Bank as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition. 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. At September 30, 2021, the Company had $113.3 million in cash and cash equivalents, representing 5.0% of total assets, and had $594.9 million available in unused lines of credit.

At September 30, 2021, liquidity measures were as follows:

Cash equivalents/(deposits plus short term borrowings)	5.51	%
(Cash equivalents plus unpledged securities)/(deposits plus short term borrowings)	12.99	%
(Cash equivalents plus unpledged securities plus additional borrowing capacity)/(deposits plus short term borrowings)	32.11	%

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The Bank of Greene County’s unfunded loan commitments and unused lines of credit are as follows at September 30, 2021:

(In thousands)	2021
Unfunded loan commitments	$	107,981
Unused lines of credit		89,239
Standby letters of credit		175
Total commitments	$	197,395

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 where the Company acts as the lead bank are referred to as “participations-out,” in reference to the credit risk associated with the customer derivatives being transferred out of the Company. Participations-out generally occur concurrently with the sale of new customer derivatives.  The Company had no participations-out at September 30, 2021 or  June 30, 2020.  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 $1.7 million and $2.1 million at September 30, 2021 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.

The Bank of Greene County and Greene County Commercial Bank met all applicable regulatory capital requirements at September 30, 2021 and June 30, 2021.

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions					Capital Conservation Buffer
The Bank of Greene County	Amount		Ratio			Amount		Ratio			Amount		Ratio			Actual			Required
As of September 30, 2021:
Total risk-based capital	$	195,011		16.9	%	$	92,488		8.0	%	$	115,610		10.0	%		8.87	%		2.50	%
Tier 1 risk-based capital		180,486		15.6			69,366		6.0			92,488		8.0			9.61			2.50
Common equity tier 1 capital		180,486		15.6			52,025		4.5			75,147		6.5			11.11			2.50
Tier 1 leverage ratio		180,486		8.1			88,743		4.0			110,929		5.0			4.14			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 September 30, 2021:
Total risk-based capital	$	70,097	37.1	%	$	15,121	8.0	%	$	18,901	10.0	%	29.09	%	2.50	%
Tier 1 risk-based capital		70,097	37.1			11,341	6.0			15,121	8.0		31.09		2.50
Common equity tier 1 capital		70,097	37.1			8,505	4.5			12,286	6.5		32.59		2.50
Tier 1 leverage ratio		70,097	7.5			37,145	4.0			46,431	5.0		3.55		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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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

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

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

Part II. Other Information

Item 1. Legal Proceedings

Greene County Bancorp, Inc. and its subsidiaries are not engaged in any material legal proceedings at the present time.

Item 1A. Risk Factors

Not applicable to smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a) Not applicable

b) Not applicable

c) On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program.  Under the repurchase program, the Company is authorized to repurchase up to 200,000 shares of its common stock. Repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. There were no additional share repurchases during the quarter ended September 30, 2021.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

a) Not applicable

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

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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 September 30, 2021, 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:  November 9, 2021

By: /s/ Donald E. Gibson

Donald E. Gibson

President and Chief Executive Officer

Date:  November 9, 2021

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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