GCBC Greene County Bancorp Inc

Notes to Financial Statements

As of and for the Years ended December 31, 2022 and 2021

NOTE A – DESCRIPTION OF PLAN

 

The following brief description of The Bank of Greene County Employees' Savings & Profit Sharing Plan and Trust (the Plan) provides only general information.  Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

The Plan is a defined contribution plan covering eligible employees of The Bank of Greene County (the Company or the Sponsor).  Employees who complete three months of service and perform a minimum of 250 hours of service are eligible to participate in the Plan.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

Each year participants may contribute up to 50% of pre-tax and post-tax annual compensation, as defined in the Plan, up to the maximum allowable under the Internal Revenue Code (IRC). The post-tax contributions are deferrals to Roth accounts. Participants who are age 50 or older may elect to defer additional amounts called “catch-up” contributions.  Rollover and transfer contributions from another qualified retirement plan or special individual retirement plan are permitted.

Participants direct the investment of their contributions into various investment options offered by the Plan.

Matching contributions made by the Sponsor to the Plan are calculated as 100% of each participant’s contributions up to 3% of compensation plus 50% of the next 3% of compensation for a total matching contribution of up to 4.5% of compensation as defined by the Plan.  Contributions are subject to certain limitations.

Participants direct the investment of their contributions into various options offered by the Plan.  Each participant’s account is credited with the participant’s contribution and allocations of (a) the Company’s matching contributions, and (b) Plan earnings (losses), and is charged with an allocation of administrative expenses.  Allocations are based on participant earnings or account balances as defined.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.  Participants may direct the investment of their account balances into various investment options offered by the Plan.  Currently, the Plan offers mutual funds, money market funds, self-directed brokerage accounts, common collective trust fund and the Sponsor’s stock as investment options for participants.  Participants may change their investment options to prospectively increase or decrease the amount of their elective deferrals at such times established by the Plan administrator in a uniform and nondiscriminatory manner.

Participants are immediately vested in their contributions plus actual earnings (losses) thereon.  Vesting in the Company’s contribution portion of their accounts is based on continuous service.  Safe harbor matching contributions made to the Plan are 100% vested upon the completion of two years of employment.  Non-safe harbor matching contributions are 100% vested upon the completion of six years of continuous employment.

Benefit payments to participants are recorded upon distribution.  Upon termination of service, disability, death or retirement, participants will receive an amount equal to the value of their accounts in a single lump-sum payment, or in partial payments or systematic installment payments.

The Plan permits the payment of Plan expenses to be made from the Plan’s assets.  These expenses are allocated proportionately based on the value of the account balances of each participant in the Plan.  Loan fees are paid by the borrower. Administrative expenses may also be made from forfeitures by non-vested participants and by the Sponsor. The payment of expenses by the Sponsor is not mandated by the Plan and is done so at the discretion of the Sponsor.

Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their account balance.  Note terms range from 1-5 years; longer terms are available if used for the purchase of a primary residence.  The notes are collateralized by the balance in the participant’s account and bear interest at prime rate plus 1%.  Processing fees for new notes and annual maintenance fees on outstanding notes are charged to the participant’s account.  The interest rate was between 4.25% and 7.25% on loans outstanding for the year ended December 31, 2022. The interest rate was between 4.25% and 6.50% on loans outstanding for the year ended December 31, 2021. Principal and interest is paid ratably through biweekly payroll deductions.

Forfeitures by non-vested participants are generally used to reduce administrative fees or reduce employer matching contributions. Forfeited balances at December 31, 2022 were $4,431 and at December 31, 2021 were $1,043.  Further, forfeitures used to reduce employer matching contributions were $5,000 during 2022 and were $4,300 during 2021.  Forfeitures used to pay administrative expenses were not significant during 2022 and 2021.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements of the Plan are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

The preparation of the Plan’s financial statements in conformity with accounting principles generally accepted in the United States of America requires the plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities at the date of the financial statements.  Actual results could differ from those estimates, and such differences may be significant.

The Plan invests in various investment securities.  Investment securities are exposed to various risks such as interest rate, market and credit risk.  Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

The Plan maintains cash balances to settle investment transactions.  Such balances are not insured.

The Plan’s investments are reported at fair value.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  See Note E for discussion of fair value measurements.

Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded on the accrual basis.  Dividends are recorded on the ex-dividend date.  Net (depreciation) appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Net investment returns reflect certain fees paid by the various investment funds to their affiliated investment advisors, transfer agents, and others as further described in each fund prospectus or other published documents.  These fees are deducted prior to allocation of the Plan’s investment earnings activity and thus not separately identifiable as an expense.

Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest.  Delinquent notes are reclassified as distributions based on the terms of the plan document.

NOTE C – PLAN TERMINATION

Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA.  Upon termination of the Plan, all amounts credited to the accounts of the participants shall vest and become non-forfeitable and the employer shall direct the trustee to make or commence distribution to, or on behalf of, each participant the value of his or her account balance in the Plan.

NOTE D – PARTY-IN-INTEREST TRANSACTIONS

Plan investments were managed by the trustee of the Plan, Reliance Trust Company, for the 2022 and 2021 plan years.  Transactions in such investments qualify as party-in-interest transactions, which are exempt from prohibited transaction rules.  Notes receivable from participants totaling $300,862 and $434,658 at December 31, 2022 and 2021, respectively, qualify as party-in-interest transactions and are secured by balances in the respective participant accounts.

In 2022 and 2021, the Plan provided participants the election of an investment in Greene County Bancorp, Inc.’s common stock through a unitized company stock fund. As of December 31, 2022, the Plan held 17,595 units of Greene County Bancorp, Inc.’s common stock fund at a per-unit price of $360.85. As of December 31, 2021, the Plan held 21,000 units of Greene County Bancorp, Inc.’s common stock fund at a per-unit price of $232.63. Assets held in this fund are expressed in terms of units and not shares of stock.  Each unit represents a proportionate interest in all of the assets of this fund.

The value of Greene County Bancorp, Inc.’s common stock held within each participant’s account is determined each business day by the number of units to the participant’s credit, multiplied by the current unit value.  The return on the participant’s investment is based on the value of units, which, in turn, is determined by the market price of the Greene County Bancorp, Inc.’s common stock and by the interest earned on a percentage of the fund’s market value held in a money market fund.  As of December 31, 2022, the unitized company stock fund consisted of Greene County Bancorp, Inc.’s common stock at a market value of $6,018,248 and a money market fund at a market value of $337,468.  As of December 31, 2021, the unitized company stock fund consisted of Greene County Bancorp, Inc.’s common stock at a market value of $4,641,158 and a money market fund at a market value of $245,249.  A percentage of the total market value of the unitized company stock fund is held in a money market fund to facilitate daily participant trading.  As of December 31, 2022, the Plan held 104,811 shares of Greene County Bancorp, Inc. common stock in the unitized common stock fund with a market value of $6,018,248 at a price per share of $57.42. As of December 31, 2021, the Plan held 126,290 shares of Greene County Bancorp, Inc. common stock in the unitized common stock fund with a market value of $4,641,158 at a price per share of $36.75.

NOTE E – FAIR VALUE MEASUREMENTS

 

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value.  That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 2:

Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3:

Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following is a description of the valuation methodology used for investments measured at fair value.  There have been no changes in the methodologies used during the years ended December 31, 2022 and 2021.

Level 1 Fair Value Measurements

The fair value of mutual funds, employer stock and self-directed brokerage accounts is valued based on quoted market prices.  Money market funds are valued based on quoted net asset values of the shares held by the Plan at year end.

The Plan held mutual funds at December 31, 2022 and 2021 as described below.

The objective of the Dodge & Cox Income Fund is to seek high and stable rate of current income, consistent with long-term preservation of capital.  A secondary objective is to take advantage of opportunities to realize capital appreciation.  The Fund invests in a diversified portfolio of high-quality bonds and other debt securities.

The objective of the Vanguard Inflation Protected Secs Fund (Adm) is to seek to provide inflation protection and income consistent with investment in inflation-indexed securities.  The Fund invests primarily in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations.

The objective of the Vanguard Small Cap Index Fund (Adm) is to track the performance of the CRSP US Small Cap Index, a broadly diversified index of stocks of smaller U.S. companies.  The Fund invests all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the index.

The objective of the Vanguard Mid Cap Index Fund (Adm) is to track the performance of the CRSP US Mid Cap Index, a broadly diversified index of stocks of mid-size U.S. companies.  The Fund invests all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the index.

The objective of the Vanguard Value Index Fund (Adm) is to track the performance of the CRSP US Large Cap Value Index that measures the investment return of large-capitalization value stocks. The Fund employs an indexing investment approach designed to track the performance of the index which is predominantly made up of value stocks of large U.S. companies.

The objective of the LSV Value Equity Fund (I) is to seek long-term growth of capital. The Fund invests primarily in equity securities of companies believed to be undervalued in the marketplace at the time of purchase and have potential for near-term appreciation.  Although the Fund may invest in securities of companies of any size, the Fund generally invests in companies with market capitalizations of $1 billion or more.

The objective of the T. Rowe Price Blue Chip Growth Fund is to provide long-term capital growth.  Income is a secondary objective.  The Fund normally invests in the common stocks of large- and medium-sized blue chip companies that are well established in their industries and have the potential for above-average earnings growth.

The objective of the American Funds EuroPacific Growth Fund (R6) is long-term growth of capital.  The Fund normally invests primarily in common stocks of issuers in Europe and the Pacific Basin believed to have the potential for growth.  A portion of assets may be invested in common stocks and other securities of companies in emerging markets.

The objective of the Invesco Global Fund (R6) is capital appreciation.  The Fund invests mainly in common stock of U.S. and foreign companies. It may invest without limit in foreign securities and can invest in any country, including countries with developing or emerging markets. The Fund currently emphasizes its investments in developed markets such as the United States, Western European countries and Japan. It does not limit its investments to companies in a particular capitalization range, but primarily invests in mid- and large-cap companies. The Fund normally will invest in at least three countries.

The objective of the Vanguard Target Retirement Income Fund (Inv) is to provide current income and some capital appreciation.  The Fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors currently in retirement.

Net Asset Value (NAV) as Fair Value

Common collective trust funds are comprised of units in such collective trust funds that are not publicly traded.  The underlying assets in these funds (common stock, preferred stock, collective investment funds, U.S. Government and Agency Obligations, debt instruments, insurance investment contracts, global wrap synthetic investment contracts, securities lending funds, repurchase agreements, futures contracts, and foreign currency contracts) are valued where applicable on exchanges and price quotes for the assets held by these funds are readily available.  When current market prices or quotations are not available, valuations are determined using valuation models adopted by the Trustee or other inputs principally from or corroborated by observable market data.  Common collective trust funds are valued at their net asset value (NAV) on the last day of the calendar year of the period; as a result, these investments are not classified within the fair value hierarchy.

Investments in common/collective trust funds are valued at the net value of participation units held by the Plan at year-end. The value of these units is determined by the trustee based on the current market values of the underlying assets of the common/collective trust fund as based on information reported by the investment advisor using the audited financial statements of the common/collective trust fund at year end.  The Plan held collective trust funds at December 31, 2022 and 2021 as described below.

The objective of the Metlife Stable Value Fund – Series 25053 Class 0, common/collective trust fund is to provide safety and preservation of principal and accumulated interest for participant-initiated transactions.  The interest credited to balances in this fund will reflect both current market conditions and performance of the underlying investments in this fund.  This fund invests entirely in the MetLife Group Annuity Contract 25053 which consists of separately managed investment portfolios directed by Reliance Trust Company.  This fund is a bank collective trust fund for which Reliance Trust Company serves as the trustee and investment manager.  This fund is not FDIC-insured or registered with the Securities and Exchange Commission. There are no unfunded commitments and no withdrawal restrictions.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan’s management believes the valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain investments could result in a different fair value measurement at the reporting date.

^a In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.  The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statements of net assets available for benefits.

NOTE F – TAX STATUS

The Plan is operating under a volume submitter profit sharing plan with CODA sponsored by Pentegra Services, Inc.  The volume submitter profit sharing plan obtained its latest determination letter on June 30, 2020, in which the Internal Revenue Service stated that the volume submitter profit sharing plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code.  The plan has been amended since receiving the determination letter, however, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code and, therefore, believe the Plan is qualified, and the related trust is tax-exempt.

EIN: 14-0553610, Plan No. 002

The Bank of Greene County Employees’ Savings & Profit Sharing Plan and Trust

Attachment to Form 5500, Schedule H, Part IV, LINE 4i –

Schedule of Assets (Held at End of Year)

December 31, 2022

*Party-In-Interest

**Historical cost has not been presented since this investment is participant-directed.

The accompanying notes are an integral part of this schedule.