Net Income: $24.3 million for the nine months ended March 31, 2023

Total Assets: $2.7 billion at March 31, 2023

Return on Average Assets: 1.26% for the nine months ended March 31, 2023

Return on Average Equity: 19.51% for the nine months ended March 31, 2023

Net interest income increased $1.1 million to $15.2 million for the three months ended March 31, 2023 from $14.1 million for the three months ended March 31, 2022. Net interest income increased $4.1 million to $47.0 million for the nine months ended March 31, 2023 from $42.9 million for the nine months ended March 31, 2022. The increase in net interest income was the result of growth in the average balance of interest-earning assets, which increased $166.8 million and $227.0 million when comparing the three and nine months ended March 31, 2023 and 2022, respectively, and increases in interest rates on interest-earning assets, which increased 89 and 52 basis points when comparing the three and nine months ended March 31, 2023 and 2022, respectively. The increase in net interest income was offset by increases in the average balance of interest-bearing liabilities, which increased $180.9 million and $237.6 million when comparing the three and nine months ended March 31, 2023 and 2022, respectively, and increases in rates paid on interest-bearing liabilities, which increased 96 and 60 basis points when comparing the three and nine months ended March 31, 2023 and 2022, respectively.

Net interest rate spread and margin both decreased when comparing the nine months ended March 31, 2023 and 2022. Net interest rate spread decreased 7 and 8 basis points to 2.31% and 2.43% for the three and nine months ended March 31, 2023 compared to 2.38% and 2.51% for the three and nine months ended March 31, 2022, respectively. Net interest margin increased 2 basis points to 2.43%, for the three months ended March 31, 2023 compared to 2.41% for the three months ended March 31, 2022. Net interest margin decreased 1 basis point to 2.53%, for the nine months ended March 31, 2023 compared to 2.54% for the nine months ended March 31, 2022. The decrease during the current quarter was due to the higher interest rate environment, which resulted in higher 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 historic low levels.

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 2.66% and 2.56% for the three months ended March 31, 2023 and 2022, respectively, and was 2.73% and 2.69% for the nine months ended March 31, 2023 and 2022, respectively.

Provision for loan losses amounted to a benefit of $944,000 and a charge of $163,000 for the three months ended March 31, 2023 and 2022, respectively, and amounted to a benefit of $1.2 million and a charge of $2.4 million for the nine months ended March 31, 2023 and 2022, respectively. The benefit for the three and nine months ended March 31, 2023 was due to a decrease in the balance and reserve percentage on loans adversely classified, as loans were upgraded due to improvements in credit quality and loans were paid off during the quarter. This was partially offset by the growth in gross loans and increases in qualitative factors in the current quarter related to the economic environment as inflation continues to be high and the impact that higher interest rates have on borrowers. Loans classified as substandard or special mention totaled $36.6 million at March 31, 2023 and $52.1 million at June 30, 2022, a decrease of $15.5 million.  Reserves on loans classified as substandard or special mention totaled $4.8 million at March 31, 2023 compared to $9.6 million at June 30, 2022, a decrease of $4.8 million. There were no loans classified as doubtful or loss at March 31, 2023 or June 30, 2022. Allowance for loan losses to total loans receivable was 1.50% at March 31, 2023 compared to 1.82% at June 30, 2022.

Net charge-offs amounted to $190,000 and $108,000 for the three months ended March 31, 2023 and 2022, respectively, an increase of $82,000. Net charge-offs totaled $407,000 and $360,000 for the nine months ended March 31, 2023 and 2022, respectively. There were no significant charge offs in any loan segment during the three and nine months ended March 31, 2023.

Nonperforming loans amounted to $4.7 million and $6.3 million at March 31, 2023 and June 30, 2022, respectively. The decrease in nonperforming loans during the period was primarily due to $1.3 million in loan repayments, $134,000 in loans returning to performing status, and $508,000 in charge-offs or transfers to foreclosed, partially offset by $293,000 of loans placed into nonperforming status. At March 31, 2023 nonperforming assets were 0.19% of total assets compared to 0.25% at June 30, 2022. Nonperforming loans were 0.34% and 0.51% of net loans at March 31, 2023 and June 30, 2022, respectively.

Noninterest income increased $154,000, or 5.3%, to $3.1 million for the three months ended March 31, 2023 compared to $2.9 million for the three months ended March 31, 2022. Noninterest income decreased $20,000, or 0.2%, to $9.1 million for the nine months ended March 31, 2023 compared to $9.1 million for the nine months ended March 31, 2022. The decrease for the nine month period was primarily due to a decrease in investment service income and a net loss on sale of available for sale securities. This was partially offset by an increase in debit card fees and service charges on deposit accounts resulting from continued growth in the number of checking accounts with debit cards and the number of deposit accounts, and the income from bank owned life insurance.

Noninterest expense increased $1.5 million or 18.5%, to $9.9 million for the three months ended March 31, 2023 compared to $8.3 million for the three months ended March 31, 2022. Noninterest expense increased $4.0 million, or 16.2%, to $28.6 million for the nine months ended March 31, 2023, compared to $24.6 million for the nine months ended March 31, 2022. The increase during the three and nine months ended March 31, 2023 was primarily due increases in salaries and employee benefits expense due to new positions created during the period to support the Company’s growth. The increase during the nine months ended March 31, 2023 was also due to a non-recurring litigation reserve expense of $1.2 million.

Provision for income taxes reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements. The effective tax rate was 13.7% and 15.0% for the three and nine months ended March 31, 2023, respectively, and 15.6% and 15.2% for the three and nine months ended March 31, 2022, respectively. The statutory tax rate is impacted by the benefits derived from tax-exempt bond and loan income, the Company’s real estate investment trust subsidiary income, income received on the bank owned life insurance, as well as the tax benefits derived from premiums paid to the Company’s pooled captive insurance subsidiary to arrive at the effective tax rate. The decrease in the current quarter’s effective tax rate was the result of an increase in tax-exempt income proportional to total income.

Total assets of the Company were $2.7 billion at March 31, 2023 and $2.6 billion at June 30, 2022, an increase of $157.4 million, or 6.1%.

Cash and due from banks for the Company were $178.3 million at March 31, 2023 and $69.0 million at June 30, 2022, an increase of $109.3 million, or 158.4%. The Company increased the overall cash position to bolster the current liquidity position in response to the current turmoil in the banking sector.

Securities available-for-sale and held-to-maturity decreased $116.1 million, or 9.9%, to $1.1 billion at March 31, 2023 as compared to $1.2 billion at June 30, 2022. The decrease was the result of utilizing maturing investments to fund loan growth during the period and due to the increase in unrealized loss on available-for-sale securities of $2.3 million. Securities purchases totaled $146.5 million during the nine months ended March 31, 2023 and consisted primarily of $144.5 million of state and political subdivision securities. Principal pay-downs and maturities during the nine months ended March 31, 2023 amounted to $256.4 million, primarily consisting of $229.8 million of state and political subdivision securities, and $24.2 million of mortgage-backed securities.

Net loans receivable increased $159.0 million, or 12.9%, to $1.4 billion at March 31, 2023 from $1.2 billion at June 30, 2022.  The loan growth experienced during the nine months consisted primarily of $107.1 million in commercial real estate loans, $14.0 million in residential real estate loans, $2.3 million in residential construction and land loans, $3.4 million in multi-family loans, and $25.1 million in commercial construction loans.

Deposits totaled $2.5 billion at March 31, 2023 and $2.2 billion at June 30, 2022, an increase of $259.7 million, or 11.7%. NOW deposits increased $265.2 million, or 17.9%, and certificates of deposits increased $80.6 million, or 197.5% when comparing March 31, 2023 and June 30, 2022. Included within certificates of deposits at March 31, 2023 and June 30, 2022 were $74.6 million and $7.2 million in brokered certificates of deposits, respectively, an increase of $67.4 million. The additional brokered deposits were obtained in an abundance of caution to support the Company’s overall liquidity and cash position, in response to the current turmoil in the banking sector. Money market deposits decreased $30.5 million, or 19.4%, savings deposits decreased $32.4 million, or 9.4%, and noninterest-bearing deposits decreased $23.2 million, or 12.3% when comparing March 31, 2023 and June 30, 2022.

Borrowings for the Company amounted to $49.4 million at March 31, 2023 compared to $173.0 million at June 30, 2022, a decrease of $123.6 million.  At March 31, 2023, borrowings consisted of $49.4 million of Fixed-to-Floating Rate Subordinated Notes.

Shareholders’ equity increased to $178.7 million at March 31, 2023 from $157.7 million at June 30, 2022, resulting primarily from net income of $24.3 million, partially offset by dividends declared and paid of $1.6 million and an increase in accumulated other comprehensive loss of $1.7 million. As of March 31, 2023, capital levels remain strong for The Bank of Greene County and its subsidiary Greene County Commercial Bank.