GREENE COUNTY BANCORP INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion is an analysis of the Company's results of operations
for years shown and was derived from the audited consolidated financial
statements of Greene County Bancorp, Inc. This discussion and analysis should be
read in conjunction with the consolidated financial statements and related
notes.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

(a) changes in general market interest rates,

(b) general economic conditions,

(c) economic or political changes related to the COVID-19 pandemic,

(d) legislative and regulatory developments,

(e) the monetary and fiscal policies of the WE Treasury and the Federal Reserve,

(f) changes in the quality or composition of Greene County Bancorp, Inc. ready

and investment portfolios,

 (g) deposit flows,


 (h) competition, and

(i) the demand for financial services in Greene County Bancorp, Inc. 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.


                                       23

————————————————– ——————————

  Index

Selected Financial Data

                                                                               At or for the year ended June 30,
(Dollars in thousands, except per share amounts)                                 2022            2021            2020
SELECTED FINANCIAL CONDITION DATA:
Total assets                                                              $ 2,571,740     $ 2,200,335     $ 1,676,803
Loans receivable, net                                                       1,229,355       1,085,947         993,522
Securities available-for-sale                                                 408,062         390,890         226,709
Securities held-to-maturity                                                   761,852         496,914         383,657
Equity securities                                                                 273             307             267
Deposits                                                                    2,212,604       2,005,108       1,501,075
Borrowings                                                                    123,700           3,000          25,484
Shareholders' equity                                                          157,714         149,584         128,805
AVERAGE BALANCES:
Total assets                                                                2,366,070       1,931,589       1,470,870
Interest-earning assets                                                     2,291,448       1,892,650       1,450,398
Loans receivable, net                                                       1,123,201       1,042,280         861,322
Securities                                                                  1,066,189         751,690         528,131
Deposits                                                                    2,134,584       1,750,733       1,318,027
Borrowings                                                                     51,193          22,386          15,300
Shareholders' equity                                                          156,098         137,511         120,387
SELECTED OPERATIONS DATA:
Total interest income                                                          63,444          58,328          53,314
Total interest expense                                                          5,439           5,183           8,481
Net interest income                                                            58,005          53,145          44,833
Provision for loan losses                                                       3,278           3,974           3,905
Net interest income after provision for loan losses                            54,727          49,171          40,928
Total noninterest income                                                       12,137           9,667           8,650
Total noninterest expense                                                      33,959          31,223          27,822
Income before provision for income taxes                                       32,905          27,615          21,756
Provision for income taxes                                                      4,919           3,673           3,029
Net income                                                                     27,986          23,942          18,727
FINANCIAL RATIOS:
Return on average assets1                                                        1.18 %          1.24 %          1.27 %
Return on average shareholders' equity2                                         17.93           17.41           15.56
Noninterest expenses to average total assets                                     1.44            1.62            1.89

Average Interest-Bearing Assets to Average Interest-Bearing Liabilities

   114.57          117.01          118.84
Net interest rate spread3                                                        2.50            2.76            2.98
Net interest margin4                                                             2.53            2.81            3.09
Efficiency ratio5                                                               48.41           49.71           52.02
Shareholders' equity to total assets, at end of period                           6.13            6.80            7.68
Average shareholders' equity to average assets                                   6.60            7.12            8.18
Dividend payout ratio6                                                          15.81           17.08           20.00
Actual dividends declared to net income7                                         9.41           10.15           11.95
Nonperforming assets to total assets, at end of period                           0.25            0.11            0.24
Nonperforming loans to net loans, at end of period                               0.51            0.21            0.41
Allowance for loan losses to nonperforming loans                               360.31          854.76          402.04
Allowance for loan losses to total loans receivable                              1.82            1.77            1.62
Book value per share8                                                     $     18.53     $     17.57     $     15.13
Basic earnings per share                                                         3.29            2.81            2.20
Diluted earnings per share                                                       3.29            2.81            2.20
OTHER DATA:
Closing market price of common stock                                      $     45.29     $     28.12     $     22.30
Number of full-service offices                                                     17              17              16
Number of full-time equivalent employees                                          198             186             182



————————————————– ——————————

1 Ratio of net income to total average assets.

2 Ratio between net income and average shareholders’ equity.

3 The difference between the weighted average return on interest-earning assets

and the weighted average cost of interest-bearing liabilities.

4 Net interest income as a percentage of average interest-earning assets.

5 Non-interest expenses divided by the sum of net interest income and

Income.

6 Dividends per share divided by basic earnings per share. This calculation makes

disregard the waiver of dividends by Bancorp of Greene County, MHC.

7 Dividends declared divided by net income.

8 Equity divided by outstanding shares.

                                       24

————————————————– ——————————

Index

GENERAL

Greene County Bancorp, Inc. (the "Company") is the holding company for The Bank
of Greene County (the "Bank"), a community-based bank offering a variety of
financial services to meet the needs of the communities it serves.  Greene
County Bancorp, Inc.'s stock is traded on the NASDAQ Capital Market under the
symbol "GCBC."  Greene County Bancorp, MHC is a mutual holding company that owns
54.1% of the Company's outstanding common stock.  The Bank of Greene County is a
federally chartered savings bank.  The Bank of Greene County's principal
business is attracting deposits from customers within its market area and
investing those funds primarily in loans, with excess funds used to invest in
securities.  At June 30, 2022, The Bank of Greene County operated 17
full-service branches, an administration office, a customer call center, a
lending center, and an operations center in New York's Hudson Valley Region.  In
June 2004, Greene County Commercial Bank ("Commercial Bank") was opened for the
limited purpose of providing financial services to local municipalities.  The
Commercial Bank is a subsidiary of The Bank of Greene County, and is a New York
State-chartered commercial bank.  In June 2011, Greene Property Holdings, Ltd.
was formed as a New York corporation that has elected under the Internal Revenue
Code to be a real estate investment trust.  Greene Properties Holding, Ltd. is a
subsidiary of The Bank of Greene County.  Certain mortgages and notes held by
The Bank of Greene County were transferred to and are beneficially owned by
Greene Property Holdings, Ltd.  The Bank of Greene County continues to service
these loans.  In December 2014, Greene Risk Management, Inc. was formed as a
Nevada corporation that is operating as a pooled captive insurance company. 

The

The purpose of this company is to provide additional insurance coverage for the Company and its subsidiaries related to Company activities for which insurance may not be economically feasible.

Overview of the Company’s Activities and Risks

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

Critical Accounting Policies

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

Credit risk management

Management considers credit risk to be an important risk factor affecting the
financial condition and operating results of the Company. The potential for loss
associated with this risk factor is managed through a combination of policies
approved by the Company's Board of Directors, the monitoring of compliance with
these policies, and the periodic reporting and evaluation of loans with problem
characteristics. Policies relate to the maximum amount that can be granted to a
single borrower and such borrower's related interests, the aggregate amount of
loans outstanding by type in relation to total assets and capital, loan
concentrations, loan-to-collateral value ratios, approval limits and other
underwriting criteria. Policies also exist with respect to the rating of loans,
determination of when loans should be placed on a nonperforming status and the
factors to be considered in establishing the Company's allowance for loan
losses.  Management also considers credit risk when evaluating potential and
current holdings of securities.  Credit risk is a critical component in
evaluating corporate debt securities.  The Company has purchased municipal
securities as part of its strategy based on the fact that such securities can
offer a higher tax-equivalent yield than other similar investments.

                                       25

————————————————– ——————————

Index

During the COVID-19 pandemic, management has been working with borrowers to
determine best strategies to help mitigate the impact of the temporary business
closures, decline in business, and loss of employment, including payment
deferrals, debt consolidations and/or loan restructurings. The Company
instituted a loan deferment program of principal and/or interest payments.
During the quarter ended March 31, 2022, in accordance with the CARES Act and
Consolidated Appropriations Act of 2021, the loan deferral program ended,
therefore there were no loans that have payments deferred as of June 30, 2022.
As of June 30, 2021 there were 8 loans aggregating $8.0 million.  As allowed
under the CARES Act, and as amended by Section 541 of the Consolidated
Appropriations Act of 2021, the Company did not report these loans as delinquent
and Trouble Debt Restructuring disclosures, and continued to recognize interest
income during the deferral period.  These loans were closely monitored to
determine collectability, accrual and delinquency status.  The Company continues
to monitor credit risk form negative impacts related to the COVID-19 pandemic.
For further discussion regarding loan deferrals see Part II, Item 8 Financial
Statements and Supplemental Data, Note 4, Loans of this Report.

FINANCIAL OVERVIEW

Net income for the year ended June 30, 2022 amounted to $28.0 million, or $3.29
per basic and diluted share, as compared to $23.9 million, or $2.81 per basic
and diluted share, for the year ended June 30, 2021, an increase of $4.1
million, or 16.9%.  The increase in net income was primarily the result of
increases of $4.9 million in net interest income, $2.5 million in noninterest
income and a decrease of $696,000 in provision for loan losses partially offset
by an increase of $2.7 million in noninterest expense and $1.2 million in
provision for income taxes. The increase in net interest income resulted from
growth in interest-earning assets offset by the decrease in rates when comparing
the years ended June 30, 2022 and 2021.  Growth in interest-earning assets was
within both investment securities and loans. Growth in loans was primarily in
commercial real estate mortgages and residential mortgages.

Net interest rate spread and margin both decreased when comparing the years
ended June 30, 2022 and 2021. Net interest rate spread decreased 26 basis points
to 2.50% for the year ended June 30, 2022 compared to 2.76% for the year ended
June 30, 2021. Net interest margin decreased 28 basis points to 2.53% for the
year ended June 30, 2022 compared to 2.81% for the year ended June 30, 2021.
Decreases in net interest rate spread and net interest margin resulted primarily
from lower yielding securities and loans offset by lower rates on deposits as
well as growth in loan and securities balances.

Total assets grew $371.4 million, or 16.9%, to $2.6 billion at June 30, 2022 as
compared to $2.2 billion at June 30, 2021.  Net loans increased $143.4 million,
or 13.2%, to $1.2 billion at June 30, 2022 as compared to $1.1 billion at June
30, 2021.  Included in net loans at June 30, 2022, are $610,000 of SBA Paycheck
Protection Program loans. Securities classified as available-for-sale and
held-to-maturity increased $282.1 million, or 31.8%, to $1.2 billion at June 30,
2022 as compared to $887.8 million at June 30, 2021.  Deposits grew $207.5
million, or 10.4%, to $2.2 billion at June 30, 2022 as compared to $2.0 billion
at June 30, 2021.  Total shareholders' equity amounted to $157.7 million and
$149.6 million at June 30, 2022 and 2021, respectively, or 6.1% and 6.8% of
total assets, respectively.

Comparison of the financial situation at June 30, 2022 and 2021

SECURITIES

Securities available-for-sale and held-to-maturity increased $282.1 million, or
31.8%, to $1.2 billion at June 30, 2022 as compared to $887.8 million at June
30, 2021. This increase was the result of utilizing excess cash on hand due to
an increase in deposits. Securities purchases totaled $669.2 million during the
year ended June 30, 2022 and consisted of $492.1 million of state and political
subdivision securities, $106.1 million of mortgage-backed securities, $24.9
million of corporate securities, $23.2 million of US Treasury securities and
$22.9 million of collateralized mortgage obligations. Principal pay-downs and
maturities during the year amounted to $359.7 million, primarily consisting of
$60.2 million of mortgage-backed securities, $297.2 million of state and
political subdivision securities, $2.3 million of collateralized mortgage
obligations.

The Company holds 63.4% of its securities portfolio at June 30, 2022 in state
and political subdivision securities to take advantage of tax savings and to
promote the Company's participation in the communities in which it operates.
Mortgage-backed securities and asset-backed securities held within the portfolio
do not contain sub-prime loans and are not exposed to the credit risk associated
with such lending.

Investment timeline

The following table set forth information with regard to contractual maturities
of debt securities shown in amortized cost ($) and weighted average yield (%) at
June 30, 2022. Weighted-average yields are an arithmetic computation of income
not fully tax equivalent ("FTE") adjusted divided by amortized cost.
Mortgage-backed securities balances are presented based on final maturity date
and do not reflect the expected cash flows from monthly principal repayments.
Expected maturities may differ from contractual maturities, because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties. No tax-equivalent adjustments were made in calculating the weighted
average yield.

                                       26

————————————————– ——————————

  Index

(Dollars in
thousands)                1 Year or Less               1-5 Years                5-10 Years              After 10 Years                 Total
Securities
available-for-sale:
U.S. government
sponsored
enterprises            $       -           -     $       -           -     $  13,066        1.31 %   $       -           -     $  13,066        1.31 %
U.S. treasury
securities                     -           -         7,767        0.97 %      12,391        1.39 %           -           -        20,158        1.23 %
State and political
subdivisions             247,894        1.19 %          84        1.89 %           -           -             -           -       247,978        1.19 %
MBS-residential                -           -           174        3.33 %       3,131        0.66 %      29,881        1.17 %      33,186        1.13 %
MBS -multi-family          1,818        2.22 %       8,202        1.53 %      26,904        1.13 %      62,429        1.20 %      99,353        1.22 %
Corporate debt
securities                     -           -        11,829        2.72 %       4,555        2.76 %       1,500        3.03 %      17,884        2.76 %
Total securities
available-for-sale     $ 249,712        1.20 %   $  28,056        1.89 %   $  60,047        1.32 %   $  93,810        1.22 %   $ 431,625        1.26 %

Securities
held-to-maturity:
U.S. treasury
securities             $       -           -     $  21,878        2.04 %   $  11,745        1.51 %   $       -           -     $  33,623        1.85 %
State and political
subdivisions              67,633        1.31 %     145,056        1.90 %    

105,515 2.16% 175,693 1.95% 493,897 1.89% MBS-residential

                1        4.50 %         684        3.32 %    

322 3.50% 41,454 2.31% 42,461 2.34% MBS-multifamily

           7,577        2.51 %      42,999        3.01 %     100,616        1.49 %      20,729        0.88 %     171,921        1.84 %
Corporate debt
securities                     -           -             -           -        19,400        4.08 %         500        1.64 %      19,900        4.02 %
Other securities              10        3.22 %           -           -     

1 7.00% 39 4.93% 50 4.62% Total securities held to maturity $75,221 1.43% $210,617 2.15% $237,599 2.00% $238,415 1.92% $761,852 1.96%



LOANS

Net loans receivable increased $143.4 million, or 13.2%, to $1.2 billion at June
30, 2022 from $1.1 billion at June 30, 2021.  The loan growth experienced during
the year consisted primarily of $122.7 million in commercial real estate loans,
$35.7 million in residential real estate loans, $21.9 million in multi-family
loans, $5.1 million in residential construction and land loans, $21.0 million in
commercial construction loans and a $2.9 million net decrease in deferred fees
due to the forgiveness of SBA PPP loans. This growth was partially offset by a
$62.0 million decrease in commercial loans, $400,000 decrease in home equity
loans and consumer installment loans, and $3.1 million increase in allowance for
loan losses.  SBA PPP loans decreased $66.8 million to $610,000 at June 30, 2022
from $67.4 million at June 30, 2021, due to the receipt of forgiveness
proceeds.  The Company continues to experience loan growth as a result of
continued growth in its customer base and its relationships with other financial
institutions in originating loan participations.  The Company continues to use a
conservative underwriting policy in regard to all loan originations, and does
not engage in sub-prime lending or other exotic loan products.  Updated
appraisals are obtained on loans when there is a reason to believe that there
has been a change in the borrower's ability to repay the loan principal and
interest, generally, when a loan is in a delinquent status.  Additionally, if an
existing loan is to be modified or refinanced, generally, an appraisal is
ordered to ensure continued collateral adequacy.

Composition of loan portfolio

Set forth below is selected information concerning the composition of the
Company's loan portfolio in dollar amounts and in percentages (before deductions
for deferred fees and costs, unearned discounts and allowances for losses) as of
the dates indicated.

                                                                                        At June 30,
                                    2022                         2021                         2020                        2019                       2018
(Dollars in thousands)      Amount        Percent        Amount        Percent        Amount        Percent       Amount       Percent       Amount       Percent
Residential real estate   $   360,824        28.82 %   $   325,167        29.34 %   $   279,332        27.58 %   $ 267,802        33.55 %   $ 255,848        35.75 %
Residential
construction and land          15,298         1.22          10,185         0.92          11,847         1.17         7,462         0.93         9,951         1.39
Multi-family                   63,822         5.10          41,951         3.78          25,104         2.48        24,592         3.08        14,961         2.09
Commercial real estate        595,635        47.57         472,887        42.66         381,415        37.67       329,668        41.31       283,935        39.68
Commercial construction        83,748         6.69          62,763         5.66          74,920         7.40        36,361         4.56        39,366         5.50
Home equity                    17,877         1.43          18,285         1.65          22,106         2.18        23,185         2.91        21,919         3.06
Consumer installment(1)         4,512         0.36           4,942         0.45           4,817         0.48         5,481         0.69         5,017         0.70
Commercial loans              110,271         8.81         172,228        15.54         213,119        21.04       103,554        12.97        84,644        11.83
Total gross loans         $ 1,251,987       100.00 %   $ 1,108,408       100.00 %   $ 1,012,660       100.00 %   $ 798,105       100.00 %   $ 715,641       100.00 %


(1) Includes direct automobile loans (on new and used automobiles) and

    personal loans.



                                       27

————————————————– ——————————

Index

Loan Maturity and Interest Rate Sensitivity

The following table sets forth certain information as of June 30, 2022 regarding
the amount of loans maturing or re-pricing in the Company's portfolio.
Adjustable-rate loans are included in the period in which interest rates are
next scheduled to adjust rather than the period in which they contractually
mature and fixed-rate loans are included in the period in which the final
contractual repayment is due.  Lines of credit with no specified maturity date
are included in the category "Within 1 Year." Home equity loans are included
within consumer loan portfolio below.

                                    1 Year or                                       After 15
(In thousands)                         Less        1-5 Years       5-15 Years        Years           Total
Fixed rate:
Residential real estate             $      729     $   10,345     $    168,637     $   77,243     $   256,954
Residential construction and land        6,820            136              265              -           7,221
Multi-family                                 -            748            4,514              -           5,262
Commercial real estate                  23,836         28,387          137,553          3,493         193,269
Commercial construction                  8,559            771                -              -           9,330
Consumer loans                             759          4,130            3,342              -           8,231
Commercial loans                         6,603         23,583           34,559            675          65,420
Total fixed rate loans              $   47,306     $   68,100     $    348,870     $   81,411     $   545,687
Variable rate:
Residential real estate             $   16,037     $   52,072     $     35,761     $        -     $   103,870
Residential construction and land        8,077              -                -              -           8,077
Multi-family                             2,207         31,758           24,595              -          58,560
Commercial real estate                 151,565        167,027           79,352          4,422         402,366
Commercial construction                 62,865         11,553                -              -          74,418
Consumer loans                          14,158              -                -              -          14,158
Commercial loans                        33,246          3,629            7,976              -          44,851
Total variable rate loans           $  288,155     $  266,039     $    147,684     $    4,422     $   706,300
Total loan portfolio                $  335,461     $  334,139     $    496,554     $   85,833     $ 1,251,987



Potential Problem Loans

Management closely monitors the quality of the loan portfolio and has
established a loan review process designed to help grade the quality and
profitability of the Company's loan portfolio.  The credit quality grade helps
management make a consistent assessment of each loan relationship's credit
risk.  Consistent with regulatory guidelines, the Company provides for the
classification of loans and other assets considered being of lesser quality.
Such ratings coincide with the "Substandard", "Doubtful" and "Loss"
classifications used by federal regulators in their examination of financial
institutions.  Assets that do not currently expose the insured financial
institutions to sufficient risk to warrant classification in one of the
aforementioned categories but otherwise possess weaknesses are designated
"Special Mention."  For further discussion regarding how management determines
when a loan should be classified, see Part II, Item 8 Financial Statements and
Supplemental Data, Note 4, Loans of this Report.

Management has been working with borrowers since the COVID-19 pandemic started
to determine best strategies to help mitigate the impact of the temporary
business closures, decline in business, and loss of employment, including
payment deferrals, debt consolidations and/or loan restructurings. The Company
has accounted for the loan deferment program in accordance with the CARES Act
and Section 541 of the Consolidated Appropriations Act of 2021.  The program was
ended during the quarter ended March 31, 2022 and therefore as of June 30, 2022,
there were zero loans on payment deferral compared to eight loans aggregating
$8.0 million as of June 30, 2021. For further discussion regarding loan
deferrals, see Part II, Item 8 Financial Statements and Supplemental Data, Note
4, Loans of this Report.

Non-accumulated loans and non-performing assets

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

                                       28

————————————————– ——————————

Index

Generally, management places loans on nonaccrual status once the loans have
become 90 days or more delinquent or sooner if there is a significant reason for
management to believe the collectability is questionable and, therefore,
interest on the loan will no longer be recognized on an accrual basis.  The
Company identifies impaired loans and measures the impairment in accordance with
FASB ASC subtopic "Receivables - Loan Impairment."  Management may consider a
loan impaired once it is classified as nonaccrual and when it is probable that
the borrower will be unable to repay the loan according to the original
contractual terms of the loan agreement or the loan is restructured in a
troubled debt restructuring. A loan does not have to be 90 days delinquent in
order to be classified as nonperforming.  Foreclosed real estate is considered
to be a nonperforming asset.  For further discussion and detail regarding
impaired loans please refer to Part II, Item 8 Financial Statements and
Supplemental Data, Note 4 Loans of this Report.

Analysis of non-current loans, non-performing assets and restructured loans

The table below details additional information related to nonaccrual loans for
the periods indicated:

                                                             At June 30,
(Dollars in thousands)              2022          2021          2020          2019          2018
Nonaccrual loans:
Residential real estate           $   2,948     $   1,324     $   2,513     $   2,474     $   1,778
Residential construction and
land                                      1             -             -             -             -
Multi-family                              -             -           151             -             -
Commercial real estate                1,269           444           781           598         1,147
Commercial construction                   -             -             -             -             -
Home equity                             188           237           319           452           298
Consumer installment                      7             -             -             6            18
Commercial                            1,904           296           313           108           276
Total nonaccrual loans                6,317         2,301         4,077         3,638         3,517

Accruing loans delinquent 90
days or more:
Residential real estate                   -             -             -             -            62
Total accruing loans delinquent
90 days or more                           -             -             -             -            62
Foreclosed real estate:
Residential real estate                  68            64             -            53           119
Total foreclosed real estate             68            64             -            53           119

Total nonperforming assets        $   6,385     $   2,365     $   4,077     $   3,691     $   3,698

Troubled debt restructuring:
Nonperforming (included above)    $   2,707     $     354     $     304     $     531     $     774
Performing (accruing and
excluded above)                       2,336         5,050           909         1,368         1,557

Unaccrued loans to total loans 0.50% 0.21% 0.40%

      0.46 %        0.49 %
Nonperforming loans to total
loans                                  0.50 %        0.21 %        0.40 %        0.46 %        0.50 %
Nonperforming assets to total
assets                                 0.25 %        0.11 %        0.24 %        0.29 %        0.32 %
Allowance for loan losses to
nonperforming loans                  360.31 %      854.76 %      402.04 %      362.84 %      335.96 %
Allowance for loan losses to
nonaccrual loans                     360.31 %      854.76 %      402.04 %      362.84 %      341.88 %



Nonperforming assets amounted to $6.4 million at June 30, 2022 and $2.4 million
at June 30, 2021, respectively.  Total impaired loans amounted to $10.8 million
at June 30, 2022 compared to $6.3 million at June 30, 2021, an increase of $4.5
million, or 71.1%.  The increase in impaired loans was the result of an increase
in residential real estate loans, commercial real estate and commercial loans
becoming delinquent and going on nonaccrual as well as commercial real estate
loans becoming impaired based on management's annual loan review process.
Impaired loans include loans that have been modified in a troubled debt
restructuring and are performing under the modified terms and have therefore
been returned to performing status.

                                       29

————————————————– ——————————

Index

Residential real estate impaired loans amounted to $2.9 million as of June 20,
2022, as compared to $1.1 million as of June 30, 2021, an increase of $1.8
million.  The increase in residential real estate impaired loans was the result
of nine relationships continuing to deteriorate and moving into nonaccrual
status, and therefore classified as impaired. The average recorded investment of
these new impaired loans was $193,000 as of June 30, 2022.  Commercial real
estate impaired loans amounted to $3.8 million as of June 30, 2022, as compared
to $1.2 million as of June 30, 2021, an increase of $2.6 million.  The increase
in commercial real estate impaired loans was the result of two relationships
continuing to deteriorate and therefore classified as impaired. The average
recorded investment of these new impaired loans was $1.4 million as of June 30,
2022.

Loans on nonaccrual status totaled $6.3 million at June 30, 2022 of which
$528,000 were in the process of foreclosure.  At June 30, 2022, there were three
residential real estate loans totaling $426,000 and one commercial real estate
loan totaling $102,000 in the process of foreclosure. Included in nonaccrual
loans were $4.4 million of loans which were less than 90 days past due at June
30, 2022, but have a recent history of delinquency greater than 90 days past
due. These loans will be returned to accrual status once they have demonstrated
a history of timely payments.  Loans on nonaccrual status totaled $2.3 million
at June 30, 2021 of which $260,000 were in the process of foreclosure.  At June
30, 2021, there were two residential real estate loans totaling $158,000 and one
commercial real estate loan totaling $102,000 in the process of foreclosure.
Included in nonaccrual loans were $1.2 million of loans which were less than 90
days past due at June 30, 2021, but have a recent history of delinquency greater
than 90 days past due. These loans will be returned to accrual status once they
have demonstrated a history of timely payments.

For further details on impaired loans, see the table in Part II, Item 8 Financial Statements and Supplementary Data, Note 4, Loans of this report.

PROVISION FOR LOAN LOSSES

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

Loans classified as substandard or special mention totaled $52.1 million at June
30, 2022 compared to $49.7 million at June 30, 2021, an increase of $2.4
million. During the year ended June 30, 2022 the Company further downgraded
commercial real estate and residential real estate loans from pass and special
mention to substandard due to deterioration in borrower cash flows, delinquent
payments and further financial deterioration or not improving financial
performance. This was offset by upgrading commercial construction loans from
special mention and substandard to pass and upgrading commercial loans from
substandard to pass, because of improvements in borrower cash flows and
financial performance. Management continues to monitor classified loan
relationships closely.  Reserves on these loans totaled $9.6 million at June 30,
2022 compared to $7.8 million at June 30, 2021, an increase of $1.8 million.  No
loans were classified as doubtful or loss at June 30, 2022 or 2021. Allowance
for loan losses to total loans receivable was 1.82% at June 30, 2022, and 1.77%
at June 30, 2021.  As of June 30, 2022 and 2021, there were $610,000 and $67.4
million, respectively, in SBA PPP loans which are 100% guaranteed by the SBA
with no allowance allocated to these loans.  Excluding the SBA guaranteed loans,
the allowance for loan losses to total loans receivable would have been 1.82%
and 1.89% at June 30, 2022 and 2021, respectively. The increase in the allowance
for loan losses to total loans receivable is due to the increase in classified
loan reserves, offset by a decrease in qualitative factors, given the overall
economic improvements over the past year and improvements in delinquent loans.

                                       30

————————————————– ——————————

Index

Net charge-offs totaled $185,000 and $697,000 for the years ended June 30, 2022
and 2021, respectively.  The decrease in charge-off activity for the year was
primarily within the commercial loan portfolio, as the Company received a
partial recovery on a larger charge off that occurred in the second quarter of
the fiscal year end June 30, 2021 and had lower charge off activity for the
current fiscal year.  This was offset by an increase in charge off activity in
the consumer loan portfolio.

Nonperforming loans amounted to $6.3 million and $2.3 million at June 30, 2022
and 2021, respectively. At June 30, 2022 and June 30, 2021, respectively,
nonperforming assets were 0.25% and 0.11% of total assets, and nonperforming
loans were 0.50% and 0.21% of net loans, with deterioration split primarily in
residential real estate loans and commercial loans, year over year.  We have not
originated "no documentation" mortgage loans and our loan portfolio does not
include any mortgage loans that we classify as sub-prime.

Analysis of Loan Loss Provision Activity

                                                  At or for the Years Ended June 30,
(Dollars in thousands)              2022           2021          2020          2019           2018
Balance at the beginning of the
period                            $  19,668      $  16,391     $  13,200     $  12,024      $  11,022
Charge-offs:
Residential real estate                  27             26           102           287            141
Commercial real estate                    -              -             -            74              -
Consumer installment                    454            309           459           374            318
Commercial loans                        112            500           335            51            159
Total loans charged off                 593            835           896           786            618

Recoveries:
Residential real estate                  13             13            16            13              -
Consumer installment                    115            124           130           137             85
Commercial loans                        280              1            36           153              5
Total recoveries                        408            138           182           303             90

Net charge-offs                         185            697           714           483            528

Provisions charged to
operations                            3,278          3,974         3,905         1,659          1,530
Balance at the end of the
period                            $  22,761      $  19,668     $  16,391     $  13,200      $  12,024

Allowance for loan losses to
total loans receivable                 1.82 %         1.77 %        1.62 %        1.65 %         1.68 %

Residential real estate net
charge-offs to average loans
outstanding                            0.00 %         0.00 %        0.01 %        0.04 %         0.02 %
Commercial real estate net
charge-offs to average loans
outstanding                               -              -             -          0.01 %            -
Consumer installment net
charge-offs to average loans
outstanding                            0.03 %         0.02 %        0.04 %        0.03 %         0.04 %
Commercial loans net
charge-offs to average loans
outstanding                           (0.01 %)        0.05 %        0.03 %       (0.01 %)        0.02 %
Net charge-offs to average
loans outstanding                      0.02 %         0.07 %        0.08 %        0.06 %         0.08 %
Net charge-offs to average
assets                                 0.01 %         0.04 %        0.05 %        0.04 %         0.05 %



                                       31

————————————————– ——————————

Index

Allocation of allowance for loan losses

The following table sets forth the allocation of the allowance for loan losses
by loan category at the dates indicated.  The allowance is allocated to each
loan category based on historical loss experience and economic conditions.

                                                                                                At June 30,
                                      2022                           2021                           2020                           2019                           2018
                                            Percent                        Percent                        Percent                        Percent                        Percent
                                            of loans                       of loans                       of loans                       of loans                       of loans
                                            in each                        in each                        in each                        in each                        in each
                            Amount of       category       Amount of       category       Amount of       category       Amount of       category       Amount of       category
                            loan loss       to total       loan loss       to total       loan loss       to total       loan loss       to total       loan loss       to total
(Dollars in thousands)      allowance        loans         allowance        loans         allowance        loans         allowance        loans         allowance        loans
Residential real estate    $     2,373           28.8 %   $     2,012           29.3 %   $     2,091           27.6 %   $     2,026           33.6 %   $     2,116           35.8 %
Residential construction
and land                           141            1.2             106            0.9             141            1.2              87            0.9             114            1.4
Multi-family                       119            5.1             186            3.8             176            2.5             180            3.1             162            2.1
Commercial real estate          16,221           47.6          13,049           42.7           8,634           37.6           7,110           41.3           5,979           39.6
Commercial construction          1,114            6.7           1,535            5.7           2,053            7.4             872            4.5             950            5.5
Home equity                         89            1.4             165            1.6             295            2.2             314            2.9             317            3.1
Consumer installment               349            0.4             267            0.5             197            0.5             250            0.7             224            0.7
Commercial loans                 2,355            8.8           2,348           15.5           2,804           21.0           2,361           13.0           2,128           11.8
Unallocated                          -              -               -              -               -              -               -              -              34              -
Totals                     $    22,761          100.0 %   $    19,668          100.0 %   $    16,391          100.0 %   $    13,200          100.0 %   $    12,024          100.0 %


For more information and details regarding the allowance for loan losses, please refer to Part II, heading 8 Financial statements and supplementary data, note 4 Loans of this report.

PREMISES AND EQUIPMENT

Premises and equipment amounted to $14.4 million and $14.1 million at June 30,
2022 and 2021, respectively.  Purchases totaled $1.1 million during the year
ended June 30, 2022, consisting primarily of building improvements, IT equipment
and new ATMs.  Purchases totaled $1.3 million during the year ended June 30,
2021, consisting primarily of building improvements and equipment for a new
branch located in Albany, New York, equipment for disaster recovery and new
ATMs. Depreciation for the year ended June 30, 2022 totaled $826,000, compared
to $775,000 for the year ended June 30, 2021.  There were no disposals of
premises and equipment during the fiscal years ended June 30, 2022 and 2021.

PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets totaled $15.2 million at June 30, 2022,
compared to $8.5 million at June 30, 2021, an increase of $6.7 million.  The
increase was due to an increase of $7.0 million in deferred taxes due to the
increase in unrealized losses on available for sale securities, offset by a
decrease of $176,000 in prepaid expense.

Real estate acquired as a result of foreclosure, or in-substance foreclosure, is
classified as foreclosed real estate ("FRE") until such time as it is sold.
When real estate is classified as FRE, it is recorded at its fair value, less
estimated costs of disposal establishing a new cost basis. Upon transfer to FRE,
if the value of the property is less than the loan, less any related specific
loan loss provisions, the difference is charged against the allowance for loan
losses.  Any subsequent write-down of FRE is charged against earnings.  There
were $68,000 in FRE assets at June 30, 2022.  At June 30, 2021, there were
$64,000 in FRE assets.

DEPOSITS

Deposits totaled $2.2 billion at June 30, 2022 and $2.0 billion at June 30,
2021, an increase of $207.5 million, or 10.4%. Noninterest-bearing deposits
increased $13.6 million, or 7.8%, NOW deposits increased $133.4 million, or
9.9%, money market deposits increased $11.8 million, or 8.1%, savings deposits
increased $42.7 million, or 14.2% and certificates of deposits increased $6.0
million, or 17.3% when comparing June 30, 2022 and June 30, 2021.  Included
within certificates of deposits at June 30, 2022 were $7.2 million in brokered
certificates of deposit. Deposits increased during the year ended June 30, 2022
as a result of an increase in new account relationships and stimulus funds
deposited across all three of our primary business lines, retail, commercial and
municipal.

                                       32

————————————————– ——————————

  Index

                                                               At June 30,
                                    2022                           2021                           2020
(Dollars in thousands)        Amount        Percent          Amount        Percent          Amount        Percent
Transaction and
savings deposits:
Noninterest-bearing
deposits                 $   187,697            8.5 %   $   174,114            8.7 %   $   138,187            9.2 %
Certificates of
deposit                       40,801            1.8          34,791            1.7          35,625            2.4
Savings deposits             343,731           15.5         301,050           15.0         241,371           16.1
Money market deposits        157,623            7.1         145,832            7.3         133,970            8.9
NOW deposits               1,482,752           67.0       1,349,321           67.3         951,922           63.4
Total deposits           $ 2,212,604          100.0 %   $ 2,005,108          100.0 %   $ 1,501,075          100.0 %


The following table summarizes total uninsured deposits based on the same methodologies and assumptions used for banking regulatory reporting:

                                                      At June 30,
(Dollars in thousands)                     2022          2021          2020

Estimated amount of uninsured deposits $328,352 $278,632 $172,852

The following table presents the distribution by maturity of the certificates of deposit of $250,000 or more:

(Dollars in thousands)                                                    At June 30, 2022
Portion of certificates of deposits in excess of insurance limits        $  

3,385

Otherwise uninsured certificates of deposit with a maturity of: Within three months

                                                      $  

1,401

After three but within six months                                                       300
After six but within twelve months                                                      301
Over twelve months                                                                    1,383



The amount of certificates of deposit by time remaining to maturity as of June
30, 2022 is set forth in Part II, Item 8 Financial Statements and Supplemental
Data, Note 6, Deposits of this Report.

LOANS

At June 30, 2022, borrowings for the Company amounted to $173.0 million,
compared to $22.6 million at June 30, 2021, an increase of $150.4 million.  At
June 30, 2022, borrowings consisted of $49.3 million of Fixed-to-Floating Rate
Subordinated Notes and $123.7 million of overnight borrowings with Federal Home
Loan Bank of New York ("FHLB"). During the year ended June 30, 2022, the Company
repaid $3.0 million of short-term borrowings with Atlantic Central Bankers Bank.

On September 17, 2020, the Company entered into Subordinated Note Purchase
Agreements with 14 qualified institutional investors, issued at 4.75%
Fixed-to-Floating Rate due September 15, 2030, in the aggregate principal amount
of $20.0 million, carried net of issuance costs of $424,000 amortized over a
period of 60 months.  These notes are callable on September 15, 2025.  At June
30, 2022, there were $19.7 million of Subordinated Note Purchases Agreements
outstanding, net of issuance costs.

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

The Company’s borrowing arrangements are further described in Part II, Item 8 Financial Statements and Supplementary Data, Note 7 Borrowings of this report.

                                       33

————————————————– ——————————

Index

OTHER COMMITMENTS

Other liabilities, consisting primarily of accrued liabilities, totaled $28.4
million at June 30, 2022, compared to $23.0 million at June 30, 2021, an
increase of $5.4 million.  This increase was due primarily to increased accrued
expenses for various employee benefit plans, including short-term and long-term
incentive plans, and supplemental executive retirement plan.  The ASU 2016-02
lease liability also increased by $119,000 when comparing the year ended June
30, 2022 to June 30, 2021. This was partially offset by a decrease in the
pension liability of $404,000 when comparing the year ended June 30, 2022 to
June 30, 2021. For further information regarding these changes, see Part II,
Item 8 Financial Statements and Supplemental Data, Note 9 Employee Benefits
Plans and Note 10 Stock-Based Compensation of this Report.

EQUITY

Shareholders' equity increased to $157.7 million at June 30, 2022 from $149.6
million at June 30, 2021, resulting primarily from net income of $28.0 million
partially offset by dividends declared and paid of $2.6 million and increase in
other comprehensive loss, net of taxes of $17.2 million. Other comprehensive
loss increased during the year due to the change in the market value of
securities available for sale. On September 17, 2019, the Board of Directors of
the Company adopted a stock repurchase program.  Under the repurchase program,
the Company may repurchase up to 200,000 shares of its common stock.
Repurchases are made at management's discretion at prices management considers
to be attractive and in the best interests of both the Company and its
stockholders, subject to the availability of stock, general market conditions,
the trading price of the stock, alternative uses for capital, and the Company's
financial performance. As of June 30, 2022, the Company had repurchased a total
of 24,400 shares of the 200,000 shares authorized by the repurchase program. The
Company did not repurchase any shares during the year ended June 30, 2022.

Selected Equity Data:                                                     

To June 30th,

                                                                        2022                2021
Shareholders' equity to total assets, at end of period                  6.13 %              6.80 %
Book value per share                                           $       18.53       $       17.57
Closing market price of common stock                           $       45.29       $       28.12

                                                                 For the years ended June 30,
                                                                        2022                2021
Average shareholders' equity to average assets                          6.60 %              7.12 %
Dividend payout ratio1                                                 15.81 %             17.08 %
Actual dividends paid to net income2                                    9.41 %             10.15 %



————————————————– ——————————

1 The payout ratio has been calculated on the basis of declared dividends

per share divided by basic earnings per share. No adjustments were made

for dividends waived by Bancorp of Greene County, MHC (“MHC”), 54.1% owner

outstanding shares of the Company.

2 Dividends declared divided by net income. MHC has waived its right to receive

dividends declared in the past three months; September 30, 2020; December

31, 2020; June 30, 2021; September 30, 2021; December 31, 2021 and March, 31st,

2022. Dividends declared during the three months ended March 31, 2021 and june

30,2022 were donated to the MHC. MHC’s ability to waive receipt of

dividends depend on the annual approval of its members as well as the receipt

  the non-objection of the Federal Reserve Board.



                                       34

————————————————– ——————————

Index

Comparison of operating results for the years ended June 30, 2022 and 2021

Average balance sheet

The following table sets forth certain information relating to the Company for
the years ended June 30, 2022 and 2021.  For the years indicated, the total
dollar amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, are expressed both in dollars and rates.  No tax equivalent
adjustments were made.  Average balances are based on daily averages.  Average
loan balances include nonperforming loans.  The loan yields include net
amortization of certain deferred fees and costs that are considered adjustments
to yields.

                                                         Fiscal Years Ended June 30,
                                              2022                                           2021
                            Average         Interest       Average         Average         Interest       Average
                          Outstanding       Earned/         Yield/       Outstanding       Earned/         Yield/
(Dollars in thousands)      Balance           Paid           Rate          Balance           Paid           Rate
Interest-earning
Assets:
Loans receivable1         $  1,144,308     $   47,125           4.12 %   $ 
1,060,471     $   45,275           4.27 %
Securities non-taxable         652,468          9,517           1.46          455,684          7,953           1.75
Securities taxable             413,721          6,595           1.59          296,006          4,958           1.68
Interest-earning bank
balances and federal
funds                           79,489            157           0.20           79,345             81           0.10
FHLB stock                       1,462             50           3.42            1,144             61           5.33
Total interest-earning
assets                       2,291,448         63,444           2.77 %      1,892,650         58,328           3.08 %
Cash and due from banks         13,474                                         12,526
Allowance for loan
losses                         (21,107 )                                      (18,191 )
Other
noninterest-earning
assets                          82,255                                         44,604
Total assets              $  2,366,070                                   $  1,931,589

Interest-Bearing
Liabilities:
Savings and money
market deposits           $    467,543     $      759           0.16 %   $    403,360     $      952           0.24 %
NOW deposits                 1,446,381          2,434           0.17       
1,156,672          2,895           0.25
Certificates of deposit         34,948            283           0.81           35,044            374           1.07
Borrowings                      51,193          1,963           3.83           22,386            962           4.30
Total interest-bearing
liabilities                  2,000,065          5,439           0.27 %      1,617,462          5,183           0.32 %
Noninterest-bearing
deposits                       185,712                                        155,657
Other
noninterest-bearing
liabilities                     24,195                                         20,959
Shareholders' equity           156,098                                        137,511
Total liabilities and
equity                    $  2,366,070                                   $  1,931,589

Net interest income                        $   58,005                                     $   53,145
Net interest rate
spread                                                          2.50 %                                         2.76 %
Net earnings assets       $    291,383                                   $    275,188
Net interest margin                                             2.53 %                                         2.81 %
Average
interest-earning assets
to average
interest-bearing
liabilities                     114.57 %                                       117.01 %


————————————————– ——————————

1 Calculated net of deferred loan fees and costs, loan forgiveness and outstanding loans.

  process.



                                       35

————————————————– ——————————

Index

Net interest income in taxable equivalent and net interest margin

                                                   For the year ended June 30,
(Dollars in thousands)                                      2022             2021
Net interest income (GAAP)                       $        58,005      $    53,145
Tax-equivalent adjustment(1)                               3,670            3,032

Net interest income (fully taxable equivalent) $61,675 $56,177

Average interest-earning assets                  $     2,291,448      $ 

1,892,650

Net interest margin (fully taxable-equivalent)              2.69 %          

2.97%

————————————————– ——————————

(1) Net interest income on a taxable-equivalent basis includes the additional
amount of interest income that would have been earned if the Company's
investment in tax-exempt securities and loans had been subject to federal and
New York State income taxes yielding the same after-tax income. The rate used
for this adjustment was approximately 21% for federal income taxes for the
periods ended June 30, 2022 and 2021, and 4.44% for New York State income taxes
for the periods ended June 30, 2022 and 2021.

Rate/volume analysis

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

(i) Variation attributable to variations in volume (variations in volume multiplied by

previous rate);

(ii) Change attributable to rate changes (rate changes multiplied by

      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.

                                                          Years Ended June 30,
                                     2022 versus 2021                              2021 versus 2020
                            Increase/(Decrease)           Total           Increase/(Decrease)           Total
                                  Due To                Increase/               Due To                Increase/
(In thousands)             Volume          Rate        (Decrease)        Volume          Rate        (Decrease)
Interest-earning
Assets:
Loans receivable, net1   $    3,484      $  (1,634 )   $     1,850     $     7,938     $  (1,822 )   $     6,116
Securities non-taxable        3,040         (1,476 )         1,564           2,627        (1,749 )           878
Securities taxable            1,884           (247 )         1,637           2,034        (3,442 )        (1,408 )
Interest-earning bank
balances and federal
funds                             -             76              76             274          (815 )          (541 )
FHLB stock                       14            (25 )           (11 )           (15 )         (16 )           (31 )
Total interest-earning
assets                        8,422         (3,306 )         5,116          12,858        (7,844 )         5,014

Interest-Bearing
Liabilities:
Savings and money
market deposits                 146           (339 )          (193 )           224          (620 )          (396 )
NOW deposits                    610         (1,071 )          (461 )         1,881        (5,400 )        (3,519 )
Certificates of
deposit                          (1 )          (90 )           (91 )           (15 )         (90 )          (105 )
Borrowings                    1,117           (116 )         1,001             152           570             722
Total interest-bearing
liabilities                   1,872         (1,616 )           256           2,242        (5,540 )        (3,298 )
Net change in net
interest income          $    6,550      $  (1,690 )   $     4,860     $    10,616     $  (2,304 )   $     8,312


————————————————– ——————————

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



As the above table shows, net interest income for the fiscal year ended June 30,
2022 has been affected most significantly by the increase in volume of loans and
securities, partially offset by an increase in volume of interest-bearing
liabilities and a decrease in rate on interest-earning assets. Net interest rate
spread decreased 26 basis points to 2.50% for the fiscal year ended June 30,
2022 as compared to 2.76% for the fiscal year ended June 30, 2021.  Net interest
margin decreased 28 basis points to 2.53% for the fiscal year ended June 30,
2022 as compared to 2.81% for the fiscal year ended June 30, 2021.

                                       36

————————————————– ——————————

Index

The Federal Reserve Board has taken a number of measures in an attempt to slow
inflation. The Federal Reserve Board changed their Monetary Policy to raise
rates in the recent two quarters. The rise in the federal funds rate will have a
positive impact to the Company's interest spread and margin as the rates on new
loans and securities purchased are at a higher rate than in the prior year. 

The

The Company continuously monitors its interest rate risk, the impact on net interest income and capital of rising interest rates and is well within established limits.

INTEREST INCOME

Interest income for the year ended June 30, 2022 amounted to $63.4 million as
compared to $58.3 million for the year ended June 30, 2021, an increase of $5.1
million, or 8.8%.  The increase in average loan and securities balances had the
greatest impact on interest income when comparing the years ended June 30, 2022
and 2021.  Interest income is derived from loans, securities and other
interest-earning assets.  Total average interest-earning assets increased to
$2.3 billion for the year ended June 30, 2022 as compared to $1.9 billion for
the year ended June 30, 2021, an increase of $398.8 million, or 21.1%.  The
yield earned on such assets decreased 31 basis points to 2.77% for the year
ended June 30, 2022 as compared to 3.08% for the year ended June 30, 2021.

Interest income earned on loans increased to $47.1 million for the year ended
June 30, 2022 as compared to $45.3 million for the year ended June 30, 2021.
Average loans outstanding increased $83.8 million, or 7.9%, to $1.1 billion for
the year ended June 30, 2022 as compared to $1.1 billion for the year ended June
30, 2021.  The yield on such loans decreased 15 basis points to 4.12% for the
year ended June 30, 2022 as compared to 4.27% for the year ended June 30, 2021.
At June 30, 2022, approximately 56.4% of the loan portfolio was adjustable rate,
of which a large portion is tied to the Prime Rate.

Interest income earned on securities (excluding FHLB stock) increased to $16.1
million for the year ended June 30, 2022 as compared to $12.9 million for the
year ended June 30, 2021.  Included in interest income earned on securities is
yield maintenance payments received when various agency mortgage-backed
securities prepaid in advance of maturity of $264,000 for the year ended June
30, 2022, a decrease of $565,000 from $829,000 when compared to June 30, 2021.
The average balance of securities increased $314.5 million to $1.1 billion for
the year ended June 30, 2022 as compared to $751.7 million for the year ended
June 30, 2021 resulting from growth in deposits within our retail, commercial
and municipal lines of business.  The average yield on such securities-non
taxable decreased 29 basis points to 1.46% for the year ended June 30, 2022 as
compared to 1.75% for the year ended June 30, 2021.  The average yield on such
securities-taxable decreased 9 basis points to 1.59% for the year ended June 30,
2022 as compared to 1.68% for the year ended June 30, 2021.  No adjustments were
made to tax-effect the income for the state and political subdivision
securities, which often carry a lower yield because of the offset expected from
income tax benefits gained from holding such securities.

Interest income earned on federal funds and interest-earning deposits amounted
to $157,000 for the year ended June 30, 2022 as compared to $81,000 for the year
ended June 30, 2021.  The average balance of federal funds and interest-earning
deposits increased marginally at $79.5 million for the year ended June 30, 2022
as compared to $79.3 million for the year ended June 30, 2021.  Dividends on
FHLB stock decreased to $50,000 for the year ended June 30, 2022 as compared to
$61,000 for the year ended June 30, 2021.

INTEREST EXPENSES

Interest expense for the year ended June 30, 2022 amounted to $5.4 million as
compared to $5.2 million for the year ended June 30, 2021, an increase of $0.2
million, or 4.9%.  The increase in average balance of interest-bearing
liabilities had the greatest impact on interest expense when comparing the years
ended June 30, 2022 and 2021. Total average interest-bearing liabilities
increased to $2.0 billion for the year ended June 30, 2022 as compared to $1.6
billion for the year ended June 30, 2021, an increase of $382.6 million, or
23.7%.  Much of this increase related to NOW accounts, primarily resulting from
growth in new deposit relationships within our retail, commercial and municipal
lines of business. The overall rate paid on interest-bearing liabilities
decreased 5 basis points to 0.27% for the year ended June 30, 2022 compared to
0.32% for the year ended June 30, 2021.

Interest expense paid on savings and money market accounts amounted to $759,000
for the year ended June 30, 2022 as compared to $952,000 for the year ended June
30, 2021, a decrease of $193,000, or 20.3%. The average rate paid on savings and
money market accounts decreased 8 basis points to 0.16% for the year ended June
30, 2022 as compared to 0.24% for the year ended June 30, 2021.  The average
balance of savings and money market accounts increased by $64.2 million to
$467.5 million for the year ended June 30, 2022 as compared to $403.4 million
for the year ended June 30, 2021.

Interest expense paid on NOW accounts amounted to $2.4 million for the year
ended June 30, 2022 as compared to $2.9 million for the year ended June 30,
2021, a decrease of $461,000 or 15.9%. The average rate paid on NOW accounts
decreased 8 basis points to 0.17% for the year ended June 30, 2022 as compared
to 0.25% for the year ended June 30, 2021.  The average balance of NOW accounts
increased by $289.7 million to $1.4 billion for the year ended June 30, 2022 as
compared to $1.2 billion for the year ended June 30, 2021.

                                       37

————————————————– ——————————

Index

Interest expense paid on certificates of deposit amounted to $283,000 for the
year ended June 30, 2022 as compared to $374,000 for the year ended June 30,
2021, a decrease of $91,000.  The average rate paid on certificates of deposit
decreased 26 basis points to 0.81% for the year ended June 30, 2022 as compared
to 1.07% for the year ended June 30, 2021.  The average balance on certificates
of deposit was $35.0 million at both the year ended June 30, 2022 and June 30,
2021.

Interest expense on borrowings amounted to $2.0 million for the year ended June
30, 2022 as compared to $962,000 for the year ended June 30, 2021, as the
average balance of borrowings increased $28.8 million to $51.2 million for the
year ended June 30, 2022 as compared to $22.4 million for the year ended June
30, 2021. The average rate paid on borrowings decreased 47 basis points to 3.83%
from 4.30% during the period.  The decrease in the average rate and increase in
average valance of borrowings was due to the Company entering into subordinated
note purchase agreements in September 2021, which was at a lower rate than the
subordinated note purchase agreements purchased in September of 2020.

PROVISION FOR LOAN LOSSES

Management continues to closely monitor asset quality and adjust the level of
the allowance for loan losses when necessary.  The amount recognized for the
provision for loan losses is determined by management based on its ongoing
analysis of the adequacy of the allowance for loan losses. Provision for loan
losses amounted to $3.3 million and $4.0 million for the years ended June 30,
2022 and 2021, respectively, a decrease of $696,000. The provision for the year
ended June 30, 2022 was due to further downgrades in classified loans and loan
growth, offset by economic improvements, including full labor participation, as
well as the lifting of the COVID-19 pandemic restrictions. The provision for the
year ended June 30, 2021 was mainly due to the economic uncertainty related to
the COVID-19 pandemic and loan growth.  The allocation of this provision was
primarily for commercial real estate and commercial loans.  For additional
details relating to the allocation of the provision for loan losses, see Part
II, Item 8 Financial Statements and Supplemental Data, Note 4, Loans of this
report.

NONINTEREST INCOME

(Dollars in thousands)                   For the years ended June 30,           Change from Prior Year
                                                 2022                2021          Amount         Percent
Service charges on deposit accounts   $         4,439       $       3,414     $     1,025           30.02 %
Debit card fees                                 4,381               3,860             521           13.50
Investment services                               944                 732             212           28.96
E-commerce fees                                   107                 113              (6 )         (5.31 )
Bank owned life insurance                       1,269                 425             844          198.59
Other operating income                            997               1,123            (126 )        (11.22 )
Total noninterest income              $        12,137       $       9,667     $     2,470           25.55 %



Noninterest income increased $2.4 million, or 25.6%, to $12.1 million for the
year ended June 30, 2022 as compared to $9.7 million for the year ended June 30,
2021.  The increase was primarily due to an increase in service charges on
deposit accounts and debit card fees, which is a result from continued growth in
the number of deposit accounts and checking accounts with debit cards. There was
also increase from the income from bank owned life insurance purchased in at the
end of the prior fiscal year with additional purchases in the current fiscal
year.

NONINTEREST EXPENSE

(Dollars in thousands)                       For the years ended June 30,  

Change from previous year

                                                    2022                 2021          Amount           Percent
Salaries and employee benefits            $       20,667       $       19,166     $     1,501              7.83 %
Occupancy expense                                  2,305                2,169             136              6.27
Equipment and furniture expense                      806                  637             169             26.53
Service and data processing fees                   2,589                2,621             (32 )           (1.22 )
Computer software, supplies and support            1,531                1,369             162             11.83
Advertising and promotion                            491                  491               -              0.00
FDIC insurance premiums                              826                  738              88             11.92
Legal and professional fees                        1,414                1,212             202             16.67
Other                                              3,330                2,820             510             18.09
Total noninterest expense                 $       33,959       $       31,223     $     2,736              8.76 %



                                       38

————————————————– ——————————

Index

Noninterest expense increased $2.8 million, or 8.8%, to $34.0 million for the
year ended June 30, 2022 as compared to $31.2 million for the year ended June
30, 2021. The increase during the year ended June 30, 2022 was primarily due to
an increase in salaries and employee benefits expense resulting from creating 14
new positions during the year.  The new positions were required to support
growth in our lending department, human resource department, marketing
department, information technology department and finance department.  Other
expense increased for the year ended June 30, 2022, compared to the year ended
June 30, 2021 due to The Bank of Greene County's contributing $250 thousand to
The Bank of Greene County Charitable Foundation in both September 2021 and June
2022.

INCOME TAXES

Provision for income taxes directly reflects the expected tax associated with
the pre-tax income generated for the given year and certain regulatory
requirements.  The effective tax rate was 14.9% and 13.3% for the years ended
June 30, 2022 and 2021, respectively.  The statutory tax rate is impacted by the
benefits derived from tax-exempt bond and loan income, the Company's real estate
investment trust subsidiary income, income received on the bank owned life
insurance, as well as the tax benefits derived from premiums paid to the
Company's pooled captive insurance subsidiary to arrive at the effective tax
rate.

CASH AND CAPITAL RESOURCES

Liquidity resources. The Company's primary sources of funds are deposits and
proceeds from principal and interest payments on loans and securities, as well
as lines of credit and term borrowing facilities available through the Federal
Home Loan Bank as needed.  While maturities and scheduled amortization of loans
and securities are predictable sources of funds, deposit outflows, mortgage
prepayments, and borrowings are greatly influenced by general interest rates,
economic conditions and competition.

The Company's most liquid assets are cash and cash equivalent accounts.  The
levels of these assets are dependent on the Company's operating, financing,
lending and investing activities during any given period.  At June 30, 2022,
cash and cash equivalents totaled $69.0 million, or 2.7% of total assets.

The Company's primary investing activities are the origination of residential
and commercial real estate mortgage loans, other consumer and commercial loans,
and the purchase of securities.  Loan originations exceeded repayments by $143.4
million and $92.9 million and purchases of securities totaled $669.2 million and
$626.6 million for the years ended June 30, 2022 and 2021, respectively.  These
activities were funded primarily through deposit growth, and principal payments
on loans and securities and borrowings.  Loan sales did not provide an
additional source of liquidity during the years ended June 30, 2022 and 2021, as
the Company originated loans for retention in its portfolio.

The Company experienced a net increase in total deposits of $207.5 million and
$504.0 million for the years ended June 30, 2022 and 2021, respectively.
Deposits increased during the year ended June 30, 2022 as a result of an
increase in new account relationships across all three of our primary business
lines, retail, commercial and municipal.  The Company continues to benefit from
consolidation of other depository institutions within its market area and has
successfully launched several marketing campaigns aimed at different segments of
the market.

The Company monitors its liquidity position on a daily basis.  Excess short-term
liquidity is usually invested in interest-earning deposits with the Federal
Reserve Bank of New York.  In the event the Company requires funds beyond its
ability to generate them internally, additional sources of funds are available
through the use of FHLB advance programs made available to The Bank of Greene
County.  During the year ended June 30, 2022, The Bank of Greene County's
maximum borrowing from the FHLB reached $123.7 million and the minimum amounted
to no borrowings.  As of the year ended June 30, 2022 there were $123.7
borrowings outstanding with the FHLB.  The liquidity position can be
significantly impacted on a daily basis by funding needs associated with Greene
County Commercial Bank.  These funding needs are also impacted by the collection
of taxes and state aid for the municipalities using the services of Greene
County Commercial Bank.  At June 30, 2022, liquidity measures were as follows:

Cash equivalents/(deposits plus short term borrowings)                      

2.95% (cash equivalents plus unsecured securities)/(deposits plus short-term borrowings)

10.99% (Cash equivalents plus unsecured securities plus additional borrowing capacity)/(deposits plus short-term borrowings)

23.18%



Off-balance sheet arrangements. In the normal course of business the Company is
party to certain financial instruments, which in accordance with accounting
principles generally accepted in the United States, are not included in its
Consolidated Statements of Condition. These transactions include commitments to
fund new loans and unused portions of lines of credit and are undertaken to
accommodate the financing needs of the Company's customers. Loan commitments are
agreements by the Company to lend monies at a future date. These loan
commitments are subject to the same credit policies and reviews as the Company's
loans. Because most of these loan commitments expire within one year from the
date of issue, the total amount of these loan commitments as of June 30, 2022,
are not necessarily indicative of future cash requirements.

                                       39

————————————————– ——————————

Index

The Company’s unfunded loan commitments and undrawn lines of credit are as follows at June 30, 2022 and 2021:

(In thousands)                   2022          2021
Unfunded loan commitments   $ 213,420     $ 121,775
Unused lines of credit         85,971        86,456
Standby letters of credit         189           175
Total commitments           $ 299,580     $ 208,406



The Company anticipates that it will have sufficient funds available to meet
current loan commitments.  Certificates of deposit scheduled to mature in one
year or less from June 30, 2022 totaled $26.8 million.  Based upon the Company's
experience and its current pricing strategy, management believes that a
significant portion of such deposits will remain with the Company.

The Company has an Irrevocable Letter of Credit Reimbursement Agreement with the
FHLB, whereby upon The Bank of Greene County's request, on behalf of Greene
County Commercial Bank, an irrevocable letter of credit is issued to secure
municipal transactional deposit accounts.  These letters of credit are secured
by residential and commercial real estate mortgage loans.  The amount of funds
available to the Company through the FHLB line of credit is reduced by any
letters of credit outstanding.  There were no municipal letters of credit
outstanding at June 30, 2022.

The Company has risk participation agreements ("RPAs") which are guarantees
issued by the Company to other parties for a fee, whereby the Company agrees to
participate in the credit risk of a derivative customer of the other party.
Under the terms of these agreements, the "participating bank" receives a fee
from the "lead bank" in exchange for the guarantee of reimbursement if the
customer defaults on an interest rate swap. The interest rate swap is transacted
such that any and all exchanges of interest payments (favorable and unfavorable)
are made between the lead bank and the customer. In the event that an early
termination of the swap occurs and the customer is unable to make a required
close out payment, the participating bank assumes that obligation and is
required to make this payment.  RPAs where the Company acts as the lead bank are
referred to as "participations-out," in reference to the credit risk associated
with the customer derivatives being transferred out of the Company.
Participations-out generally occur concurrently with the sale of new customer
derivatives.  The Company had no participations-out at June 30, 2022 or 2021.
RPAs where the Company acts as the participating bank are referred to as
"participations-in," in reference to the credit risk associated with the
counterparty's derivatives being assumed by the Company. The Company's maximum
credit exposure is based on its proportionate share of the settlement amount of
the referenced interest rate swap. Settlement amounts are generally calculated
based on the fair value of the swap plus outstanding accrued interest
receivables from the customer. There was no credit exposure associated with risk
participations-ins as of June 30, 2022 due to the recent rise in interest rate
and was $7.2 million at June 30, 2021.  The RPAs participations-ins are spread
out over four financial institution counterparties and terms range between 5 to
14 years.

Capital Resources.  The Company and the Bank considers current needs and future
growth, with the sources of capital being the retention of earnings, less
dividends paid, and proceeds from the issuance of subordinated debt. The Company
believes its current capital is adequate to support ongoing operations. As a
result of the significant growth in assets, the Company contributed $7.0 million
of additional capital to The Bank of Greene County during the fiscal year ended
June 30, 2022.  At June 30, 2022 and 2021, The Bank of Greene County and Greene
County Commercial Bank exceeded all of their regulatory capital requirements, as
illustrated in Part II, Item 8 Financial Statements and Supplementary Data Note
17. Regulatory Matters of this Report.  Shareholders' equity represented 6.1%
and 6.8% of total consolidated assets at June 30, 2022 and 2021, respectively.

IMPACT OF INFLATION AND PRICE CHANGES

The consolidated financial statements of Greene County Bancorp, Inc. and notes
thereto, presented elsewhere herein, have been prepared in accordance with U.S.
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation.  The impact of inflation is reflected in the increased cost of
Greene County Bancorp, Inc.'s operations.  Unlike most industrial companies,
nearly all the assets and liabilities of Greene County Bancorp, Inc. are
monetary.  As a result, interest rates have a greater impact on Greene County
Bancorp, Inc.'s performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.

                                       40

————————————————– ——————————

Index

IMPACT OF RECENT ACCOUNTING STATEMENTS

Recent accounting pronouncements that may have an impact on the Company’s financial statements are discussed in Part II, Item 8 Financial Statements and Supplementary Data, Note 1 Summary of Significant Accounting Policies of this report.

© Edgar Online, source Previews

About Adam Gray

Check Also

Goeasy Ltd. Fiscal Year 2022 Profit Estimate issued by Cormark (TSE:GSY)

goeasy ltd. (EAST: GSY – Get a rating) – Cormark equity research analysts have reduced …