GREENE COUNTY BANCORP INC

Greene County Bancorp, Inc. operates as the federally chartered holding company of the Bank of Greene County, a federally chartered savings bank, and its subsidiaries Greene County Commercial Bank, a New York State-chartered limited purpose commercial bank, and Greene Property Holdings, Ltd., a real estate investment trust. The Company's primary market area consists of the Hudson Valley and Capital District Regions of New York State, specifically Greene, Columbia, Albany, Ulster and Rensselaer Counties. The Company faces significant competition from a high density of financial institutions, including online competitors, many of which are larger institutions with greater financial resources, as well as from commercial banks, savings banks, credit unions, mortgage-banking companies, insurance companies, securities and brokerage firms, and fintech firms.

The Company's competitive positioning is built on its community bank model, offering a variety of financial services to meet the needs of the communities it serves. At June 30, 2025, the Company operated 18 ¹ full-service banking offices, lending centers, an operations center, customer call center, administration center and a wealth management center. The Company's mutual holding company, Greene County Bancorp, MHC, owns 54.1% ² of the issued and outstanding common stock of Greene County Bancorp, Inc. The Company emphasizes high quality underwriting standards and does not engage in sub-prime lending or other exotic loan products.

The Company generates revenue primarily by attracting retail deposits from the general public in the areas surrounding its branches and investing those deposits, together with funds generated from operations and borrowings, primarily in residential mortgage loans, commercial real estate mortgage loans, consumer loans, home equity loans and commercial business loans. A significant portion of assets is also invested in state and political subdivision securities and mortgage-backed securities. Revenues are derived principally from interest on residential and commercial real estate mortgages, and to a lesser extent from interest on consumer and commercial loans and other securities, as well as from servicing fees, service charges on deposit accounts, debit card fee income, and bank owned life insurance income. The Bank also offers investment alternatives through Osaic Institutions, Inc., rebranded as Greene Investment Services.

The Company's principal lending activity is the origination, for retention in its portfolio, of fixed-rate and adjustable-rate mortgage loans collateralized by residential and commercial real estate primarily located within its primary market area. The Company also originates home equity loans, line of credit products, consumer loans and commercial business loans, and has increased its focus on all aspects of commercial lending. At June 30, 2025, the loan portfolio consisted of $417.719 million ³ in residential real estate loans, $1.054504 billion ⁴ in commercial real estate loans, $34.103 million ⁵ in home equity loans, $4.311 million ⁶ in consumer loans, and $116.769 million ⁷ in commercial loans. Commercial real estate loans are the largest segment, comprising 64.8% ⁸ of total loans, with non-owner occupied loans representing 84.4% ⁹ of commercial real estate loans. The Company's securities portfolio is managed with a risk management approach of diversified investing among short-, intermediate- and long-term categories, and the Company generally does not engage in balance sheet derivative or hedging transactions. At June 30, 2025, the Company held $356.062 million ¹⁰ in securities available-for-sale and $776.147 million ¹¹ in securities held-to-maturity, net of allowance. The Company also operates a limited-purpose subsidiary, Greene County Commercial Bank, which had $1.210940 billion ¹² in assets and $1.184514 billion ¹³ in deposits at June 30, 2025, primarily from local municipalities.

During fiscal 2025, the Company purchased $53.4 million ¹⁴ of commercial real estate loans outside of its primary market area, for which full due diligence was completed. The Company also purchased $17.4 million ¹⁵ of residential loans outside of its primary market area during fiscal 2024. The Company has a stock repurchase program adopted on September 17, 2019, authorizing the repurchase of up to 400,000 ¹⁶ shares of its common stock. As of June 30, 2025, the Company had repurchased 48,800 ¹⁷ shares under this program, with no repurchases during fiscal 2025. The Company has issued subordinated notes as a cost effective way to raise regulatory capital, including $20.0 million ¹⁸ in 4.75% Fixed-to-Floating Rate Subordinated Notes due September 15, 2030, and $30.0 million ¹⁹ in 3.00% Fixed-to-Floating Rate Subordinated Notes due September 15, 2031. The Company also entered into interest rate swap agreements with commercial customers, with a notional amount of $18.9 million ²⁰ in risk participation agreements transferred out and $130.9 million ²¹ in risk participation agreements held as of June 30, 2025.

Net income for the year ended June 30, 2025 was $31.138 million ²², or $1.83 ²³ per basic and diluted share, compared to $24.769 million ²⁴, or $1.45 ²⁵ per basic and diluted share, for the year ended June 30, 2024, an increase of $6.3 million, or 25.7% ²⁶. Total assets grew $214.8 million, or 7.6% ²⁷, to $3.040609 billion ²⁸ at June 30, 2025 from $2.825788 billion ²⁹ at June 30, 2024. Net loans increased $127.0 million, or 8.6% ³⁰, to $1.607260 billion ³¹ at June 30, 2025. Deposits increased $250.6 million, or 10.5% ³², to $2.639835 billion ³³ at June 30, 2025. Net interest income increased $9.1 million ³⁴ to $60.121 million ³⁵ for fiscal 2025 from $50.979 million ³⁶ in fiscal 2024. The net interest rate spread increased 22 basis points to 1.97% ³⁷ for fiscal 2025, and the net interest margin increased 21 basis points to 2.19% ³⁸.

The Company has emphasized growing its commercial lending department and believes it has developed a strong team of lenders, credit and business development staff, resulting in continued growth in these portfolios. 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 has a new focus on first time home buyer loans and has been successful in marketing and originating adjustable-rate loans, particularly in the higher interest rate environment. The Company also continues to utilize high quality underwriting standards and does not engage in sub-prime lending or other exotic loan products.

The Company's growth strategy includes expanding its municipal deposit base through Greene County Commercial Bank, which had $1.2 billion ³⁹ in deposits at June 30, 2025. The Company has formed relationships with other community banks within its region to participate in and participate out larger commercial loan relationships, allowing it to obtain loan relationships while limiting credit exposure. The Company also offers investment alternatives through Osaic Institutions, Inc., rebranded as Greene Investment Services, which contributes to revenues.

The Company's net interest rate spread increased 22 basis points to 1.97% ⁴⁰ for the year ended June 30, 2025, compared to 1.75% ⁴¹ for the prior year. Net interest margin increased 21 basis points to 2.19% ⁴² for fiscal 2025, compared to 1.98% ⁴³ in fiscal 2024. The efficiency ratio improved to 52.25% ⁴⁴ for fiscal 2025 from 57.49% ⁴⁵ in fiscal 2024. Noninterest expense increased $2.1 million, or 5.6% ⁴⁶, to $39.372 million ⁴⁷ for fiscal 2025, primarily due to increases in salaries and employee benefits, service and data processing fees, and occupancy expenses.

The Company continues to expand investments in information technology security, including continuous end-user training, layered defenses, identifying and protecting critical assets, and strengthening monitoring and alerting. The Company had 190 ⁴⁸ full-time employees and 22 ⁴⁹ part-time employees at the Bank of Greene County as of June 30, 2025, with an average tenure of approximately 7.5 years ⁵⁰. The Company invests in employee development through professional development opportunities, a tuition reimbursement program, and professional certifications.

The Company's capital allocation strategy includes the retention of earnings, less dividends paid, and proceeds from the issuance of subordinated debt. The Company declared dividends of $0.36 ⁵¹ per share for fiscal 2025, compared to $0.32 ⁵² per share in fiscal 2024. The dividend payout ratio was 19.67% ⁵³ for fiscal 2025. The Company has a stock repurchase program authorizing up to 400,000 ⁵⁴ shares, with 48,800 ⁵⁵ shares repurchased as of June 30, 2025. Purchases of premises and equipment totaled $691,000 ⁵⁶ during fiscal 2025, primarily for data equipment and surveillance systems. Securities purchases totaled $444.2 million ⁵⁷ during fiscal 2025.

The Company faces significant competition in its market area, which has a high density of financial institutions, including online competitors and larger institutions with greater financial resources. Competition for deposits, loan origination, and other financial services may limit the Company's growth and adversely impact its profitability. The Company's results of operations are significantly affected by general economic and competitive conditions, changes in interest rates, and government policies and actions of regulatory authorities. The Company's primary market areas in Greene, Columbia, Albany, Ulster and Rensselaer Counties have economies dependent on tourism, state government, health care services, higher education, and technology jobs.

The Company's most significant form of market risk is interest rate risk, as most of its assets and liabilities are sensitive to changes in market prices and interest rates. The Company's assets consist primarily of mortgage loans with longer maturities than its liabilities, which consist primarily of deposits. The Company's net interest income sensitivity analysis indicates a relatively low level of exposure to rising rates, with the primary risk being a declining rate environment. The Company's EVE modeling projects that as of the reporting date, the EVE remains within the Company's policy limits in response to instantaneous rate shocks.

The Company's most significant market risk is interest rate risk, as its assets consist primarily of longer-term mortgage loans while its liabilities consist primarily of shorter-term deposits, and a rising interest rate environment could compress net interest income. Credit risk is material, particularly in the commercial real estate loan portfolio, which represents 64.8% ⁵⁸ of total loans and includes $282.342 million ⁵⁹ in non-owner occupied multi-family loans and $72.015 million ⁶⁰ in non-owner occupied construction loans, with non-performing assets totaling $3.060 million ⁶¹ at June 30, 2025. The Company faces significant competition from larger financial institutions and online competitors in its market area, which could limit growth and adversely impact profitability. The Company's municipal deposit concentration is substantial, with $1.184514 billion ⁶² in municipal deposits representing 44.9% ⁶³ of total deposits, and uninsured deposits after exclusions were $329.042 million ⁶⁴ at June 30, 2025, which could be subject to rapid withdrawal. The Company is subject to extensive regulation, and effective March 31, 2026, it will become subject to FRB consolidated regulatory capital requirements as its assets exceeded $3 billion ⁶⁵ at June 30, 2025.

Management's message emphasizes the Company's strong financial performance for fiscal 2025, with net income increasing to $31.138 million ⁶⁶ from $24.769 million ⁶⁷ in the prior year, driven by growth in net interest income and noninterest income. The strategic priorities emphasized include continued growth in the commercial lending department, maintaining high quality underwriting standards, and expanding customer relationships through a focus on first time home buyer loans and adjustable-rate mortgage products. Management also highlights the Company's strong liquidity position, with cash and cash equivalents of $183.078 million ⁶⁸ and significant borrowing capacity, and its commitment to managing interest rate risk through balance sheet composition rather than derivative hedging transactions.