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

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


FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2014

OR

☐ 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: ☒     No: ☐

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: ☒    No: ☐

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   ☐
Accelerated filer ☐
Non-accelerated filer     ☐
Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes: ☐   No: ☒

As of February 13, 2015, the registrant had 4,222,357shares 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
 
6
 
7
 
8
 
9-29
     
Item 2.
30-43
     
Item 3.
44
     
Item 4.
44
     
PART II.
OTHER INFORMATION
 
     
Item 1.
45
     
Item 1A.
45
     
Item 2.
45
     
Item 3.
45
     
Item 4.
45
     
Item 5.
45
     
Item 6.
45
     
 
46
 
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 December 31, 2014 and June 30, 2014
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
 
December 31, 2014
   
June 30, 2014
 
Total cash and cash equivalents
 
$
14,869
   
$
13,809
 
                 
Long term certificate of deposit
   
250
     
250
 
Securities available for sale, at fair value
   
69,071
     
56,151
 
Securities held to maturity, at amortized cost (fair value $181,981at December 31, 2014; $181,932 at June 30, 2014)
   
181,065
     
181,946
 
Federal Home Loan Bank stock, at cost
   
3,230
     
1,561
 
                 
Loans
   
429,628
     
405,841
 
Allowance for loan losses
   
(7,796
)
   
(7,419
)
Unearned origination fees and costs, net
   
884
     
887
 
Net loans receivable
   
422,716
     
399,309
 
                 
Premises and equipment
   
14,355
     
14,307
 
Accrued interest receivable
   
2,937
     
2,710
 
Foreclosed real estate
   
581
     
473
 
Prepaid expenses and other assets
   
3,348
     
3,645
 
Total assets
 
$
712,422
   
$
674,161
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Noninterest bearing deposits
 
$
66,348
   
$
67,446
 
Interest bearing deposits
   
516,833
     
522,128
 
Total deposits
   
583,181
     
589,574
 
                 
Borrowings from Federal Home Loan Bank, short-term
   
43,500
     
3,150
 
Borrowings from Federal Home Loan Bank, long-term
   
15,500
     
14,500
 
Accrued expenses and other liabilities
   
5,777
     
5,737
 
Total liabilities
   
647,958
     
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 4,218,857 shares at December 31, 2014, and 4,213,757 shares at June 30, 2014
   
431
     
431
 
Additional paid-in capital
   
11,239
     
11,208
 
Retained earnings
   
54,198
     
51,305
 
Accumulated other comprehensive loss
   
(749
)
   
(1,050
)
Treasury stock, at cost 86,813 shares at December 31, 2014, and 91,913 shares at June 30, 2014
   
(655
)
   
(694
)
Total shareholders’ equity
   
64,464
     
61,200
 
Total liabilities and shareholders’ equity
 
$
712,422
   
$
674,161
 

See notes to consolidated financial statements
 
3

       Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Six Months Ended December 31, 2014 and 2013
(Unaudited)
(In thousands, except share and per share amounts)

   
2014
   
2013
 
Interest income:
       
Loans
 
$
9,783
   
$
9,124
 
Investment securities - taxable
   
277
     
333
 
Mortgage-backed securities
   
1,446
     
1,294
 
Investment securities - tax exempt
   
1,132
     
1,018
 
Interest bearing deposits and federal funds sold
   
10
     
8
 
Total interest income
   
12,648
     
11,777
 
                 
Interest expense:
               
Interest on deposits
   
1,001
     
1,099
 
Interest on borrowings
   
124
     
61
 
Total interest expense
   
1,125
     
1,160
 
                 
Net interest income
   
11,523
     
10,617
 
Provision for loan losses
   
716
     
821
 
Net interest income after provision for loan losses
   
10,807
     
9,796
 
                 
Noninterest income:
               
Service charges on deposit accounts
   
1,446
     
1,331
 
Debit card fees
   
844
     
775
 
Investment services
   
189
     
192
 
E-commerce fees
   
53
     
51
 
Other operating income
   
377
     
317
 
Total noninterest income
   
2,909
     
2,666
 
                 
Noninterest expense:
               
Salaries and employee benefits
   
4,757
     
4,257
 
Occupancy expense
   
668
     
619
 
Equipment and furniture expense
   
253
     
262
 
Service and data processing fees
   
842
     
654
 
Computer software, supplies and support
   
339
     
207
 
Advertising and promotion
   
132
     
136
 
FDIC insurance premiums
   
192
     
192
 
Legal and professional fees
   
592
     
455
 
Other
   
998
     
781
 
Total noninterest expense
   
8,773
     
7,563
 
                 
Income before provision for income taxes
   
4,943
     
4,899
 
Provision for income taxes
   
1,357
     
1,420
 
Net income
 
$
3,586
   
$
3,479
 
                 
Basic earnings per share
 
$
0.85
   
$
0.83
 
Basic average shares outstanding
   
4,215,738
     
4,199,349
 
Diluted earnings per share
 
$
0.84
   
$
0.82
 
Diluted average shares outstanding
   
4,246,793
     
4,237,766
 
Dividends per share
 
$
0.36
   
$
0.35
 
 
See notes to consolidated financial statements
 
4

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended December 31, 2014 and 2013
(Unaudited)
(In thousands, except share and per share amounts)

   
2014
   
2013
 
Interest income:
       
Loans
 
$
4,944
   
$
4,626
 
Investment securities - taxable
   
134
     
167
 
Mortgage-backed securities
   
741
     
644
 
Investment securities - tax exempt
   
580
     
508
 
Interest bearing deposits and federal funds sold
   
8
     
6
 
Total interest income
   
6,407
     
5,951
 
                 
Interest expense:
               
Interest on deposits
   
500
     
549
 
Interest on borrowings
   
63
     
33
 
Total interest expense
   
563
     
582
 
                 
Net interest income
   
5,844
     
5,369
 
Provision for loan losses
   
305
     
508
 
Net interest income after provision for loan losses
   
5,539
     
4,861
 
                 
Noninterest income:
               
Service charges on deposit accounts
   
730
     
655
 
Debit card fees
   
429
     
386
 
Investment services
   
87
     
87
 
E-commerce fees
   
25
     
25
 
Other operating income
   
169
     
163
 
Total noninterest income
   
1,440
     
1,316
 
                 
Noninterest expense:
               
Salaries and employee benefits
   
2,390
     
2,063
 
Occupancy expense
   
344
     
296
 
Equipment and furniture expense
   
177
     
149
 
Service and data processing fees
   
388
     
318
 
Computer software, supplies and support
   
106
     
93
 
Advertising and promotion
   
51
     
69
 
FDIC insurance premiums
   
101
     
103
 
Legal and professional fees
   
379
     
250
 
Other
   
560
     
410
 
Total noninterest expense
   
4,496
     
3,751
 
                 
Income before provision for income taxes
   
2,483
     
2,426
 
Provision for income taxes
   
672
     
701
 
Net income
 
$
1,811
   
$
1,725
 
                 
Basic earnings per share
 
$
0.43
   
$
0.41
 
Basic average shares outstanding
   
4,217,118
     
4,203,985
 
Diluted earnings per share
 
$
0.43
   
$
0.41
 
Diluted average shares outstanding
   
4,248,175
     
4,240,216
 
Dividends per share
 
$
0.180
   
$
0.175
 

See notes to consolidated financial statements
 
5

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Six Months Ended December 31, 2014 and 2013
(Unaudited)
(In thousands)

   
2014
   
2013
 
Net Income
 
$
3,586
   
$
3,479
 
Other comprehensive income (loss):
               
Unrealized holding gains (losses) on available for sale securities, net of income taxes of $89 and ($434), respectively
   
142
     
(688
)
                 
Accretion of unrealized loss on securities transferred to held to maturity, net of income taxes of $100 and $27, respectively(1)
   
159
     
43
 
                 
Total other comprehensive income (loss), net of taxes
   
301
     
(645
)
                 
Comprehensive income
 
$
3,887
   
$
2,834
 

 
(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.

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended December 31, 2014 and 2013
(Unaudited)
(In thousands)

   
2014
   
2013
 
Net Income
 
$
1,811
   
$
1,725
 
Other comprehensive income (loss):
               
Unrealized holding gains (losses) on available for sale securities, net of income taxes of $77 and ($77), respectively
   
124
     
(123
)
                 
Accretion of unrealized loss on securities transferred to held to maturity, net of income taxes of $34 and $26, respectively(1)
   
54
     
41
 
                 
Total other comprehensive income (loss), net of taxes
   
178
     
(82
)
                 
Comprehensive income
 
$
1,989
   
$
1,643
 

 
(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.
 
6

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Six Months Ended December 31, 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
           
(13
)
                   
120
     
107
 
Tax benefit of stock based compensation
           
27
                             
27
 
Dividends declared1
                   
(668
)
                   
(668
)
Net income
                   
3,479
                     
3,479
 
Other comprehensive loss, net of taxes
                           
(645
)
           
(645
)
Balance at December 31, 2013
 
$
431
   
$
11,182
   
$
48,923
   
$
(1,395
)
 
$
(733
)
 
$
58,408
 
                                                 
   
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
           
25
                     
39
     
64
 
Tax benefit of stock based compensation
           
6
                             
6
 
Dividends declared1
                   
(693
)
                   
(693
)
Net income
                   
3,586
                     
3,586
 
Other comprehensive income, net of taxes
                           
301
             
301
 
Balance at December 31, 2014
 
$
431
   
$
11,239
   
$
54,198
   
$
(749
)
 
$
(655
)
 
$
64,464
 
 
 
(1)
Dividends declared were $0.36 per share and $0.35 per share for the six months ended December 31, 2014 and 2013. This is based on total number of shares outstanding.  However, Greene County Bancorp, MHC, the owner of 54.6% of the Company’s shares outstanding waived its right to receive dividends during the six months ended December 31, 2014 and 2013.  The MHC’s ability to waive the receipt of dividends is dependent upon annual approval of its members as well as receiving the non-objection of the Federal Reserve Board.

See notes to consolidated financial statements.
 
7

Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2014 and 2013
(Unaudited)
(In thousands)

   
2014
   
2013
 
Cash flows from operating activities:
       
Net Income
 
$
3,586
   
$
3,479
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
260
     
341
 
Deferred income tax benefit
   
(1,542
)
   
(1,567
)
Net amortization of premiums and discounts
   
627
     
969
 
Net amortization of deferred loan costs and fees
   
182
     
179
 
Provision for loan losses
   
716
     
821
 
Loss (gain) on foreclosed real estate
   
92
     
(5
)
Excess tax benefit from share-based payment arrangements
   
(6
)
   
(27
)
Net increase in accrued income taxes
   
2,837
     
2,909
 
Net increase in accrued interest receivable
   
(227
)
   
(91
)
Net increase in prepaid and other assets
   
(1,264
)
   
(309
)
Net increase (decrease) in other liabilities
   
122
     
(36
)
Net cash provided by operating activities
   
5,383
     
6,663
 
                 
Cash flows from investing activities:
               
Securities available for sale:
               
Proceeds from maturities
   
2,250
     
515
 
Purchases of securities
   
(18,941
)
   
-
 
Principal payments on securities
   
3,805
     
4,383
 
Securities held to maturity:
               
Proceeds from maturities
   
9,822
     
14,864
 
Purchases of securities
   
(12,266
)
   
(11,107
)
Principal payments on securities
   
3,155
     
4,528
 
Net redemption of Federal Home Loan Bank Stock
   
(1,669
)
   
(1,152
)
Net increase in loans receivable
   
(24,807
)
   
(29,061
)
Proceeds from sale of foreclosed real estate
   
302
     
105
 
Purchases of premises and equipment
   
(308
)
   
(346
)
Net cash used by investing activities
   
(38,657
)
   
(17,271
)
                 
Cash flows from financing activities
               
Net increase in short-term FHLB advances
   
40,350
     
21,100
 
Proceeds from long-term FHLB advances
   
1,000
     
4,500
 
Payment of cash dividends
   
(693
)
   
(668
)
Proceeds from issuance of stock options
   
64
     
107
 
Excess tax benefit from share-based payment arrangements
   
6
     
27
 
Net decrease in deposits
   
(6,393
)
   
(9,004
)
Net cash provided by financing activities
   
34,334
     
16,062
 
                 
Net increase in cash and cash equivalents
   
1,060
     
5,454
 
Cash and cash equivalents at beginning of period
   
13,809
     
6,222
 
Cash and cash equivalents at end of period
 
$
14,869
   
$
11,676
 
                 
Non-cash investing activities:
               
Foreclosed loans transferred to foreclosed real estate
 
$
502
     
404
 
Available for sale securities transferred at fair value to held to maturity
   
-
     
11,735
 
Cash paid during period for:
               
Interest
 
$
1,131
   
$
1,156
 
Income taxes
 
$
62
   
$
78
 
 
See notes to consolidated financial statements
 
8

Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
As of and for the Six and Three Months Ended December 31, 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 six and three months ended December 31, 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 six and three months ended December 31, 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. has two wholly-owned subsidiaries, The Bank of Greene County and Greene Risk Management, Inc.  Greene Risk Management, Inc. was formed on December 30, 2014 as a pooled captive insurance company subsidiary, incorporated in the State of Nevada, to provide additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.
 
9

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its banking subsidiaries.  The Bank of Greene County has twelve full-service offices and an administrative office, operations center and lending 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.  The Bank of Greene County has two subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd.  Greene County Commercial Bank’s primary business is to attract deposits from and provide banking services to local municipalities. Greene Property Holdings, Ltd.is a real estate investment trust, which holds mortgages and notes which were originated through and serviced by The Bank of Greene County.
 
(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 December 31, 2014 consisted of the following:
 
(In thousands) Securities available for sale:
 
Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Estimated Fair Value
 
U.S. government sponsored enterprises
 
$
8,623
   
$
230
   
$
-
   
$
8,853
 
State and political subdivisions
   
20,260
     
16
     
3
     
20,273
 
Mortgage-backed securities-residential
   
8,558
     
181
     
15
     
8,724
 
Mortgage-backed securities-multi-family
   
26,092
     
199
     
106
     
26,185
 
Asset-backed securities
   
14
     
-
     
2
     
12
 
Corporate debt securities
   
4,553
     
306
     
15
     
4,844
 
Total debt securities
   
68,100
     
932
     
141
     
68,891
 
Equity securities
   
62
     
118
     
-
     
180
 
Total securities available for sale
   
68,162
     
1,050
     
141
     
69,071
 
Securities held to maturity:
                               
U.S. government sponsored enterprises
   
2,000
     
-
     
83
     
1,917
 
State and political subdivisions
   
93,968
     
745
     
79
     
94,634
 
Mortgage-backed securities-residential
   
20,185
     
964
     
-
     
21,149
 
Mortgage-backed securities-multi-family
   
64,058
     
872
     
1,490
     
63,440
 
Other securities
   
854
     
-
     
13
     
841
 
Total securities held to maturity
   
181,065
     
2,581
     
1,665
     
181,981
 
Total securities
 
$
249,227
   
$
3,631
   
$
1,806
   
$
251,052
 
 
10

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 December 31, 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 December 31, 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:
                             
State and political subdivisions
 
$
801
   
$
3
   
1
   
$
-
   
$
-
     
-
 
$
801
   
$
3
   
1
 
Mortgage-backed securities-residential
   
4,031
     
15
   
2
     
-
     
-
           
4,031
     
15
   
2
 
Mortgage-backed securities-multi-family
   
3,801
     
41
   
3
     
6,734
     
65
     
3
   
10,535
     
106
   
6
 
Asset-backed securities
   
-
     
-
   
-
     
12
     
2
     
1
   
12
     
2
   
1
 
Corporate debt securities
   
764
     
15
   
3
     
-
     
-
     
-
   
764
     
15
   
3
 
Total securities available for sale
   
9,397
     
74
   
9
     
6,746
     
67
     
4
   
16,143
     
141
   
13
 
Securities held to maturity:
                                                                 
U.S. government sponsored enterprises
   
1,917
     
83
   
1
     
-
     
-
     
-
   
1,917
     
83
   
1
 
State and political subdivisions
   
5,658
     
73
   
26
     
288
     
6
     
6
   
5,946
     
79
   
32
 
Mortgage-backed securities-multi-family
   
26,832
     
1,095
   
7
     
11,726
     
395
     
5
   
38,558
     
1,490
   
12
 
Other securities
   
210
     
2
   
2
     
411
     
11
     
1
   
621
     
13
   
3
 
Total securities held to maturity
   
34,617
     
1,253
   
36
     
12,425
     
412
     
12
   
47,042
     
1,665
   
48
 
Total securities
 
$
44,014
   
$
1,327
   
45
   
$
19,171
   
$
479
     
16
 
$
63,185
   
$
1,806
   
61
 
 
11

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 December 31, 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 six and three months ended December 31, 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 six and three months ended December 31, 2014 and 2013.
 
12

The estimated fair values of debt securities at December 31, 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
 
$
23,138
   
$
23,165
 
After one year through five years
   
5,681
     
5,981
 
After five years through ten years
   
4,617
     
4,824
 
After ten years
   
-
     
-
 
Total available for sale debt securities
   
33,436
     
33,970
 
Mortgage-backed and asset-backed securities
   
34,664
     
34,921
 
Equity securities
   
62
     
180
 
Total available for sale securities
   
68,162
     
69,071
 
                 
Held to maturity debt securities
               
Within one year
   
26,623
     
26,658
 
After one year through five years
   
42,642
     
43,013
 
After five years through ten years
   
19,448
     
19,573
 
After ten years
   
8,109
     
8,148
 
Total held to maturity debt securities
   
96,822
     
97,392
 
Mortgage-backed
   
84,243
     
84,589
 
Total held to maturity securities
   
181,065
     
181,981
 
Total securities
 
$
249,227
   
$
251,052
 

As of December 31, 2014 and June 30, 2014, respectively, securities with an aggregate fair value of $217.1 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 December 31, 2014 and June 30, 2014, securities with an aggregate fair value of $4.8 million and $5.2 million, respectively, 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 six and three months ended December 31, 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 six and three months ended December 31, 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.
 
13

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.
 
14

Loan balances by internal credit quality indicator as of December 31, 2014 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential mortgage
 
$
223,094
   
$
599
   
$
98
   
$
2,971
   
$
226,762
 
Nonresidential mortgage
   
122,660
     
-
     
1,752
     
2,831
     
127,243
 
Residential construction and land
   
3,651
     
-
     
-
     
-
     
3,651
 
Commercial construction
   
5,686
     
-
     
-
     
-
     
5,686
 
Multi-family
   
4,347
     
-
     
-
     
109
     
4,456
 
Home equity
   
20,818
     
33
     
-
     
221
     
21,072
 
Consumer installment
   
4,105
     
-
     
-
     
-
     
4,105
 
Commercial loans
   
35,410
     
4
     
356
     
883
     
36,653
 
Total gross loans
 
$
419,771
   
$
636
   
$
2,206
   
$
7,015
   
$
429,628
 

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 December 31, 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 December 31, 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 December 31, 2014 of which $2.8 million were in the process of foreclosure.  Included in nonaccrual loans were $3.3 million of loans which were less than 90 days past due at December 31, 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 $489,000 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.
 
15

The following table sets forth information regarding delinquent and/or nonaccrual loans as of December 31, 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
 
$
1,088
   
$
616
   
$
1,646
   
$
3,350
   
$
223,412
   
$
226,762
   
$
2,080
 
Nonresidential mortgage
   
865
     
1,576
     
939
     
3,380
     
123,863
     
127,243
     
3,103
 
Residential construction and land
   
-
     
-
     
-
     
-
     
3,651
     
3,651
     
-
 
Commercial construction
   
-
     
-
     
-
     
-
     
5,686
     
5,686
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
4,456
     
4,456
     
-
 
Home equity
   
304
     
33
     
221
     
558
     
20,514
     
21,072
     
221
 
Consumer installment
   
70
     
-
     
-
     
70
     
4,035
     
4,105
     
-
 
Commercial loans
   
720
     
102
     
200
     
1,022
     
35,631
     
36,653
     
418
 
Total gross loans
 
$
3,047
   
$
2,327
   
$
3,006
   
$
8,380
   
$
421,248
   
$
429,628
   
$
5,822
 

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 December 31, 2014 totaling $465,000 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 six and three months ended December 31:

   
For the six months
ended December 31,
   
For the three months
ended December 31
 
(In thousands)
 
2014
   
2013
   
2014
   
2013
 
Interest income that would have been recorded if loans had been performing in accordance with original terms
 
$
199
   
$
208
   
$
71
   
$
83
 
Interest income that was recorded on nonaccrual loans
   
85
     
64
     
39
     
35
 
 
16

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.

The tables below detail additional information on impaired loans at the date or periods indicated:
 
   
As of December 31, 2014
   
For the six months ended
December 31, 2014
   
For the three months ended
December 31, 2014
 
(In thousands)
 
Recorded Investment
   
Unpaid Principal
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance recorded:
                     
Residential mortgage
 
$
671
   
$
671
   
$
-
   
$
672
   
$
13
   
$
672
   
$
10
 
Nonresidential mortgage
   
453
     
453
     
-
     
457
     
13
     
455
     
6
 
Home equity
   
-
     
-
     
-
     
80
     
-
     
64
     
-
 
     
1,124
     
1,124
     
-
     
1,209
     
26
     
1,191
     
16
 
With an allowance recorded:
                                                       
Residential mortgage
   
2,124
     
2,124
     
363
     
2,669
     
47
     
2,450
     
16
 
Nonresidential mortgage
   
2,416
     
2,803
     
333
     
2,476
     
42
     
2,429
     
-
 
Home equity
   
200
     
200
     
90
     
200
     
-
     
200
     
-
 
Commercial loans
   
599
     
599
     
3
     
600
     
20
     
599
     
10
 
     
5,339
     
5,726
     
789
     
5,945
     
109
     
5,678
     
26
 
Total impaired:
                                                       
Residential mortgage
   
2,795
     
2,795
     
363
     
3,341
     
60
     
3,122
     
26
 
Nonresidential mortgage
   
2,869
     
3,256
     
333
     
2,933
     
55
     
2,884
     
6
 
Home equity
   
200
     
200
     
90
     
280
     
-
     
264
     
-
 
Commercial loans
   
599
     
599
     
3
     
600
     
20
     
599
     
10
 
   
$
6,463
   
$
6,850
   
$
789
   
$
7,154
   
$
135
   
$
6,869
   
$
42
 
 
17

   
As of June 30, 2014
   
For the six months ended
December 31, 2013
   
For the three months ended
December 31, 2013
 
(In thousands)
 
Recorded Investment
   
Unpaid Principal
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
   
Average Recorded Investment
   
Interest Income Recognized
 
With no related allowance recorded:
                     
Residential mortgage
 
$
206
   
$
206
   
$
-
   
$
399
   
$
1
   
$
207
   
$
1
 
Nonresidential mortgage
   
461
     
461
     
-
     
596
     
17
     
539
     
8
 
Home equity
   
96
     
96
     
-
     
-
     
-
     
-
     
-
 
     
763
     
763
     
-
     
995
     
18
     
746
     
9
 
With an allowance recorded:
                                         
Residential mortgage
   
2,700
     
2,790
     
441
     
3,100
     
30
     
3,065
     
15
 
Nonresidential mortgage
   
2,572
     
2,959
     
338
     
1,992
     
20
     
2,423
     
12
 
Commercial construction
   
-
     
-
     
-