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EXCEL - IDEA: XBRL DOCUMENT - GREENE COUNTY BANCORP INCFinancial_Report.xls
EX-31.1 - EXHIBIT 31.1 - GREENE COUNTY BANCORP INCex31_1.htm
EX-32.2 - EXHIBIT 32.2 - GREENE COUNTY BANCORP INCex32_2.htm
EX-31.2 - EXHIBIT 31.2 - GREENE COUNTY BANCORP INCex31_2.htm
EX-32.1 - EXHIBIT 32.1 - GREENE COUNTY BANCORP INCex32_1.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
 
GREENE COUNTY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Commission file number  0-25165
 
United States
14-1809721
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer  Identification Number)
 
302 Main Street, Catskill, New York
12414
(Address of principal executive office)
(Zip code)

Registrant's telephone number, including area code: (518) 943-2600

Check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes: x   No: o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes: x    No: o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
Accelerated filer o
Non-accelerated filer   o
Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes: o  No: x
 
As of November 14, 2014, the registrant had 4,216,857 shares of common stock outstanding at $ 0.10 par value per share.
 


GREENE COUNTY BANCORP, INC.

INDEX

PART I.
FINANCIAL INFORMATION
 
   
Page
Item 1.
Financial Statements (unaudited)
 
 
3
 
4
 
5
 
6
 
7
 
8-26
     
Item 2.
27-38
     
Item 3.
38
     
Item 4.
38
     
PART II.
OTHER INFORMATION
 
     
Item 1.
39
     
Item 1A.
39
     
Item 2.
39
     
Item 3.
39
     
Item 4.
39
     
Item 5.
39
     
Item 6.
39
     
 
40
 
Exhibit 31.1 302 Certification of Chief Executive Officer
 
 
Exhibit 31.2 302 Certification of Chief Financial Officer
 
 
Exhibit 32.1 906 Statement of Chief Executive Officer
 
 
Exhibit 32.2 906 Statement of Chief Financial Officer
 
 
Exhibit 101 Extensible Business Reporting Language (XBRL)
 
 
2

Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of September 30, 2014 and June 30, 2014
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
 
September 30, 2014
   
June 30, 2014
 
Total cash and cash equivalents
 
$
19,735
   
$
13,809
 
                 
Long term certificate of deposit
   
250
     
250
 
Securities available for sale, at fair value
   
65,315
     
56,151
 
Securities held to maturity, at amortized cost (fair value $184,608 at September 30, 2014; $181,932 at June 30, 2014)
   
184,235
     
181,946
 
Federal Home Loan Bank stock, at cost
   
1,444
     
1,561
 
                 
Loans
   
413,543
     
405,841
 
Allowance for loan losses
   
(7,720
)
   
(7,419
)
Unearned origination fees and costs, net
   
871
     
887
 
Net loans receivable
   
406,694
     
399,309
 
                 
Premises and equipment
   
14,357
     
14,307
 
Accrued interest receivable
   
2,918
     
2,710
 
Foreclosed real estate
   
336
     
473
 
Prepaid expenses and other assets
   
3,752
     
3,645
 
Total assets
 
$
699,036
   
$
674,161
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Noninterest bearing deposits
 
$
70,236
   
$
67,446
 
Interest bearing deposits
   
541,072
     
522,128
 
Total deposits
   
611,308
     
589,574
 
                 
Borrowings from Federal Home Loan Bank, short-term
   
4,800
     
3,150
 
Borrowings from Federal Home Loan Bank, long-term
   
14,500
     
14,500
 
Accrued expenses and other liabilities
   
5,629
     
5,737
 
Total liabilities
   
636,237
     
612,961
 
                 
SHAREHOLDERS' EQUITY
               
Preferred stock, Authorized - 1,000,000 shares; Issued - None
   
-
     
-
 
Common stock, par value $.10 per share; Authorized - 12,000,000 shares; Issued - 4,305,670 shares Outstanding 4,216,857 shares at September 30, 2014, and 4,213,757 shares at June 30, 2014
   
431
     
431
 
Additional paid-in capital
   
11,229
     
11,208
 
Retained earnings
   
52,736
     
51,305
 
Accumulated other comprehensive loss
   
(927
)
   
(1,050
)
Treasury stock, at cost 88,813 shares at September 30, 2014, and 91,913 shares at June 30, 2014
   
(670
)
   
(694
)
Total shareholders’ equity
   
62,799
     
61,200
 
Total liabilities and shareholders’ equity
 
$
699,036
   
$
674,161
 
 
See notes to consolidated financial statements
 
3

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
(In thousands, except share and per share amounts)

   
2014
   
2013
 
Interest income:
       
Loans
 
$
4,839
   
$
4,498
 
Investment securities - taxable
   
143
     
166
 
Mortgage-backed securities
   
705
     
650
 
Investment securities - tax exempt
   
552
     
510
 
Interest bearing deposits and federal funds sold
   
2
     
2
 
Total interest income
   
6,241
     
5,826
 
                 
Interest expense:
               
Interest on deposits
   
501
     
550
 
Interest on borrowings
   
61
     
28
 
Total interest expense
   
562
     
578
 
                 
Net interest income
   
5,679
     
5,248
 
Provision for loan losses
   
411
     
313
 
Net interest income after provision for loan losses
   
5,268
     
4,935
 
                 
Noninterest income:
               
Service charges on deposit accounts
   
716
     
676
 
Debit card fees
   
415
     
389
 
Investment services
   
102
     
105
 
E-commerce fees
   
28
     
26
 
Other operating income
   
208
     
154
 
Total noninterest income
   
1,469
     
1,350
 
                 
Noninterest expense:
               
Salaries and employee benefits
   
2,367
     
2,194
 
Occupancy expense
   
324
     
323
 
Equipment and furniture expense
   
76
     
113
 
Service and data processing fees
   
454
     
336
 
Computer software, supplies and support
   
233
     
114
 
Advertising and promotion
   
81
     
67
 
FDIC insurance premiums
   
91
     
89
 
Legal and professional fees
   
213
     
205
 
Other
   
438
     
371
 
Total noninterest expense
   
4,277
     
3,812
 
                 
Income before provision for income taxes
   
2,460
     
2,473
 
Provision for income taxes
   
685
     
719
 
Net income
 
$
1,775
   
$
1,754
 
                 
Basic earnings per share
 
$
0.42
   
$
0.42
 
Basic average shares outstanding
   
4,214,358
     
4,194,714
 
Diluted earnings per share
 
$
0.42
   
$
0.41
 
Diluted average shares outstanding
   
4,245,325
     
4,234,845
 
Dividends per share
 
$
0.180
   
$
0.175
 

See notes to consolidated financial statements
 
4

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
(In thousands)

   
2014
   
2013
 
Net Income
 
$
1,775
   
$
1,754
 
Other comprehensive income (loss):
               
Unrealized holding gains (losses) on available for sale securities, net of income taxes of $12 and ($356), respectively
   
18
     
(565
)
                 
Accretion of unrealized loss on securities transferred to held to maturity, net of income taxes of $67 and $2, respectively(1)
   
105
     
2
 
                 
Total other comprehensive income (loss), net of taxes
   
123
     
(563
)
                 
Comprehensive income
 
$
1,898
   
$
1,191
 

(1) The accretion of the unrealized holding losses in accumulated other comprehensive income at the date of transfer partially offsets the amortization of the difference between the par value and fair value of the investment securities at the date of transfer, and is an adjustment of interest income.

See notes to consolidated financial statements.
 
5

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
(In thousands)

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated Other Comprehensive Income
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at June 30, 2013
 
$
431
   
$
11,168
   
$
46,112
   
$
(750
)
 
$
(853
)
 
$
56,108
 
Options exercised
           
(14
)
                   
55
     
41
 
Tax benefit of stock based compensation
           
4
                             
4
 
Dividends declared
                   
(332
)
                   
(332
)
Net income
                   
1,754
                     
1,754
 
Other comprehensive loss, net of taxes
                           
(563
)
           
(563
)
Balance at September 30, 2013
 
$
431
   
$
11,158
   
$
47,534
   
$
(1,313
)
 
$
(798
)
 
$
57,012
 
                                                 
   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated Other Comprehensive Loss
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at June 30, 2014
 
$
431
     
11,208
   
$
51,305
   
$
(1,050
)
 
$
(694
)
 
$
61,200
 
Options exercised
           
15
                     
24
     
39
 
Tax benefit of stock based compensation
           
6
                             
6
 
Dividends declared
                   
(344
)
                   
(344
)
Net income
                   
1,775
                     
1,775
 
Other comprehensive income, net of taxes
                           
123
             
123
 
Balance at September 30, 2014
 
$
431
   
$
11,229
   
$
52,736
   
$
(927
)
 
$
(670
)
 
$
62,799
 
 
See notes to consolidated financial statements.
 
6

Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
(In thousands)

   
2014
     
2013
 
Cash flows from operating activities:
       
Net Income
 
$
1,775
   
$
1,754
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
130
     
174
 
Deferred income tax expense
   
635
     
651
 
Net amortization of premiums and discounts
   
344
     
495
 
Net amortization of deferred loan costs and fees
   
15
     
81
 
Provision for loan losses
   
411
     
313
 
Gain on sale of foreclosed real estate
   
(7
)
   
(3
)
Excess tax benefit from share-based payment arrangements
   
(6
)
   
(4
)
Net increase in accrued income taxes
   
30
     
20
 
Net increase in accrued interest receivable
   
(208
)
   
(207
)
Net increase in prepaid and other assets
   
(168
)
   
(25
)
Net decrease in other liabilities
   
(784
)
   
(282
)
Net cash provided by operating activities
   
2,167
     
2,967
 
                 
Cash flows from investing activities:
               
Securities available for sale:
               
Proceeds from maturities
   
2,250
     
-
 
Purchases of securities
   
(12,889
)
   
-
 
Principal payments on securities
   
1,394
     
2,395
 
Securities held to maturity:
               
Proceeds from maturities
   
5,091
     
6,934
 
Purchases of securities
   
(8,942
)
   
(7,147
)
Principal payments on securities
   
1,500
     
2,602
 
Net redemption of Federal Home Loan Bank Stock
   
117
     
275
 
Net increase in loans receivable
   
(7,969
)
   
(15,106
)
Proceeds from sale of foreclosed real estate
   
302
     
103
 
Purchases of premises and equipment
   
(180
)
   
(70
)
Net cash used by investing activities
   
(19,326
)
   
(10,014
)
                 
Cash flows from financing activities
               
Net decrease in short-term FHLB advances
   
1,650
     
(7,100
)
Proceeds from long-term FHLB advances
   
-
     
1,000
 
Payment of cash dividends
   
(344
)
   
(332
)
Proceeds from issuance of stock options
   
39
     
41
 
Excess tax benefit from share-based payment arrangements
   
6
     
4
 
Net increase in deposits
   
21,734
     
22,043
 
Net cash provided by financing activities
   
23,085
     
15,656
 
                 
Net increase in cash and cash equivalents
   
5,926
     
8,609
 
Cash and cash equivalents at beginning of period
   
13,809
     
6,222
 
Cash and cash equivalents at end of period
 
$
19,735
   
$
14,831
 
                 
Non-cash investing activities:
               
Foreclosed loans transferred to foreclosed real estate
 
$
158
     
--
 
Cash paid during period for:
               
Interest
 
$
572
   
$
581
 
Income taxes
 
$
20
   
$
48
 

See notes to consolidated financial statements
 
7

Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
As of and for the Three Months Ended September 30, 2014 and 2013

(1)
Basis of Presentation

The accompanying unaudited consolidated statement of financial condition as of June 30, 2014 was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, The Bank of Greene County (the “Bank”) and the Bank’s wholly owned subsidiary, Greene County Commercial Bank and Greene Property Holdings, Ltd.  The consolidated financial statements at and for the three months ended September 30, 2014 and 2013 are unaudited.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.  To the extent that information and notes required by GAAP for complete financial statements are contained in or are consistent with the audited financial statements incorporated by reference to Greene County Bancorp, Inc.’s Annual Report on Form 10-K for the year ended June 30, 2014, such information and notes have not been duplicated herein.  In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included.   Amounts in the prior year’s consolidated financial statements have been reclassified whenever necessary to conform to the current year’s presentation.  These reclassifications, if any, had no effect on net income or retained earnings as previously reported.  All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three months ended September 30, 2014 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2015.   These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.

CRITICAL ACCOUNTING POLICIES

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

Securities are evaluated for other-than-temporary impairment by performing periodic reviews of individual securities in the investment portfolio.  Greene County Bancorp, Inc. makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis.  The Company considers many factors, including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, intent to sell the security, the likelihood to be required to sell the security before it recovers the entire amortized cost, external credit ratings and recent downgrades.  The Company is required to record other-than-temporary impairment charges through earnings, if it has the intent to sell, or will more likely than not be required to sell an impaired debt security before a recovery of its amortized cost basis.  In addition, the Company is required to record other-than-temporary impairment charges through earnings for the amount of credit losses, regardless of the intent or requirement to sell.  Credit loss is measured as the difference between the present value of an impaired debt security’s cash flows and its amortized cost basis.  Non-credit related impairment must be recorded as decreases to accumulated other comprehensive income as long as the Company has no intent or requirement to sell an impaired security before a recovery of amortized cost basis.

(2)
Nature of Operations

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its two banking subsidiaries.  The Bank of Greene County has twelve full-service offices and an operations center located in its market area within the Hudson Valley Region of New York State.    The Bank of Greene County is primarily engaged in the business of attracting deposits from the general public in The Bank of Greene County’s market area, and investing such deposits, together with other sources of funds, in loans and investment securities.  Greene County Commercial Bank’s primary business is to attract deposits from and provide banking services to local municipalities.
 
8

(3)
Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could materially differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the assessment of other-than-temporary security impairment.

While management uses available information to recognize losses on loans, future additions to the allowance for loan losses (the “Allowance”) may be necessary, based on changes in economic conditions, asset quality or other factors.  In addition, various regulatory authorities, as an integral part of their examination process, periodically review the Allowance.  Such authorities may require the Company to recognize additions to the Allowance based on their judgments of information available to them at the time of their examination.

Greene County Bancorp, Inc. makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis.  The Company considers many factors including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, intent to sell the security, whether it is more likely than not we will be required to sell the security before recovery, whether loss of the entire amortized cost is expected, external credit ratings and recent downgrades.  Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value.

(4)
Securities

Securities at September 30, 2014 consisted of the following:
 
(In thousands)
 
Amortized Cost
   
Gross Unrealized
Gains
   
Gross Unrealized
 Losses
   
Estimated Fair
Value
 
Securities available for sale:
               
U.S. government sponsored enterprises
 
$
8,633
   
$
211
   
$
-
   
$
8,844
 
State and political subdivisions
   
14,211
     
21
     
-
     
14,232
 
Mortgage-backed securities-residential
   
8,924
     
181
     
22
     
9,083
 
Mortgage-backed securities-multi-family
   
28,206
     
115
     
216
     
28,105
 
Asset-backed securities
   
14
     
-
     
1
     
13
 
Corporate debt securities
   
4,557
     
338
     
17
     
4,878
 
Total debt securities
   
64,545
     
866
     
256
     
65,155
 
Equity securities
   
62
     
98
     
-
     
160
 
Total securities available for sale
   
64,607
     
964
     
256
     
65,315
 
Securities held to maturity:
                               
U.S. government sponsored enterprises
   
2,000
     
-
     
111
     
1,889
 
State and political subdivisions
   
95,411
     
835
     
132
     
96,114
 
Mortgage-backed securities-residential
   
21,467
     
1,016
     
-
     
22,483
 
Mortgage-backed securities-multi-family
   
64,451
     
781
     
1,993
     
63,239
 
Other securities
   
906
     
-
     
23
     
883
 
Total securities held to maturity
   
184,235
     
2,632
     
2,259
     
184,608
 
Total securities
 
$
248,842
   
$
3,596
   
$
2,515
   
$
249,923
 
 
9

Securities at June 30, 2014 consisted of the following:

(In thousands)
 
Amortized Cost
   
Gross Unrealized
Gains
   
Gross Unrealized
Losses
   
Estimated
Fair Value
 
Securities available for sale:
               
U.S. government sponsored enterprises
 
$
10,648
   
$
250
   
$
-
   
$
10,898
 
State and political subdivisions
   
1,324
     
23
     
-
     
1,347
 
Mortgage-backed securities-residential
   
9,345
     
213
     
13
     
9,545
 
Mortgage-backed securities-multi-family
   
29,268
     
89
     
339
     
29,018
 
Asset-backed securities
   
15
     
-
     
2
     
13
 
Corporate debt securities
   
4,811
     
375
     
16
     
5,170
 
Total debt securities
   
55,411
     
950
     
370
     
55,991
 
Equity securities
   
62
     
98
     
-
     
160
 
Total securities available for sale
   
55,473
     
1,048
     
370
     
56,151
 
Securities held to maturity:
                               
U.S. government sponsored enterprises
   
2,000
     
-
     
102
     
1,898
 
State and political subdivisions
   
91,634
     
787
     
204
     
92,217
 
Mortgage-backed securities-residential
   
22,785
     
1,150
     
-
     
23,935
 
Mortgage-backed securities-multi-family
   
64,605
     
759
     
2,381
     
62,983
 
Other securities
   
922
     
1
     
24
     
899
 
Total securities held to maturity
   
181,946
     
2,697
     
2,711
     
181,932
 
Total securities
 
$
237,419
   
$
3,745
   
$
3,081
   
$
238,083
 
 
Greene County Bancorp, Inc.’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations and certain mutual funds.  In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations.  The Company’s investments in mortgage-backed securities include pass-through securities and collateralized mortgage obligations issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA.  As of September 30, 2014 and June 30, 2014, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio.  The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured.  The obligations issued by school districts are supported by state aid.  Primarily, these investments are issued by municipalities within New York State.

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2014.


   
Less Than 12 Months
   
More Than 12 Months
   
Total
 
(In thousands, except number of securities)
 
Fair
Value
   
Unrealized Losses
   
Number of Securities
   
Fair
Value
   
Unrealized Losses
   
Number of Securities
   
Fair
Value
   
Unrealized Losses
   
Number of Securities
 
Securities available for sale:
                                   
Mortgage-backed securities-residential
 
$
4,154
   
$
22
     
2
   
$
-
   
$
-
     
-
   
$
4,154
   
$
22
     
2
 
Mortgage-backed securities-multi-family
   
2,880
     
22
     
2
     
15,523
     
194
     
6
     
18,403
     
216
     
8
 
Asset-backed securities
   
-
     
-
     
-
     
13
     
1
     
1
     
13
     
1
     
1
 
Corporate debt securities
   
764
     
17
     
2
     
-
     
-
     
-
     
764
     
17
     
2
 
Total securities available for sale
   
7,798
     
61
     
6
     
15,536
     
195
     
7
     
23,334
     
256
     
13
 
Securities held to maturity:
                                                                       
U.S. government sponsored enterprises
   
1,889
     
111
     
1
     
-
     
-
     
-
     
1,889
     
111
     
1
 
State and political subdivisions
   
6,516
     
119
     
29
     
928
     
13
     
5
     
7,444
     
132
     
34
 
Mortgage-backed securities-multi-family
   
26,705
     
1,426
     
7
     
11,595
     
567
     
5
     
38,300
     
1,993
     
12
 
Other securities
   
130
     
2
     
2
     
402
     
21
     
2
     
532
     
23
     
4
 
Total securities held to maturity
   
35,240
     
1,658
     
39
     
12,925
     
601
     
12
     
48,165
     
2,259
     
51
 
Total securities
 
$
43,038
   
$
1,719
     
45
   
$
28,461
   
$
796
     
19
   
$
71,499
   
$
2,515
     
64
 
 
10

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2014.

   
Less Than 12 Months
   
More Than 12 Months
   
Total
 
(In thousands, except number of securities)
 
Fair
Value
   
Unrealized Losses
   
Number of Securities
   
Fair
Value
   
Unrealized Losses
   
Number of Securities
   
Fair
Value
   
Unrealized Losses
   
Number of Securities
 
Securities available for sale:
                                   
Mortgage-backed securities-residential
 
$
4,302
   
$
13
     
2
   
$
-
   
$
-
     
-
   
$
4,302
   
$
13
     
2
 
Mortgage-backed securities-multi-family
   
4,448
     
5
     
3
     
19,404
     
334
     
7
     
23,852
     
339
     
10
 
Asset-backed securities
   
-
     
-
     
-
     
13
     
2
     
1
     
13
     
2
     
1
 
Corporate debt securities
   
767
     
16
     
2
     
-
     
-
     
-
     
767
     
16
     
2
 
Total securities available for sale
   
9,517
     
34
     
7
     
19,417
     
336
     
8
     
28,934
     
370
     
15
 
Securities held to maturity:
                                                                       
U.S. government sponsored enterprises
   
1,898
     
102
     
1
     
-
     
-
     
-
     
1,898
     
102
     
1
 
State and political subdivisions
   
6,693
     
175
     
34
     
1,815
     
29
     
11
     
8,508
     
204
     
45
 
Mortgage-backed securities-multi-family
   
26,522
     
1,617
     
7
     
15,440
     
764
     
6
     
41,962
     
2,381
     
13
 
Other securities
   
130
     
2
     
2
     
401
     
22
     
2
     
531
     
24
     
4
 
Total securities held to maturity
   
35,243
     
1,896
     
44
     
17,656
     
815
     
19
     
52,899
     
2,711
     
63
 
Total securities
 
$
44,760
   
$
1,930
     
51
   
$
37,073
   
$
1,151
     
27
   
$
81,833
   
$
3,081
     
78
 

When the fair value of a held to maturity or available for sale security is less than its amortized cost basis, an assessment is made as to whether other-than-temporary impairment (“OTTI”) is present.  The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover.  The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issuer (and guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a rating agency, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

For debt securities, OTTI is considered to have occurred if (1) the Company intends to sell the security, (2) it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, or (3) if the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.  In determining the present value of expected cash flows, the Company discounts the expected cash flows at the effective interest rate implicit in the security at the date of acquisition.  In estimating cash flows expected to be collected, the Company uses available information with respect to security prepayment speeds, default rates and severity.  In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

For debt securities, credit-related OTTI is recognized in income while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”).  Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis.  Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized.  For securities classified as held to maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods.  For equity securities, the entire amount of OTTI is recognized in income.  Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2014.  Management believes that the reasons for the decline in fair value are due to interest rates and widening credit spreads at the end of the quarter.

During the quarters ended September 30, 2014 and 2013, there were no sales of securities and no gains or losses were recognized.  There was no other-than-temporary impairment loss recognized during the quarters ended September 30, 2014 and 2013.
 
11

The estimated fair values of debt securities at September 30, 2014, by contractual maturity are shown below.  Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
(In thousands)
 
Available for sale debt securities
 
Amortized Cost
   
Fair Value
 
Within one year
 
$
17,093
   
$
17,134
 
After one year through five years
   
5,686
     
6,025
 
After five years through ten years
   
4,622
     
4,795
 
After ten years
   
-
     
-
 
Total available for sale debt securities
   
27,401
     
27,954
 
Mortgage-backed and asset-backed securities
   
37,144
     
37,201
 
Equity securities
   
62
     
160
 
Total available for sale securities
   
64,607
     
65,315
 
                 
Held to maturity debt securities
               
Within one year
   
28,754
     
28,788
 
After one year through five years
   
40,980
     
41,500
 
After five years through ten years
   
20,487
     
20,525
 
After ten years
   
8,096
     
8,073
 
Total held to maturity debt securities
   
98,317
     
98,886
 
Mortgage-backed
   
85,918
     
85,722
 
Total held to maturity securities
   
184,235
     
184,608
 
Total securities
 
$
248,842
   
$
249,923
 

As of September 30, 2014 and June 30, 2014, respectively, securities with an aggregate fair value of $205.4 million and $210.0 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank.  As of September 30, 2014 and June 30, 2014, securities with an aggregate fair value of $4.9 million were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window.  Greene County Bancorp, Inc. did not participate in any securities lending programs during the quarters ended September 30, 2014 or 2013.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula.  This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par.  As a result of these restrictions, FHLB stock is carried at cost.  FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value.  Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following:   its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position.  After evaluating these considerations, Greene County Bancorp, Inc. concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no other-than-temporary impairment charge was recorded during the fiscal quarters ended September 30, 2014 or 2013.

(5)
Loans and Allowance for Loan Losses

Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality and profitability of the Company’s loan portfolio.  The credit quality grade helps management make a consistent assessment of each loan relationship’s credit risk. Consistent with regulatory guidelines, The Bank of Greene County provides for the classification of loans considered being of lesser quality.  Such ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. Substandard assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in assets classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as Loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a full loss reserve and/or charge-off is not warranted. Assets that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.”   Management also maintains a listing of loans designated “Watch.” These loans represent borrowers with declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average risk.
 
12

When The Bank of Greene County classifies problem assets as either Substandard or Doubtful, it generally establishes a specific valuation allowance or “loss reserve” in an amount deemed prudent by management.  General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular loans.  When The Bank of Greene County identifies problem loans as being impaired, it is required to evaluate whether the Bank will be able to collect all amounts due either through repayments or the liquidation of the underlying collateral.  If it is determined that impairment exists, the Bank is required either to establish a specific allowance for losses equal to the amount of impairment of the assets, or to charge-off such amount.  The Bank of Greene County’s determination as to the classification of its loans and the amount of its valuation allowance is subject to review by its regulatory agencies, which can order the establishment of additional general or specific loss allowances.  The Bank of Greene County reviews its portfolio monthly to determine whether any assets require classification in accordance with applicable regulations.

The Bank primarily has four segments within its loan portfolio that it considers when measuring credit quality: real estate loans, home equity, consumer installment and commercial loans.  The real estate portfolio consists of residential, nonresidential, and construction loan classes. The inherent risk within the loan portfolio varies depending upon each of these loan types.

The Bank of Greene County’s primary lending activity is the origination of residential mortgage loans, including home equity loans, which are collateralized by residences.   Generally, residential mortgage loans are made in amounts up to 89.9% of the appraised value of the property.  However, The Bank of Greene County will originate residential mortgage loans with loan-to-value ratios of up to 95.0%, with private mortgage insurance.  In the event of default by the borrower, The Bank of Greene County will acquire and liquidate the underlying collateral. By originating the loan at a loan-to-value ratio of 89.9% or less or obtaining private mortgage insurance, The Bank of Greene County limits its risk of loss in the event of default.  However, the market values of the collateral may be adversely impacted by declines in the economy.  Home equity loans may have an additional inherent risk if The Bank of Greene County does not hold the first mortgage.  The Bank of Greene County may stand in a secondary position in the event of collateral liquidation resulting in a greater chance of insufficiency to meet all obligations.

Construction lending generally involves a greater degree of risk than other residential mortgage lending.  The repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of the construction of the subject property within specified cost limits.  The Bank of Greene County completes inspections during the construction phase prior to any disbursements.  The Bank of Greene County limits its risk during the construction as disbursements are not made until the required work for each advance has been completed.  Construction delays may further impair the borrower’s ability to repay the loan.

Loans collateralized by nonresidential mortgage loans, and multi-family loans, such as apartment buildings generally are larger than residential loans and involve a greater degree of risk. Commercial mortgage loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on the results of operations and management of the properties or underlying businesses, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of nonresidential mortgage loans makes them more difficult for management to monitor and evaluate.

Consumer loans generally have shorter terms and higher interest rates than residential mortgage loans. In addition, consumer loans expand the products and services offered by The Bank of Greene County to better meet the financial services needs of its customers.  Consumer loans generally involve greater credit risk than residential mortgage loans because of the difference in the nature of the underlying collateral.  Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation in the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections depend on the borrower’s personal financial stability.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and nonresidential mortgage lending. Real estate lending is generally considered to be collateral-based, with loan amounts based on fixed loan-to-collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.
 
13

Loan balances by internal credit quality indicator as of September 30, 2014 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential mortgage
 
$
222,888
   
$
286
   
$
99
   
$
2,726
   
$
225,999
 
Nonresidential mortgage
   
114,843
     
-
     
1,770
     
2,867
     
119,480
 
Residential construction and land
   
2,922
     
-
     
-
     
-
     
2,922
 
Commercial construction
   
4,155
     
-
     
-
     
-
     
4,155
 
Multi-family
   
4,407
     
-
     
-
     
111
     
4,518
 
Home equity
   
20,564
     
222
     
-
     
317
     
21,103
 
Consumer installment
   
4,172
     
9
     
-
     
-
     
4,181
 
Commercial loans
   
29,795
     
147
     
353
     
890
     
31,185
 
Total gross loans
 
$
403,746
   
$
664
   
$
2,222
   
$
6,911
   
$
413,543
 

Loan balances by internal credit quality indicator as of June 30, 2014 are shown below.
 
(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential mortgage
 
$
223,772
   
$
221
   
$
99
   
$
3,281
   
$
227,373
 
Nonresidential mortgage
   
109,281
     
-
     
1,789
     
2,996
     
114,066
 
Residential construction and land
   
3,005
     
-
     
-
     
-
     
3,005
 
Commercial construction
   
1,558
     
-
     
-
     
-
     
1,558
 
Multi-family
   
3,946
     
-
     
-
     
113
     
4,059
 
Home equity
   
20,239
     
-
     
-
     
339
     
20,578
 
Consumer installment
   
4,208
     
-
     
-
     
-
     
4,208
 
Commercial loans
   
29,686
     
-
     
385
     
923
     
30,994
 
Total gross loans
 
$
395,695
   
$
221
   
$
2,273
   
$
7,652
   
$
405,841
 

The Company had no loans classified Doubtful or Loss at September 30, 2014 or June 30, 2014.

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent.  A nonaccrual loan is defined as a loan in which collectability is questionable and therefore interest on the loan will no longer be recognized on an accrual basis.  A loan is not placed back on accrual status until the borrower has demonstrated the ability and willingness to make timely payments on the loan.  A loan does not have to be 90 days delinquent in order to be classified as nonaccrual.   Nonaccrual loans consisted primarily of loans secured by real estate at September 30, 2014 and June 30, 2014.  While the Bank makes every reasonable effort to work with the borrowers to collect amounts due, the number of loans in process of foreclosure has remained historically high over the past several years.  These high levels have been the result of adverse changes within the economy and increases in local unemployment.   These levels are also due in part to the extended length of time required to meet all of the legal requirements mandated by New York state law prior to a foreclosure sale, which may be in excess of two years. Loans on nonaccrual status totaled $5.8 million at September 30, 2014 of which $2.7 million were in the process of foreclosure.  Included in nonaccrual loans were $1.9 million of loans which were less than 90 days past due at September 30, 2014, 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.  Included in total loans past due were $916,000 of loans which were making payments pursuant to forbearance agreements.  Under the forbearance agreements, the customers have made arrangements with the Bank to bring the loans current over a specified period of time (resulting in an insignificant delay in repayment).  During this term of the forbearance agreement, the Bank has agreed not to continue foreclosure proceedings.  Loans on nonaccrual status totaled $5.9 million at June 30, 2014 of which $3.0 million were in the process of foreclosure.  Included in nonaccrual loans were $922,000 of loans which were less than 90 days past due at June 30, 2014, but have a recent history of delinquency greater than 90 days past due.
 
14

The following table sets forth information regarding delinquent and/or nonaccrual loans as of September 30, 2014:
 
(In thousands)
 
30-59
days
past due
   
60-89
days
past due
   
90 days
or more
past due
   
Total
past due
   
Current
   
Total
Loans
   
Loans on
Non-
accrual
 
Residential mortgage
 
$
1,699
   
$
235
   
$
1,867
   
$
3,801
   
$
222,198
   
$
225,999
   
$
1,924
 
Nonresidential mortgage
   
-
     
430
     
1,787
     
2,217
     
117,263
     
119,480
     
3,144
 
Residential construction and land
   
-
     
-
     
-
     
-
     
2,922
     
2,922
     
-
 
Commercial construction
   
-
     
-
     
-
     
-
     
4,155
     
4,155
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
4,518
     
4,518
     
-
 
Home equity
   
104
     
222
     
317
     
643
     
20,460
     
21,103
     
317
 
Consumer installment
   
64
     
9
     
-
     
73
     
4,108
     
4,181
     
-
 
Commercial loans
   
789
     
147
     
175
     
1,111
     
30,074
     
31,185
     
426
 
Total gross loans
 
$
2,656
   
$
1,043
   
$
4,146
   
$
7,845
   
$
405,698
   
$
413,543
   
$
5,811
 

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2014:

(In thousands)
 
30-59
days
past due
   
60-89
days
past due
   
90 days
or more
past due
   
Total
past due
   
Current
   
Total
Loans
   
Loans on
Non-
accrual
 
Residential mortgage
 
$
1,047
   
$
290
   
$
1,938
   
$
3,275
   
$
224,098
   
$
227,373
   
$
2,473
 
Nonresidential mortgage
   
-
     
504
     
2,688
     
3,192
     
110,874
     
114,066
     
2,775
 
Residential construction and land
   
-
     
-
     
-
     
-
     
3,005
     
3,005
     
-
 
Commercial construction
   
-
     
-
     
-
     
-
     
1,558
     
1,558
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
4,059
     
4,059
     
-
 
Home equity
   
260
     
-
     
339
     
599
     
19,979
     
20,578
     
339
 
Consumer installment
   
51
     
-
     
-
     
51
     
4,157
     
4,208
     
-
 
Commercial loans
   
509
     
123
     
278
     
910
     
30,084
     
30,994
     
312
 
Total gross loans
 
$
1,867
   
$
917
   
$
5,243
   
$
8,027
   
$
397,814
   
$
405,841
   
$
5,899
 
 
The Bank of Greene County had accruing loans delinquent more than 90 days as of September 30, 2014 totaling $263,000 and had accruing loans delinquent more than 90 days as of June 30, 2014 totaling $266,000.    The loans delinquent more than 90 days and accruing consist of loans that are well collateralized and the borrowers have demonstrated the ability and willingness to pay.  The borrower has made arrangements with the Bank to bring the loan current within a specified time period and has made a series of payments as agreed.

The table below details additional information related to nonaccrual loans for the three months ended September 30:

(In thousands)
 
2014
   
2013
 
Interest income that would have been recorded if loans had been performing in accordance with original terms
 
$
128
   
$
125
 
Interest income that was recorded on nonaccrual loans
   
46
     
29
 

Impaired Loan Analysis

The Company identifies impaired loans and measures the impairment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) subtopic “Receivables – Loan Impairment.”  Management may consider a loan impaired once it is classified as nonaccrual and when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring.  It should be noted that management does not evaluate all loans individually for impairment.  The Bank of Greene County considers residential mortgages, home equity loans, smaller commercial loans and installment loans as small, homogeneous loans, which are evaluated for impairment collectively based on historical loan experience and other factors.  In contrast, large commercial mortgage, construction, multi-family and commercial loans are viewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreement.  The measurement of impaired loans is generally based on the fair value of the underlying collateral.  The majority of The Bank of Greene County loans, including most nonaccrual loans, are small homogenous loan types adequately supported by collateral.  Management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors.  Loans that are either delinquent a minimum of 60 days or are on nonaccrual status, and are not individually evaluated for impairment, are either designated as Special Mention or Substandard, and the allocation of the allowance for loan loss is based upon the risk associated with such designation.  Loans that have been modified as a troubled debt restructuring are included in impaired loans.  The measurement of impairment is generally based on the discounted cash flows based on the original rate of the loan before the restructuring, unless it is determined that the restructured loan is collateral dependent.  If the restructured loan is deemed to be collateral dependent, impairment is based on the fair value of the underlying collateral.
 
15

The tables below detail additional information on impaired loans at the date or periods indicated:
 
   
As of September 30, 2014
   
For the three months ended
September 30, 2014
 
(In thousands)
 
Recorded Investment
   
Unpaid Principal
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance recorded:
             
Residential mortgage
 
$
206
   
$
206
   
$
-
   
$
206
   
$
3
 
Nonresidential mortgage
   
456
     
456
     
-
     
458
     
7
 
Home equity
   
96
     
96
     
-
     
96
     
-
 
     
758
     
758
     
-
     
760
     
10
 
With an allowance recorded:
                                       
Residential mortgage
   
2,466
     
2,556
     
370
     
2,585
     
31
 
Nonresidential mortgage
   
2,448
     
2,835
     
315
     
2,522
     
42
 
Home equity
   
200
     
200
     
87
     
200
     
-
 
Commercial loans
   
600
     
600
     
3
     
601
     
10
 
     
5,714
     
6,191
     
775
     
5,908
     
83
 
Total impaired:
                                       
Residential mortgage
   
2,672
     
2,762
     
370
     
2,791
     
34
 
Nonresidential mortgage
   
2,904
     
3,291
     
315
     
2,980
     
49
 
Home equity
   
296
     
296
     
87
     
296
     
-
 
Commercial loans
   
600
     
600
     
3
     
601
     
10
 
   
$
6,472
   
$
6,949
   
$
775
   
$
6,668
   
$
93
 
 
16

   
As of June 30, 2014
   
For the three months ended
September 30, 2013
 
(In thousands)
 
Recorded Investment
   
Unpaid Principal
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance recorded:
             
Residential mortgage
 
$
206
   
$
206
   
$
-
   
$
590
   
$
-
 
Nonresidential mortgage
   
461
     
461
     
-
     
653
     
9
 
Home equity
   
96
     
96
     
-
     
-
     
-
 
     
763
     
763
     
-
     
1,243
     
9
 
With an allowance recorded:
                                       
Residential mortgage
   
2,700
     
2,790
     
441
     
3,135
     
15
 
Nonresidential mortgage
   
2,572
     
2,959
     
338
     
1,561
     
8
 
Commercial construction
   
-
     
-
     
-
     
1,052
     
18
 
Multi-family
   
-
     
-
     
-
     
463
     
-
 
Home equity
   
200
     
200
     
87
     
-
     
-
 
Commercial loans
   
603
     
603
     
3
     
608
     
10
 
     
6,075
     
6,552
     
869
     
6,819
     
51
 
                                         
Residential mortgage
   
2,906
     
2,996
     
441
     
3,725
     
15
 
Nonresidential mortgage
   
3,033
     
3,420
     
338
     
2,214
     
17
 
Commercial construction
   
-
     
-
     
-
     
1,052
     
18
 
Multi-family
   
-
     
-
     
-
     
463
     
-
 
Home equity
   
296
     
296
     
87
     
-
     
-
 
Commercial loans
   
603
     
603
     
3
     
608
     
10
 
   
$
6,838
   
$
7,315
   
$
869
   
$
8,062
   
$
60
 
 
There were no loans that have been modified as a troubled debt restructuring during the three months ended September 30, 2014.

The table below details loans that have been modified as a troubled debt restructuring during the three months ended September 30, 2013.

(Dollars in thousands)
 
Number of Contracts
   
Pre-Modification
Outstanding
Recorded Investment
   
Post-Modification
Outstanding
Recorded Investment
   
Current Outstanding
Recorded Investment
 
Residential mortgage
   
2
   
$
367
   
$
367
   
$
365
 
Nonresidential mortgage
   
1
     
442
     
442
     
440
 

These loans have been classified as troubled debt restructurings due to concessions granted to the debtors that The Bank of Greene County would not otherwise consider as a result of financial difficulties of the borrowers.  For these loans, concessions consisted of any combination of the following: additional funds were advanced, the interest rate was reduced and/or the term extended. If the borrower performs under the terms of the modification, and the ultimate collectability of all amounts contractually due under the modified terms is not in doubt, these loans will be returned to accrual status.   These loans identified as a troubled debt restructuring have been evaluated for impairment and the impact to the allowance for loan loss was immaterial.

There were no loans that have been modified as a troubled debt restructuring during the previous twelve months which has subsequently defaulted during the three months ended September 30, 2014.

The table below details loans that have been modified as a troubled debt restructuring during the previous twelve months which has subsequently defaulted during the three months ended September 30, 2013:

(Dollars in thousands)
 
Number of Contracts
   
Recorded Investment
   
Allowance for Loan Loss
 
Residential mortgage
   
1
   
$
73
   
$
--
 
Nonresidential mortgage
   
1
     
547
     
182
 
 
17

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions.  Such evaluation, which includes a review of certain identified loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for the loan loss allowance.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review The Bank of Greene County’s allowance for loan losses.  Such agencies may require The Bank of Greene County to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The Bank of Greene County considers smaller balance residential mortgages, home equity loans, commercial loans and installment loans to customers as small, homogeneous loans, which are evaluated for impairment collectively based on historical loss experience.  Larger balance residential, commercial mortgage and business loans are viewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements.  The measurement of impaired loans is generally based on the fair value of the underlying collateral.  The Bank of Greene County charges loans off against the allowance for credit losses when it becomes evident that a loan cannot be collected within a reasonable amount of time or that it will cost the Bank more than it will receive, and all possible avenues of repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers.  Generally, consumer loans and smaller business loans (not secured by real estate) in excess of 90 days are charged-off against the allowance for loan losses, unless equitable arrangements are made.   For loans secured by real estate, a charge-off is recorded when it is determined that the collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated.

The following tables set forth the activity and allocation of the allowance for loan losses by loan category during and at the periods indicated.  The allowance is allocated to each loan category based on historical loss experience and economic conditions.
 
   
Activity for the three months ended September 30, 2014
 
(In thousands)
 
Balance at
June 30, 2014
   
Charge-offs
   
Recoveries
   
Provision
   
Balance at
September 30, 2014
 
Residential mortgage
 
$
2,731
   
$
74
   
$
-
   
$
(10
)
 
$
2,647
 
Nonresidential mortgage
   
2,936
     
-
     
-
     
228
     
3,164
 
Residential construction and land
   
42
     
-
     
-
     
(1
)
   
41
 
Commercial construction
   
38
     
-
     
-
     
71
     
109
 
Multi-family
   
59
     
-
     
-
     
(14
)
   
45
 
Home equity
   
361
     
-
     
-
     
15
     
376
 
Consumer installment
   
240
     
55
     
19
     
39
     
243
 
Commercial loans
   
811
     
-
     
-
     
20
     
831
 
Unallocated
   
201
     
-
     
-
     
63
     
264
 
Total
 
$
7,419
   
$
129
   
$
19
   
$
411
   
$
7,720
 
 
18

   
Allowance for Loan Losses
   
Loans Receivable
 
   
Ending Balance
September 30, 2014
Impairment Analysis
   
Ending Balance
September 30, 2014
Impairment Analysis
 
(In thousands)
 
Individually
Evaluated
   
Collectively
Evaluated
   
Individually
Evaluated
   
Collectively
Evaluated
 
Residential mortgage
 
$
370
   
$
2,277
   
$
2,672
   
$
223,327
 
Nonresidential mortgage
   
315
     
2,849
     
2,904
     
116,576
 
Residential construction and land
   
-
     
41
     
-
     
2,922
 
Commercial construction
   
-
     
109
     
-
     
4,155
 
Multi-family
   
-
     
45
     
-
     
4,518
 
Home equity
   
87
     
289
     
296
     
20,807
 
Consumer installment
   
-
     
243
     
-
     
4,181
 
Commercial loans
   
3
     
828
     
600
     
30,585