GREENE COUNTY BANCORP INC

Previous wording

Total assets of the Company were $2.74 billion at December 31, 2023 and $2.70 billion at June 30, 2023, an increase of $38.4 million or 1.4%. Securities available-for-sale and held-to-maturity for the Company were $1.0 billion at December 31, 2023 and June 30, 2023. Net loans receivable for the Company increased $49.2 million, or 3.6%, to $1.44 billion at December 31, 2023 from $1.39 billion at June 30, 2023.

Current wording

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

Previous wording

Total cash and cash equivalents for the Company were $176.1 million at December 31, 2023 and $196.4 million at June 30, 2023. The level of cash and cash equivalents is a function of the daily account clearing needs and deposit levels as well as activities associated with securities transactions and loan funding. All of these items can cause cash levels to fluctuate significantly on a daily basis. The Company has continued to maintain strong capital and liquidity positions as of December 31, 2023.

Current wording

Total cash and cash equivalents for the Company were $255.8 million at March 31, 2024 and $196.4 million at June 30, 2023. The level of cash and cash equivalents is a function of the daily account clearing needs and deposit levels as well as activities associated with securities transactions and loan funding. All of these items can cause cash levels to fluctuate significantly on a daily basis. The Company has continued to maintain strong capital and liquidity positions as of March 31, 2024.

Previous wording

Securities available-for-sale and held-to-maturity for the Company were $1.0 billion at December 31, 2023 and June 30, 2023. Securities purchases totaled $121.3 million during the six months ended December 31, 2023 and consisted primarily of $119.7 million of state and political subdivision securities and $1.6 million of corporate debt securities. Principal pay-downs and maturities during the six months ended December 31, 2023 amounted to $122.2 million, primarily consisting of $109.3 million of state and political subdivision securities, $1.4 million of collateralized mortgage obligations, and $11.5 million of mortgage-backed securities. At December 31, 2023, 62.2% of our securities portfolio consisted of state and political subdivision securities to take advantage of tax savings and to promote the Company’s participation in the communities in which it operates. Mortgage-backed securities, which represent 27.7% of our securities portfolio at December 31, 2023, do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

Current wording

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

Previous wording

Held-to-maturity securities are evaluated for credit losses on a quarterly basis under the CECL methodology. At December 31, 2023, the ACL on held-to-maturity securitieswas $485,000.

Current wording

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

Previous wording

Net loans receivable increased $49.2 million, or 3.6%, to $1.44 billion at December 31, 2023 from $1.39 billion at June 30, 2023. The loan growth experienced during the six months consisted primarily of $29.3 million in commercial real estate loans, $10.7 million in residential real estate loans, $3.3 million in home equity loans and $4.9 million in commercial loans. The Company continues to experience loan growth as a result of continued growth in its customer base and its relationships with other financial institutions in originating loan participations. The Company continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products. Updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status. Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy.

Current wording

Net loans receivable increased $69.6 million, or 5.0%, to $1.5 billion at March 31, 2024 from $1.4 billion at June 30, 2023. The loan growth experienced during the nine months consisted primarily of $42.4 million in commercial real estate loans, $20.6 million in residential real estate loans, and $4.8 million in home equity loans. The Company continues to experience loan growth as a result of continued growth in its customer base and its relationships with other financial institutions in originating loan participations. The Company continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products. Updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status. Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy.

Previous wording

The ACL totaled $20.3 million at December 31, 2023, compared to $21.2 million at June 30, 2023 and $19.9 million at July 1, 2023. The ACL to total loans receivable was 1.39% at December 31, 2023 compared to 1.51% at June 30, 2023 and 1.42% at day-one CECL adoption (July 1, 2023). The ACL as of December 31, 2023 is consistent with the July 1, 2023 day-one ACL. The decrease in the ACL from June 30, 2023 to December 31, 2023 was primarily due to the CECL adoption.

Current wording

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

Previous wording

The allowance for credit losses on unfunded commitments as of December 31, 2023 was $1.6 million.

Current wording

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

Previous wording

Nonperforming assets amounted to $6.0 million and $5.8 million at December 31, 2023 and June 30, 2023, respectively. Loans on nonaccrual status totaled $5.6 million at December 31, 2023, of which there were two residential loans totaling $449,000 and two commercial real estate loans totaling $1.4 million that were in process of foreclosure. Included in nonaccrual loans were $1.7 million of loans which were less than 90 days past due at December 31, 2023, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Loans on nonaccrual status totaled $5.5 million at June 30, 2023 of which three residential real estate loans totaling $625,000 and two commercial real estate loans totaling $1.4 million in the process of foreclosure. Included in nonaccrual loans were $3.1 million of loans which were less than 90 days past due at June 30, 2023, but have a recent history of delinquency greater than 90 days past due.

Current wording

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

Previous wording

Deposits totaled $2.3 billion at December 31, 2023 and $2.4 billion at June 30, 2023, a decrease of $102.3 million, or 4.2%. NOW deposits decreased $42.6 million, or 2.5%, and noninterest-bearing deposits decreased $21.6 million, or 13.6%, money market deposits decreased $23.3 million, or 20.2%, and savings deposits decreased $32.6 million, or 10.9%, when comparing December 31, 2023 and June 30, 2023. Certificates of deposits increased $17.7 million, or 13.8%, when comparing December 31, 2023 and June 30, 2023. As of December 31, 2023, the overall brokered deposit balance amounted to $64.1 million, which included $15.0 million of NOW deposits in the form of IntraFi Insured Network Deposits and $49.1 million of certificates of deposits in the form of brokered certificates of deposits. As of June 30, 2023, the overall brokered deposits balance amounted to $60.0 million of brokered certificates of deposits. The Company maintained the increased level of brokered deposits to support overall liquidity and a higher cash position.

Current wording

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

Previous wording

At December 31, 2023, the Bank had pledged approximately $587.7 million of its residential and commercial mortgage portfolio as collateral for borrowing and irrevocable municipal letters of credit at the Federal Home Loan Bank of New York (“FHLB”). The maximum amount of funding available from the FHLB was $359.8 million at December 31, 2023, of which there were $4.4 million term fixed rate borrowings, $150.0 million irrevocable municipal letters of credit and $125.0 million of overnight borrowings outstanding at December 31, 2023. At June 30, 2023, the Bank had zero overnight borrowings outstanding and $110.0 million in irrevocable municipal letters of credit at the FHLB. Interest rates on overnight borrowings are determined at the time of borrowing. The irrevocable municipal letters of credit with the FHLB have been issued to secure municipal transactional deposit accounts, on behalf of Greene County Commercial Bank.

Current wording

At March 31, 2024, the Bank had pledged approximately $588.6 million of its residential and commercial mortgage portfolio as collateral for borrowing and irrevocable municipal letters of credit at the Federal Home Loan Bank of New York (“FHLB”). The maximum amount of funding available from the FHLB was $368.9 million at March 31, 2024, of which there were $9.2 million long-term fixed rate borrowings, $210.0 million irrevocable municipal letters of credit and zero overnight borrowings outstanding at March 31, 2024. At June 30, 2023, the Bank had zero overnight or long-term borrowings outstanding and $110.0 million in irrevocable municipal letters of credit at the FHLB. Interest rates on overnight borrowings are determined at the time of borrowing. The irrevocable municipal letters of credit with the FHLB have been issued to secure municipal transactional deposit accounts, on behalf of Greene County Commercial Bank.

Previous wording

The FHLB term fixed rate borrowing of $4.4 million has a stated rate of 5.7%, maturing September 2024. The Company received a corresponding credit related to the FHLB term fixed rate borrowing, from the “FHLB 0% Development Advance (ZDA) Program”, which effectively reduces the interest rate paid to zero percent.

Current wording

The FHLB term borrowings include long-term fixed rate borrowings from the “FHLB 0% Development Advance (ZDA) Program.” The Company receives a corresponding credit related to the FHLB term fixed rate borrowings, which effectively reduces the interest rate paid to zero percent. At March 31, 2024, the Bank had a FHLB long-term fixed rate borrowing of $4.4 million at a stated rate of 5.7%, maturing September 2024, and a FHLB long-term fixed rate borrowing of $4.8 million at a stated rate of 5.2%, maturing March 2025.

Previous wording

The Bank also pledges securities and certificates of deposit as collateral at the Federal Reserve Bank discount window for overnight borrowings. At December 31, 2023, approximately $24.3 million of collateral was available to be pledged against potential borrowings at the Federal Reserve Bank discount window the Bank Term Funding Program. There were no balances outstanding with the Federal Reserve Bank at December 31, 2023.

Current wording

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

Previous wording

The Bank has established unsecured lines of credit with Atlantic Community Bankers Bank for $15.0 million and two other financial institutions for $50.0 million. The Company has also established an unsecured line of credit with Atlantic Community Bankers Bank for $7.5 million. The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. There were no borrowings outstanding with these lines of credit for both the Company and the Bank at December 31, 2023 and June 30, 2023.

Current wording

The Bank has established unsecured lines of credit with Atlantic Community Bankers Bank for $15.0 million and three other financial institutions for $75.0 million. The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. There were no borrowings outstanding with these lines of credit for the Bank at March 31, 2024 and June 30, 2023.

Previous wording

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 December 31, 2023, there were $29.7 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

Current wording

On September 15, 2021, the Company entered into Subordinated Note Purchase Agreements with 18 qualified institutional investors, issued at 3.00% Fixed-to-Floating Rate due September 15, 2031, in the aggregate principal amount of $30.0 million, carried net of issuance costs of $499,000 amortized over a period of 60 months. These notes are callable on September 15, 2026. At March 31, 2024, there were $29.8 million of these Subordinated Note Purchases Agreements outstanding, net of issuance costs.

Previous wording

Shareholders’ equity increased to $195.3 million at December 31, 2023 from $183.3 million at June 30, 2023, resulting primarily from net income of $12.2 million and a decrease in accumulated other comprehensive loss of $2.3 million, partially offset by dividends declared and paid of $2.0 million and the day-one CECL adoption impact of $510,000. Unrealized loss on available for sale securities decreased at December 31, 2023 compared to June 30, 2023, as the market yields on bonds decreased during the six months ended December 31, 2023.

Current wording

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

Previous wording

On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 400,000 shares of its common stock. Repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. For the three and six months ended December 31, 2023, the Company did not repurchase any shares.

Current wording

On September 17, 2019, the Board of Directors of the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 400,000 shares of its common stock. Repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. For the three and nine months ended March 31, 2024, the Company did not repurchase any shares.

Previous wording

Comparison of Operating Results for the Three and Six Months Ended December 31, 2023 and 2022

Current wording

Comparison of Operating Results for the Three and Nine Months Ended March 31, 2024 and 2023

Previous wording

The following table sets forth certain information relating to the Company for the three and six months ended December 31, 2023 and 2022. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances were based on daily averages. Average loan balances include nonperforming loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields.

Current wording

The following table sets forth certain information relating to the Company for the three and nine months ended March 31, 2024 and 2023. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances were based on daily averages. Average loan balances include nonperforming loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields.

Previous wording

Return on average assets and return on average equity are common methods of measuring operating results. Annualized return on average assets decreased to 0.86% from 1.12% for the three months ended December 31, 2023 and 2022, respectively, and decreased to 0.92% from 1.27% for the six months ended December 31, 2023 and 2022, respectively. Annualized return on average equity decreased to 12.12% and 13.07% for the three and six months ended December 31, 2023 as compared to 17.64% and 20.03% for the three and six months ended December 31, 2022. The decrease in return on average assets and return on average equity for the three and six months ended December 31, 2023 was primarily the result of the balance sheet growing at a faster rate than net income growth. Net income amounted to $5.7 million and $7.2 million for the three months ended December 31, 2023 and 2022, respectively, a decrease of $1.5 million, or 20.8%, as compared to $12.2 million and $16.2 million for the six months ended December 31, 2023 and 2022, respectively, a decrease of $4.0 million, or 25.0%. Average assets increased $75.4 million, or 2.9%, to $2.64 billion for the three months ended December 31, 2023 as compared to $2.57 billion for the three months ended December 31, 2022. Average equity increased $25.1 million, or 15.4%, to $188.4 million for the three months ended December 31, 2023 as compared to $163.2 million for the three months ended December 31, 2022. Average assets increased $82.4 million, or 3.2%, to $2.63 billion for the six months ended December 31, 2023 as compared to $2.55 billion for the six months ended December 31, 2022. Average equity increased $24.1 million, or 14.9%, to $186.3 million for the six months ended December 31, 2023 as compared to $162.1 million for the six months ended December 31, 2022.

Current wording

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

Previous wording

Interest income amounted to $25.6 million for the three months ended December 31, 2023 as compared to $20.5 million for the three months ended December 31, 2022, an increase of $5.1 million, or 24.7%. Interest income amounted to $50.3 million for the six months ended December 31, 2023 as compared to $39.2 million for the six months ended December 31, 2022, an increase of $11.1 million, or 28.3%. The increase in yields earned on loans and securities had the greatest impact on interest income. The average balances of loans also increased during the comparative periods contributing to higher interest income.

Current wording

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

Previous wording

Average loan balances increased $81.6 million and $98.6 million and the yield on loans increased 58 and 66 basis points when comparing the three and six months ended December 31, 2023 and 2022, respectively. Average securities decreased $78.8 million and $86.0 million and the yield on such securities increased 31 and 64 basis points when comparing the three and six months ended December 31, 2023 and 2022, respectively. Average interest-bearing bank balances and federal funds increased $66.1 million and $62.7 million and the yield increased 187 and 238 basis points when comparing the three and six months ended December 31, 2023 and 2022, respectively.

Current wording

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

Previous wording

Interest expense amounted to $13.2 million for the three months ended December 31, 2023 as compared to $4.6 million for the three months ended December 31, 2022, an increase of $8.6 million, or 186.8%. Interest expense amounted to $24.4 million for the six month ended December 31, 2023 as compared to $7.4 million for the six months ended December 31, 2022, an increase of $17.0 million, or 229.8%. The increase during the three and six months ended December 31, 2023 was primarily due to a the increase in the cost of funds on NOW deposits and insured cash sweep (“ICS”) deposits which had the greatest impact on interest expense reflecting higher market interest rates when comparing the periods.

Current wording

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

Previous wording

The cost of NOW deposits increased 179 and 178 basis points, the cost of certificates of deposit increased 153 and 213 basis points, and the cost of savings and money market deposits increased 15 and 13 basis points when comparing the three and six months ended December 31, 2023 and 2022, respectively. The increase in the cost of interest-bearing liabilities was partly due to growth in the average balances of interest-bearing liabilities of $77.4 million and $83.6 million when comparing the three and six months ended December 31, 2023 and 2022, respectively. This was due to an increase in NOW deposits of $183.2 million and $179.8 million and an increase in average certificates of deposits of $23.6 million and $35.8 million, offset by a decrease in average savings and money market deposits of $110.9 million and $105.2 million and a decrease in average borrowings of $18.5 million and $26.8 million when comparing the three and six months ended December 31, 2023 and 2022, respectively. Yields on interest-earning assets and costs of interest-bearing deposits increased for the three and six months ended December 31, 2023, as the Federal Reserve Board raised interest rates throughout the calendar year 2022 and into the third quarter of calendar year 2023.

Current wording

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

Previous wording

Net interest income decreased $3.5 million to $12.4 million for the three months ended December 31, 2023 from $15.9 million for the three months ended December 31, 2022. Net interest income decreased $5.9 million to $25.8 million for the six months ended December 31, 2023 from $31.8 million for the six months ended December 31, 2022. The decrease in net interest income was due to an increase in the average balance of interest-bearing liabilities, which increased $77.4 million and $83.6 million when comparing the three and six months ended December 31, 2023 and 2022, respectively, and increases in rates paid on interest-bearing liabilities, which increased 147 and 148 basis points when comparing the three and six months ended December 31, 2023 and 2022, respectively. The decrease in net interest income was partially offset by increases in the average balance of interest-earning assets, which increased $68.5 million and $74.4 million when comparing the three and six months ended December 31, 2023 and 2022, respectively, and increases in interest rates on interest-earning assets, which increased 70 and 78 basis points when comparing the three and six months ended December 31, 2023 and 2022, respectively.

Current wording

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

Previous wording

Net interest rate spread and margin both decreased when comparing the three and six months ended December 31, 2023 and 2022. Net interest rate spread decreased 77 and 70 basis points to 1.70% and 1.79% for the three and six months ended December 31, 2023 compared to 2.47% and 2.49% for the three and six months ended December 31, 2022, respectively. Net interest margin decreased 63 and 54 basis points to 1.94% and 2.03% for the three and six months ended December 31, 2023 compared to 2.57% for both the three and six months ended December 31, 2022, respectively. The decrease was due to the higher interest rate environment and the pressure to match higher yields on deposits, which resulted in higher rates paid on deposits and therefore higher interest expense. This was partially offset by increases in interest income on loans and securities, as they reprice at higher yields and the interest rates earned on new balances were higher than the historic low levels from the prior period.

Current wording

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

Previous wording

Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. Tax equivalent net interest margin was 2.19% and 2.77% for the three months ended December 31, 2023 and 2022, respectively, and was 2.28% and 2.77% for the six months ended December 31, 2023 and 2022, respectively.

Current wording

Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. Tax equivalent net interest margin was 2.20% and 2.66% for the three months ended March 31, 2024 and 2023, respectively, and was 2.25% and 2.73% for the nine months ended March 31, 2024 and 2023, respectively.

Previous wording

Provision for credit losses amounted to $170,000 and $244,000 for the three months ended December 31, 2023 and 2022, respectively, and amounted to a charge of $627,000 and a benefit of $255,000 for the six months ended December 31, 2023 and 2022, respectively. The loan provision for the six months ended December 31, 2023 was primarily due to the growth in gross loans and increases in the qualitative factor adjustments, offset by improvements in the economic forecasts. The allowance for credit losses on loans to total loans receivable was 1.39% at December 31, 2023 compared to 1.51% at June 30, 2023 and 1.42% at day-one CECL adoption (July 1, 2023).

Current wording

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

Previous wording

Loans classified as substandard and special mention totaled $55.0 million at December 31, 2023 and $41.9 million at June 30, 2023, an increase of $13.1 million. There were no loans classified as doubtful or loss at December 31, 2023 or June 30, 2023.

Current wording

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

Previous wording

Net charge-offs amounted to $123,000 and $102,000 for the three months ended December 31, 2023 and 2022, respectively, an increase of $21,000. Net charge-offs totaled $216,000 and $217,000 for the six months ended December 31, 2023 and 2022, respectively. There were no significant charge offs in any loan segment during the three and six months ended December 31, 2023.

Current wording

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

Previous wording

Noninterest income increased $583,000, or 20.1%, to $3.5 million for the three months ended December 31, 2023 compared to $2.9 million for the three months ended December 31, 2022. Noninterest income increased $784,000, or 13.1%, to $6.8 million for the six months ended December 31, 2023 compared to $6.0 million for the six months ended December 31, 2022. The increase during the three and six months ended December 31, 2023 was primarily due to an increase in fee income earned on customer interest rate swap contracts and income from bank owned life insurance.

Current wording

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

Previous wording

Noninterest expense decreased $625,000, or 6.3%, to $9.3 million for the three months ended December 31, 2023 compared to $10.0 million for the three months ended December 31, 2022. Noninterest expense decreased $577,000 or 3.1%, to $18.2 million for the six months ended December 31, 2023, compared to $18.7 million for the six months ended December 31, 2022. The decrease during the three and six months ended December 31, 2023 was primarily due to a decrease in legal and professional fees and service and data processing fees paid as compared to the three and six months ended December 31, 2022. This was partially offset by the increase in computer software and supplies due to the Company purchasing new equipment to upgrade our IT infrastructure, and an increase in salaries and benefits expense, as compared to the three and six months ended December 31, 2022.

Current wording

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

Previous wording

Provision for income taxes reflects the expected tax associated with the pre-tax income generated for the given period and certain regulatory requirements. The effective tax rate was 10.4% and 11.8% for the three and six months ended December 31, 2023 and 16.5% and 15.7% for the three and six months ended December 31, 2022. The statutory tax rate is impacted by the benefits derived from tax-exempt bond and loan income, the Company’s real estate investment trust subsidiary income, and income received on the bank owned life insurance, to arrive at the effective tax rate. The decrease in the current quarter’s effective tax rate was the result of an increase in tax-exempt income proportional to total income.

Current wording

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

Previous wording

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates or prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. The Company’s most significant form of market risk is interest rate risk since the majority of the Company’s assets and liabilities are sensitive to changes in interest rates. The Company’s primary sources of funds are deposits and proceeds from principal and interest payments on loans, mortgage-backed securities and debt securities, with lines of credit available through the Federal Home Loan Bank, Atlantic Community Bankers Bank and two other financial institutions, as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition. At December 31, 2023, the Company had $176.1 million in cash and cash equivalents, representing 6.4% of total assets, and had $175.4 million available in unused lines of credit.

Current wording

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates or prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. The Company’s most significant form of market risk is interest rate risk since the majority of the Company’s assets and liabilities are sensitive to changes in interest rates. The Company’s primary sources of funds are deposits and proceeds from principal and interest payments on loans, mortgage-backed securities and debt securities, with lines of credit available through the Federal Home Loan Bank, Atlantic Community Bankers Bank and two other financial institutions, as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition. At March 31, 2024, the Company had $255.8 million in cash and cash equivalents, representing 8.9% of total assets, and had $260.0 million available in unused lines of credit.

Previous wording

On March 12, 2023, in response to liquidity concerns in the banking system, the Federal Deposit Insurance Corporation, Federal Reserve and U.S. Department of Treasury, collaboratively approved certain actions with a stated intention to reduce stress across the financial system, support financial stability and minimize any impact on business, households, taxpayers, and the broader economy. Among other actions, the Federal Reserve Board has created a new Bank Term Funding Program (BTFP) to make additional funding available to eligible depository institutions to help assure institutions can meet the needs of their depositors. Eligible institutions may obtain liquidity against a wide range of collateral. BTFP advances can be requested through March 11, 2024. The Company has not requested funding through the BTFP as of December 31, 2023, but has an established relationship with the Federal Reserve to take advantage of this program.

Current wording

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

Previous wording

In efforts to enhance strong levels of liquidity and to fund strong loan demand, the Bank and Commercial Bank (the “Banks”) accept brokered certificates of deposits, generally in denominations of less than $250,000, from national brokerage networks or through IntraFi’s one-way CDARS and ICS products, including IntraFi’s Insured Network Deposits (“IND”). The Banks can place and obtain brokered deposits from a national brokerage network up to 10% of total deposits, in the amount of $233.5 million based on policy. The Banks can also place and obtain brokered deposits from IntraFi up to 10% of total deposits, in the amount of $233.5 million based on policy. Additionally, both Banks participate in the IntraFi reciprocal (“two-way”) CDARS and the ICS products, which provides for reciprocal two-way transactions among other institutions, facilitated by IntraFi, for the purpose of maximizing FDIC insurance for depositors.

Current wording

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

Previous wording

As of December 31, 2023, the overall brokered deposit balance amounted to $64.1 million, which included $15.0 million of NOW deposits in the form of IntraFi IND and $49.1 million of certificates of deposits in the form of brokered certificates of deposits. As of June 30, 2023, the overall brokered deposits balance amounted to $60.0 million of brokered certificates of deposits. The Company maintained the increased level of brokered deposits to support overall liquidity and a higher cash position.

Current wording

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