GREENE COUNTY BANCORP INC - FORM 10-Q

Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 - GREENE COUNTY BANCORP INC	ex31_2.htm
EX-32.2 - EXHIBIT 32.2 - GREENE COUNTY BANCORP INC	ex32_2.htm
EX-32.1 - EXHIBIT 32.1 - GREENE COUNTY BANCORP INC	ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - GREENE COUNTY BANCORP INC	ex31_1.htm

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 MARCH 31, 2016

☐ 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 May 13, 2016, the registrant had 8,474,414 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)
	* Consolidated Statements of Financial Condition	3
	* Consolidated Statements of Income	4-5
	* Consolidated Statements of Comprehensive Income	6
	* Consolidated Statements of Changes in Shareholders’ Equity	7
	* Consolidated Statements of Cash Flows	8
	* Notes to Consolidated Financial Statements	9-29

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30-44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	45

	Signatures	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)

Index

Greene County Bancorp, Inc.

Consolidated Statements of Financial Condition

As of March 31, 2016 and June 30, 2015

(Unaudited)

(In thousands, except share and per share amounts)

ASSETS	March 31, 2016			June 30, 2015
Total cash and cash equivalents	$	39,136		$	15,538

Long term certificate of deposit		2,210			1,230
Securities available-for-sale, at fair value		103,246			86,034
Securities held-to-maturity, at amortized cost (fair value $197,652 at March 31, 2016; $171,976 at June 30, 2015)		191,576			169,000
Federal Home Loan Bank stock, at cost		1,531			2,494

Loans		501,182			450,755
Allowance for loan losses		(8,988	)		(8,142	)
Unearned origination fees and costs, net		937			883
Net loans receivable		493,131			443,496

Premises and equipment		14,225			14,515
Accrued interest receivable		3,649			3,026
Foreclosed real estate		370			847
Prepaid expenses and other assets		2,311			2,467
Total assets	$	851,385		$	738,647

LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	84,688		$	73,359
Interest-bearing deposits		665,621			549,358
Total deposits		750,309			622,717

Borrowings from Federal Home Loan Bank, short-term		-			22,900
Borrowings from Federal Home Loan Bank, long-term		20,300			18,800
Accrued expenses and other liabilities		7,791			7,310
Total liabilities		778,400			671,727

SHAREHOLDERS' EQUITY
Preferred stock, Authorized - 1,000,000 shares; Issued - None		-			-
Common stock, par value $.10 per share; Authorized - 12,000,000 shares; Issued – 8,611,340 shares at March 31, 2016, and 4,305,670 shares at June 30, 2015; Outstanding 8,474,414 shares at March 31, 2016,and 4,222,357 shares at June 30, 2015		861			431
Additional paid-in capital		10,870			11,220
Retained earnings		62,256			56,696
Accumulated other comprehensive loss		(485	)		(798	)
Treasury stock, at cost 136,926 shares at March 31, 2016, and 83,313 shares at June 30, 2015		(517	)		(629	)
Total shareholders’ equity		72,985			66,920
Total liabilities and shareholders’ equity	$	851,385		$	738,647

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Nine Months Ended March 31, 2016 and 2015

(Unaudited)

(In thousands, except share and per share amounts)

	2016		2015
Interest income:
Loans	$	16,337	$	14,779
Investment securities - taxable		424		412
Mortgage-backed securities		2,296		2,177
Investment securities - tax exempt		2,167		1,734
Interest-bearing deposits and federal funds sold		38		13
Total interest income		21,262		19,115

Interest expense:
Interest on deposits		1,645		1,504
Interest on borrowings		247		200
Total interest expense		1,892		1,704

Net interest income		19,370		17,411
Provision for loan losses		1,138		1,132
Net interest income after provision for loan losses		18,232		16,279

Noninterest income:
Service charges on deposit accounts		2,153		2,069
Debit card fees		1,343		1,248
Investment services		260		284
E-commerce fees		70		76
Other operating income		560		483
Total noninterest income		4,386		4,160

Noninterest expense:
Salaries and employee benefits		7,674		7,196
Occupancy expense		1,079		1,126
Equipment and furniture expense		376		403
Service and data processing fees		1,417		1,272
Computer software, supplies and support		335		429
Advertising and promotion		266		220
FDIC insurance premiums		307		293
Legal and professional fees		806		800
Other		1,735		1,488
Total noninterest expense		13,995		13,227

Income before provision for income taxes		8,623		7,212
Provision for income taxes		1,992		1,842
Net income	$	6,631	$	5,370

Basic earnings per share¹	$	0.78	$	0.64
Basic average shares outstanding¹		8,454,147		8,434,894
Diluted earnings per share¹	$	0.78	$	0.63
Diluted average shares outstanding¹		8,469,732		8,496,114
Dividends per share¹	$	0.2775	$	0.2700

¹	Share and per share data for 2015 have been adjusted for 2-for-1 stock split

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

(In thousands, except share and per share amounts)

	2016		2015
Interest income:
Loans	$	5,565	$	4,996
Investment securities - taxable		151		135
Mortgage-backed securities		743		731
Investment securities - tax exempt		770		602
Interest-bearing deposits and federal funds sold		34		3
Total interest income		7,263		6,467

Interest expense:
Interest on deposits		574		503
Interest on borrowings		78		76
Total interest expense		652		579

Net interest income		6,611		5,888
Provision for loan losses		421		416
Net interest income after provision for loan losses		6,190		5,472

Noninterest income:
Service charges on deposit accounts		670		623
Debit card fees		438		404
Investment services		89		95
E-commerce fees		29		23
Other operating income		136		106
Total noninterest income		1,362		1,251

Noninterest expense:
Salaries and employee benefits		2,736		2,439
Occupancy expense		383		458
Equipment and furniture expense		138		150
Service and data processing fees		499		430
Computer software, supplies and support		106		90
Advertising and promotion		71		88
FDIC insurance premiums		103		101
Legal and professional fees		269		208
Other		443		490
Total noninterest expense		4,748		4,454

Income before provision for income taxes		2,804		2,269
Provision for income taxes		643		485
Net income	$	2,161	$	1,784

Basic earnings per share¹	$	0.26	$	0.21
Basic average shares outstanding¹		8,464,392		8,441,880
Diluted earnings per share¹	$	0.25	$	0.21
Diluted average shares outstanding¹		8,484,209		8,501,046
Dividends per share¹	$	0.0925	$	0.0900

¹	Share and per share data for 2015 have been adjusted for 2-for-1 stock split

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Nine Months Ended March 31, 2016 and 2015

(Unaudited)

(In thousands)

	2016		2015
Net Income	$	6,631	$	5,370
Other comprehensive income:
Unrealized holding gains on available-for-sale securities, net of income taxes of $192 and $266, respectively		305		422

Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $5 and $120, respectively		8		190

Total other comprehensive income, net of taxes		313		612

Comprehensive income	$	6,944	$	5,982

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

(In thousands)

	2016		2015
Net Income	$	2,161	$	1,784
Other comprehensive income:
Unrealized holding gains on available-for-sale securities, net of income taxes of $206 and $177, respectively		326		280

Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $1 and $19, respectively		1		31

Total other comprehensive income, net of taxes		327		311

Comprehensive income	$	2,488	$	2,095

See notes to consolidated financial statements.

Index

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended March 31, 2016 and 2015

(Unaudited)

(In thousands)

	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				43								65			108
Tax benefit of stock based compensation				16											16
Dividends declared²						(1,453	)								(1,453	)
Net income						5,370									5,370
Other comprehensive income, net of taxes									612						612
Balance at March 31, 2015	$	431	$	11,267	$	55,222		$	(438	)	$	(629	)	$	65,853

	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders' Equity
Balance at June 30, 2015	$	431	$	11,220		$	56,696		$	(798	)	$	(629	)	$	66,920
Options exercised				74									112			186
Tax benefit of stock based compensation				6												6
2-for-1 Stock Split¹		430		(430	)											-
Dividends declared²							(1,071	)								(1,071	)
Net income							6,631									6,631
Other comprehensive income, net of taxes										313						313
Balance at March 31, 2016	$	861	$	10,870		$	62,256		$	(485	)	$	(517	)	$	72,985

¹	On March 15, 2016, the Company issued an additional 4,305,670 shares at a par value of $0.10 per share as a result of the payment of a 2-for-1 stock split.

Dividends declared were $0.2775 per share and $0.27 per share for the nine months ended March 31, 2016 and 2015, adjusted for 2-for-1 stock split. This is based on total number of shares outstanding. However, Greene County Bancorp, MHC, the owner of 54.4% of the Company’s shares outstanding at March 31, 2016, waived its right to receive dividends during the nine months ended March 31, 2016 and the six months ended December 31, 2014. Dividends were paid to the MHC during the three months ended March 31, 2015. 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.

Index

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2016 and 2015

(Unaudited)

(In thousands)

	2016			2015
Cash flows from operating activities:
Net Income	$	6,631		$	5,370
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		471			400
Deferred income tax benefit		(1,697	)		(539	)
Net amortization of premiums and discounts		498			880
Net amortization of deferred loan costs and fees		289			276
Provision for loan losses		1,138			1,132
Losses on sale and write-downs of foreclosed real estate		177			101
Excess tax benefit from share based compensation		(6	)		(16	)
Net increase in accrued income taxes		1,632			2,295
Net increase in accrued interest receivable		(623	)		(494	)
Net increase in prepaid and other assets		(149	)		(1,067	)
Net decrease in other liabilities		660			383
Net cash provided by operating activities		9,021			8,721

Cash flows from investing activities:
Securities available-for-sale:
Proceeds from maturities		30,899			3,250
Purchases of securities		(51,069	)		(23,507	)
Principal payments on securities		3,292			4,612
Securities held-to-maturity:
Proceeds from maturities		6,745			12,847
Purchases of securities		(36,011	)		(15,594	)
Principal payments on securities		6,368			6,427
Net redemption of Federal Home Loan Bank Stock		963			207
Purchases of long term certificates of deposit		(980	)		(980	)
Net increase in loans receivable		(51,446	)		(38,343	)
Proceeds from sale of foreclosed real estate		684			302
Purchases of premises and equipment		(181	)		(516	)
Net cash used by investing activities		(90,736	)		(51,295	)

Cash flows from financing activities
Net decrease in short-term FHLB advances		(22,900	)		(3,150	)
Proceeds from long-term FHLB advances		1,500			2,800
Payment of cash dividends		(1,071	)		(1,453	)
Proceeds from issuance of stock options		186			108
Excess tax benefit from share based compensation		6			16
Net increase in deposits		127,592			55,267
Net cash provided by financing activities		105,313			53,588

Net increase in cash and cash equivalents		23,598			11,014
Cash and cash equivalents at beginning of period		15,538			13,809
Cash and cash equivalents at end of period	$	39,136		$	24,823

Non-cash investing activities:
Foreclosed loans transferred to foreclosed real estate	$	384		$	934
Cash paid during period for:
Interest	$	1,880		$	1,700
Income taxes	$	2,057		$	86

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Notes to Consolidated Financial Statements

As of and for the Nine and Three Months Ended March 31, 2016 and 2015

(1)	Basis of Presentation

Within the accompanying unaudited consolidated statement of financial condition, June 30, 2015 was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, The Bank of Greene County (the “Bank”) and Greene Risk Management, Inc., and the Bank’s wholly owned subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd. The consolidated financial statements at and for the nine and three months ended March 31, 2016 and 2015 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, 2015, 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 nine and three months ended March 31, 2016, are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2016. 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 subsidiaries, The Bank of Greene County and Greene Risk Management, Inc. The Bank of Greene County has 13 full-service offices, an 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. Greene Risk Management, Inc. is a pooled captive insurance company, which provides additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible. The Bank of Greene County also owns and operates 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.

Index

(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 March 31, 2016 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	$	4,592	$	293	$	-	$	4,885
State and political subdivisions		63,238		8		-		63,246
Mortgage-backed securities-residential		6,738		159		13		6,884
Mortgage-backed securities-multi-family		22,933		959		1		23,891
Asset-backed securities		5		-		1		4
Corporate debt securities		4,033		154		6		4,181
Total debt securities		101,539		1,573		21		103,091
Equity securities		62		93		-		155
Total securities available-for-sale		101,601		1,666		21		103,246
Securities held-to-maturity:
U.S. government sponsored enterprises		2,000		14		-		2,014
State and political subdivisions		97,729		3,410		7		101,132
Mortgage-backed securities-residential		15,072		621		-		15,693
Mortgage-backed securities-multi-family		73,587		2,047		23		75,611
Corporate debt securities		1,000		-		-		1,000
Other securities		2,188		15		1		2,202
Total securities held-to-maturity		191,576		6,107		31		197,652
Total securities	$	293,177	$	7,773	$	52	$	300,898

Index

Securities at June 30, 2015 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	$	7,608	$	247	$	-	$	7,855
State and political subdivisions		39,574		9		1		39,582
Mortgage-backed securities-residential		7,797		155		10		7,942
Mortgage-backed securities-multi-family		25,291		486		42		25,735
Asset-backed securities		10		-		1		9
Corporate debt securities		4,544		242		12		4,774
Total debt securities		84,824		1,139		66		85,897
Equity securities		62		75		-		137
Total securities available-for-sale		84,886		1,214		66		86,034
Securities held-to-maturity:
U.S. government sponsored enterprises		2,000		-		49		1,951
State and political subdivisions		81,501		2,137		187		83,451
Mortgage-backed securities-residential		17,468		768		-		18,236
Mortgage-backed securities-multi-family		67,239		990		665		67,564
Other securities		792		-		18		774
Total securities held-to-maturity		169,000		3,895		919		171,976
Total securities	$	253,886	$	5,109	$	985	$	258,010

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 issued by these entities. As of March 31, 2016, all mortgage-backed securities including collateralized mortgage obligations were securities of government sponsored enterprises, 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 March 31, 2016.

	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	$	2,406	$	13		2	$	-	$	-			$	2,406	$	13		2
Mortgage-backed securities-multi-family		1,876		1		1		-		-				1,876		1		1
Asset-backed securities		-		-		-		4		1		1		4		1		1
Corporate debt securities		-		-		-		494		6		1		494		6		1
Total securities available-for-sale		4,282		14		3		498		7		2		4,780		21		5
Securities held-to-maturity:
State and political subdivisions		969		6		11		26		1		1		995		7		12
Mortgage-backed securities-multi-family		6,333		23		5		-		-		-		6,333		23		5
Other securities		-		-		-		161		1		1		161		1		1
Total securities held-to-maturity		7,302		29		16		187		2		2		7,489		31		18
Total securities	$	11,584	$	43		19	$	685	$	9		4	$	12,269	$	52		23

Index

	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	$	799	$	1		1	$	-	$	-			$	799	$	1		1
Mortgage-backed securities-residential		-		-		-		1,630		10		1		1,630		10		1
Mortgage-backed securities-multi-family		2,023		26		1		753		16		1		2,776		42		2
Asset-backed securities		-		-		-		9		1		1		9		1		1
Corporate debt securities		273		2		1		491		10		2		764		12		3
Total securities available-for-sale		3,095		29		3		2,883		37		5		5,978		66		8
Securities held-to-maturity:
U.S. government sponsored enterprises		-		-		-		1,951		49		1		1,951		49		1
State and political subdivisions		11,171		143		49		1,221		44		9		12,392		187		58
Mortgage-backed securities-multi-family		14,464		100		4		28,187		565		6		42,651		665		10
Other securities		334		11		1		202		7		1		536		18		2
Total securities held-to-maturity		25,969		254		54		31,561		665		17		57,530		919		71
Total securities	$	29,064	$	283		57	$	34,444	$	702		22	$	63,508	$	985		79

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 March 31, 2016. 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 nine and three months ended March 31, 2016 and 2015, there were no sales of securities and no gains or losses were recognized. There was no other-than-temporary impairment loss recognized during the nine and three months ended March 31, 2016 and 2015.

Index

The estimated fair values of debt securities at March 31, 2016, 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	$	63,694	$	63,723
After one year through five years		8,169		8,589
After five years through ten years		-		-
After ten years		-		-
Total available-for-sale debt securities		71,863		72,312
Mortgage-backed and asset-backed securities		29,676		30,779
Equity securities		62		155
Total available-for-sale securities		101,601		103,246

Held-to-maturity debt securities
Within one year		14,012		14,201
After one year through five years		52,959		54,390
After five years through ten years		25,455		26,601
After ten years		10,491		11,156
Total held-to-maturity debt securities		102,917		106,348
Mortgage-backed		88,659		91,304
Total held-to-maturity securities		191,576		197,652
Total securities	$	293,177	$	300,898

As of March 31, 2016 and June 30, 2015, respectively, securities with an aggregate fair value of $277.4 million and $223.1 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 March 31, 2016 and June 30, 2015, securities with an aggregate fair value of $4.2 million and $4.8 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 nine months ended March 31, 2016 or 2015.

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 nine and three months ended March 31, 2016 or 2015.

Index

(5)	Loans and Allowance for Loan Losses

Loan segments and classes at March 31, 2016 and June 30, 2015 are summarized as follows:

(In thousands)	March 31, 2016			June 30, 2015
Residential real estate:
Residential real estate	$	232,330		$	226,648
Residential construction and land		5,267			3,621
Multi-family		3,848			4,287
Commercial real estate:
Commercial real estate		176,210			142,323
Commercial construction		12,140			8,936
Consumer loan:
Home equity		21,322			21,019
Consumer installment		4,084			4,123
Commercial loans		45,981			39,798
Total gross loans		501,182			450,755
Allowance for loan losses		(8,988	)		(8,142	)
Deferred fees and costs		937			883
Loans receivable, net	$	493,131		$	443,496

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.

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: residential real estate loans, commercial real estate loans, consumer loans and commercial loans. The residential real estate portfolio consists of residential, construction and land, and multi-family loan classes. Commercial real estate loans consist of commercial real estate and commercial construction loan classes. Consumer loans consist of home equity loan and consumer installment loan classes. Commercial loans consist of installment loans and lines of credit issued to business. 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.

Index

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 commercial real estate, and multi-family dwellings, such as apartment buildings generally are larger than residential loans and involve a greater degree of risk. Commercial real estate 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 commercial real estate 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 commercial real estate 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.

Loan balances by internal credit quality indicator as of March 31, 2016 are shown below.

(In thousands)	Performing		Watch		Special Mention		Substandard		Total
Residential real estate	$	229,813	$	591	$	95	$	1,831	$	232,330
Residential construction and land		5,267		-		-		-		5,267
Multi-family		3,748		-		-		100		3,848
Commercial real estate		173,544		319		535		1,812		176,210
Commercial construction		12,140		-		-		-		12,140
Home equity		21,303		1		13		5		21,322
Consumer installment		4,083		1		-		-		4,084
Commercial loans		44,820		-		712		449		45,981
Total gross loans	$	494,718	$	912	$	1,355	$	4,197	$	501,182

Index

Loan balances by internal credit quality indicator as of June 30, 2015 are shown below.

(In thousands)	Performing		Watch		Special Mention		Substandard		Total
Residential real estate	$	224,195	$	638	$	97	$	1,718	$	226,648
Residential construction and land		3,621		-		-		-		3,621
Multi-family		4,182		-		-		105		4,287
Commercial real estate		138,468		-		986		2,869		142,323
Commercial construction		8,936		-		-		-		8,936
Home equity		20,731		-		15		273		21,019
Consumer installment		4,117		6		-		-		4,123
Commercial loans		38,334		-		844		620		39,798
Total gross loans	$	442,584	$	644	$	1,942	$	5,585	$	450,755

The Company had no loans classified Doubtful or Loss at March 31, 2016 or June 30, 2015.

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 March 31, 2016 and June 30, 2015. Loans on nonaccrual status totaled $3.7 million at March 31, 2016, of which $1.5 million were in the process of foreclosure. Of total loans in process of foreclosure, $923,000 consisted of residential real estate and home equity loans. Included in nonaccrual loans were $2.2 million of loans which were less than 90 days past due at March 31, 2016, 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 $78,000 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 $4.6 million at June 30, 2015 of which $1.2 million were in the process of foreclosure. Included in nonaccrual loans were $2.6 million of loans which were less than 90 days past due at June 30, 2015, but have a recent history of delinquency greater than 90 days past due.

The following table sets forth information regarding delinquent and/or nonaccrual loans as of March 31, 2016:

(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 real estate	$	1,595	$	286	$	997	$	2,878	$	229,452	$	232,330	$	1,214
Residential construction and land		23		-		-		23		5,244		5,267		-
Multi-family		-		-		-		-		3,848		3,848		-
Commercial real estate		1,211		-		590		1,801		174,409		176,210		2,231
Commercial construction		-		-		-		-		12,140		12,140		-
Home equity		79		14		5		98		21,224		21,322		18
Consumer installment		-		1		-		1		4,083		4,084		-
Commercial loans		268		-		-		268		45,713		45,981		205
Total gross loans	$	3,176	$	301	$	1,592	$	5,069	$	496,113	$	501,182	$	3,668

Index

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2015:

(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 real estate	$	1,233	$	329	$	785	$	2,347	$	224,301	$	226,648	$	1,087
Residential construction and land		28		-		-		28		3,593		3,621		-
Multi-family		-		-		-		-		4,287		4,287		-
Commercial real estate		339		1		1,132		1,472		140,851		142,323		2,964
Commercial construction		-		-		-		-		8,936		8,936		-
Home equity		244		-		33		277		20,742		21,019		169
Consumer installment		25		6		-		31		4,092		4,123		-
Commercial loans		-		-		175		175		39,623		39,798		388
Total gross loans	$	1,869	$	336	$	2,125	$	4,330	$	446,425	$	450,755	$	4,608

The Bank of Greene County had accruing loans delinquent more than 90 days totaling $78,000 and $84,000 as of March 31, 2016 and June 30, 2015, respectively. 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 borrowers have made arrangements with the Bank to bring the loans current within a specified time period and have made a series of payments as agreed.

The table below details additional information related to nonaccrual loans for the nine and three months ended March 31:

	For the nine months ended March 31,				For the three months ended March 31
(In thousands)	2016		2015		2016		2015
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	222	$	246	$	63	$	47
Interest income that was recorded on nonaccrual loans		137		127		38		42

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.

Index

The tables below detail additional information on impaired loans at the date or periods indicated:

	As of March 31, 2016						For the nine months ended March 31, 2016				For the three months ended March 31, 2016
(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 real estate	$	266	$	266	$	-	$	235	$	5	$	171	$	3
Commercial real estate		1,027		1,234		-		1,105		22		1,028		5
Home equity		5		5		-		62		1		5		-
Impaired loans with no allowance		1,298		1,505		-		1,402		28		1,204		8

With an allowance recorded:
Residential real estate		1,464		1,464		273		1,395		45		1,399		17
Commercial real estate		407		407		61		514		21		410		9
Commercial loans		87		87		2		90		4		88		1
Impaired loans with allowance		1,958		1,958		336		1,999		70		1,897		27

Total impaired:
Residential real estate		1,730		1,730		273		1,630		50		1,570		20
Commercial real estate		1,434		1,641		61		1,619		43		1,438		14
Home equity		5		5		-		62		1		5		-
Commercial loans		87		87		2		90		4		88		1
Total impaired loans	$	3,256	$	3,463	$	336	$	3,401	$	98	$	3,101	$	35

	As of June 30, 2015						For the nine months ended March 31, 2015				For the three months ended March 31, 2015
(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 real estate	$	432	$	432	$	-	$	500	$	26	$	716	$	13
Commercial real estate		1,206		1,412		-		890		31		1,409		18
Home equity		154		154		-		69		1		48		1
Commercial loans		-		-				167		9		500		9
Impaired loans with no allowance		1,792		1,998		-		1,626		67		2,673		41

With an allowance recorded:
Residential real estate		1,411		1,411		263		2,345		63		2,061		16
Commercial real estate		895		895		187		1,935		53		1,203		11
Home equity		-		-		-		178		-		133		-
Commercial loans		93		93		1		432		21		97		1
Impaired loans with allowance		2,399		2,399		451		4,890		137		3,494		28

Total impaired:
Residential mortgage		1,843		1,843		263		2,845		89		2,777		29
Nonresidential mortgage		2,101		2,307		187		2,825		84		2,612		29
Home equity		154		154		-		247		1		181		1
Commercial loans		93		93		1		599		30		597		10
Total impaired loans	$	4,191	$	4,397	$	451	$	6,516	$	204	$	6,167	$	69

Index

The table below details loans that have been modified as a troubled debt restructuring during the nine months ended March 31, 2016 and 2015.

(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Current Outstanding Recorded Investment
Nine months ended March 31, 2016
Residential real estate		-	$	-	$	-	$	-

Nine months ended March 31, 2015
Residential real estate		1	$	164	$	184	$	184

There were no loans modified as a troubled debt restructuring during the three months ended March 31, 2016 and 2015.

There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to June 30, 2015 or 2014 which have subsequently defaulted during the nine and three months ended March 31, 2016 or 2015, respectively.

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.

Index

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 March 31, 2016
(In thousands)	Balance at December 31, 2015		Charge-offs		Recoveries		Provision			Balance at March 31, 2016
Residential real estate	$	2,392	$	-	$	-	$	29		$	2,421
Residential construction and land		70		-		-		1			71
Multi-family		25		-		-		(3	)		22
Commercial real estate		4,020		-		-		377			4,397
Commercial construction		331		-		-		(17	)		314
Home equity		305		-		-		-			305
Consumer installment		188		50		25		29			192
Commercial loans		1,272		19		-		7			1,260
Unallocated		8		-		-		(2	)		6
Total	$	8,611	$	69	$	25	$	421		$	8,988

	Activity for the nine months ended March 31, 2016
(In thousands)	Balance at June 30, 2015		Charge-offs		Recoveries		Provision			Balance at March 31, 2016
Residential real estate	$	2,454	$	-	$	-	$	(33	)	$	2,421
Residential construction and land		50		-		-		21			71
Multi-family		40		-		-		(18	)		22
Commercial real estate		3,699		162		17		843			4,397
Commercial construction		233		-		-		81			314
Home equity		314		-		-		(9	)		305
Consumer installment		223		193		65		97			192
Commercial loans		1,129		19		-		150			1,260
Unallocated		-		-		-		6			6
Total	$	8,142	$	374	$	82	$	1,138		$	8,988

	Allowance for Loan Losses				Loans Receivable
	Ending Balance March 31, 2016 Impairment Analysis				Ending Balance March 31, 2016 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	273	$	2,148	$	1,730	$	230,600
Residential construction and land		-		71		-		5,267
Multi-family		-		22		-		3,848
Commercial real estate		61		4,336		1,434		174,776
Commercial construction		-		314		-		12,140
Home equity		-		305		5		21,317
Consumer installment		-		192		-		4,084
Commercial loans		2		1,258		87		45,894
Unallocated		-		6		-		-
Total	$	336	$	8,652	$	3,256	$	497,926

Index

	Activity for the three months ended March 31, 2015
(In thousands)	Balance at December 31, 2014		Charge-offs		Recoveries		Provision			Balance at March 31, 2015
Residential real estate	$	2,589	$	53	$	6	$	(43	)	$	2,499
Residential construction and land		3,467		127		-		228			3,568
Multi-family		51		-		-		2			53
Commercial real estate		148		-		-		7			155
Commercial construction		44		-		-		(2	)		42
Home equity		372		121		-		53			304
Consumer installment		244		73		20		15			206
Commercial loans		881		42		2		156			997
Unallocated		-		-		-		-			-
Total	$	7,796	$	416	$	28	$	416		$	7,824

	Activity for the nine months ended March 31, 2015
(In thousands)	Balance at June 30, 2014		Charge-offs		Recoveries		Provision			Balance at March 31, 2015
Residential real estate	$	2,731	$	295	$	6	$	57		$	2,499
Residential construction and land		2,936		127		-		759			3,568
Multi-family		42		-		-		11			53
Commercial real estate		38		-		-		117			155
Commercial construction		59		-		-		(17	)		42
Home equity		361		121		-		64			304
Consumer installment		240		194		44		116			206
Commercial loans		811		48		8		226			997
Unallocated		201		-		-		(201	)		-
Total	$	7,419	$	785	$	58	$	1,132		$	7,824

	Allowance for Loan Losses				Loans Receivable
	Ending Balance June 30, 2015 Impairment Analysis				Ending Balance June 30, 2015 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	263	$	2,191	$	1,843	$	224,805
Residential construction and land		-		50		-		3,621
Multi-family		-		40		-		4,287
Commercial real estate		187		3,512		2,101		140,222
Commercial construction		-		233		-		8,936
Home equity		-		314		154		20,865
Consumer installment		-		223		-		4,123
Commercial loans		1		1,128		93		39,705
Unallocated		-		-		-		-
Total	$	451	$	7,691	$	4,191	$	446,564

(6)	Fair Value Measurements and Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of March 31, 2016 and June 30, 2015 and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

Index

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The FASB ASC Topic on “Fair Value Measurement” established a fair value hierarchy that prioritized the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

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

For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used are as follows:

			Fair Value Measurements Using
(In thousands)	March 31, 2016		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored enterprises	$	4,885	$	-	$	4,885	$	-
State and political subdivisions		63,246		-		63,246		-
Mortgage-backed securities-residential		6,884		-		6,884		-
Mortgage-backed securities-multi-family		23,891		-		23,891		-
Asset-backed securities		4		4		-		-
Corporate debt securities		4,181		4,181		-		-
Equity securities		155		155		-		-
Securities available-for-sale	$	103,246	$	4,340	$	98,906	$	-

			Fair Value Measurements Using
(In thousands)	June 30, 2015		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored enterprises	$	7,855	$	-	$	7,855	$	-
State and political subdivisions		39,582		-		39,582		-
Mortgage-backed securities-residential		7,942		-		7,942		-
Mortgage-backed securities-multi-family		25,735		-		25,735		-
Asset-backed securities		9		9		-		-
Corporate debt securities		4,774		4,774		-		-
Equity securities		137		137		-		-
Securities available-for-sale	$	86,034	$	4,920	$	81,114	$	-

Certain investments that are actively traded and have quoted market prices have been classified as Level 1 valuations. Other available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.

Index

In addition to disclosures of the fair value of assets on a recurring basis, FASB ASC Topic on “Fair Value Measurement” requires disclosures for assets and liabilities measured at fair value on a nonrecurring basis, such as impaired assets, in the period in which a re-measurement at fair value is performed. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated as required by the “Receivables –Loan Impairment” subtopic of the FASB ASC when establishing the allowance for credit losses. Impaired loans are those loans for which the Company has re-measured impairment generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount may not necessarily represent the actual fair value of the loan. Real estate collateral is typically valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. The Company has also re-measured impairment based on the discounted cash flows for those loans that have been modified as a troubled-debt restructuring. The cash flows of the restructured debt have been discounted by the original interest rate prior to the restructuring of the loan to establish the fair value and is therefore classified as Level 3.

			Fair Value Measurements Using
(In thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2016
Impaired loans	$	488	$	-	$	-	$	488
Foreclosed real estate		370		-		-		370

June 30, 2015
Impaired loans	$	922	$	-	$	-	$	922
Foreclosed real estate		490		-		-		490

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were utilized to determine fair value:

(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
March 31, 2016
Impaired Loans	$	488	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		16.50%-38.85	%		21.01	%
				Liquidation expenses⁽³⁾		4.09%-8.35	%		4.92	%
Foreclosed real estate		370	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00%-54.17	%		8.83	%
				Liquidation expenses⁽³⁾		0.42%-12.67	%		7.81	%
June 30, 2015
Impaired loans	$	922	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00%-38.85	%		22.81	%
				Liquidation expenses⁽³⁾		0.00%-7.50	%		3.91	%
Foreclosed real estate		490	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		7.41%-54.17	%		24.65	%
				Liquidation expenses⁽³⁾		0.42%-10.86	%		6.40	%

⁽¹⁾

Fair value is generally determined through independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.

⁽²⁾

Appraisals may be adjusted downwards by management for qualitative factors such as economic conditions. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received or age of the appraisal.

⁽³⁾

Appraisals may be adjusted downwards by management for qualitative factors such as the estimated costs to liquidate the collateral.

At March 31, 2016, loans subject to nonrecurring fair value measurement had a recorded investment of $656,000 with related allowances of $168,000. At June 30, 2015, loans subject to nonrecurring fair value measurement had a recorded investment of $1.2 million with related allowances of $277,000. No other financial assets or liabilities were re-measured during the year on a nonrecurring basis.

The carrying amounts reported in the statements of financial condition for cash and cash equivalents, accrued interest receivable and accrued interest payable approximate their fair values. Fair values of securities are based on quoted market prices (Level 1), where available, or matrix pricing (Level 2), which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. The carrying amount of Federal Home Loan Bank stock approximates fair value due to its restricted nature. Fair values for variable rate loans that reprice frequently, with no significant credit risk, are based on carrying value. Fair value for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values disclosed for demand and savings deposits are equal to carrying amounts at the reporting date. The carrying amounts for variable rate money market deposits approximate fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using discounted cash flows and interest rates currently being offered in the market on similar certificates. Fair value for Federal Home Loan Bank long term borrowings are estimated using discounted cash flows and interest rates currently being offered on similar borrowings. The carrying value of short-term Federal Home Loan Bank borrowings approximates its fair value.

Index

The fair value of commitments to extend credit is estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the credit-worthiness of the potential borrowers. At March 31, 2016 and June 30, 2015, the estimated fair values of these off-balance sheet financial instruments were immaterial, and are therefore excluded from the table below.

The carrying amounts and estimated fair value of financial instruments are as follows:

(In thousands)	March 31, 2016				Fair Value Measurements Using
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	39,136	$	39,136	$	39,136	$	-	$	-
Long term certificate of deposit		2,210		2,210		2,210		-		-
Securities available-for-sale		103,246		103,246		4,340		98,906		-
Securities held-to-maturity		191,576		197,652		-		197,652		-
Federal Home Loan Bank stock		1,531		1,531		-		1,531		-
Net loans		493,131		502,476		-		-		502,476
Accrued interest receivable		3,649		3,649		-		3,649		-
Deposits		750,309		750,500		-		750,500		-
Federal Home Loan Bank borrowings		20,300		20,390		-		20,390		-
Accrued interest payable		76		76		-		76		-

(In thousands)	June 30, 2015				Fair Value Measurements Using
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	15,538	$	15,538	$	15,538	$	-	$	-
Long term certificate of deposit		1,230		1,230		1,230		-		-
Securities available-for-sale		86,034		86,034		4,920		81,114		-
Securities held-to-maturity		169,000		171,976		-		171,976		-
Federal Home Loan Bank stock		2,494		2,494		-		2,494		-
Net loans		443,496		450,437		-		-		450,437
Accrued interest receivable		3,026		3,026		-		3,026		-
Deposits		622,717		622,900		-		622,900		-
Federal Home Loan Bank borrowings		41,700		41,598		-		41,598		-
Accrued interest payable		64		64		-		64		-

Index

(7)	Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding under the treasury stock method if all potentially dilutive common shares (such as stock options) issued became vested during the period. There were no anti-dilutive securities or contracts outstanding during the nine and three months ended March 31, 2016 and 2015. On February 17, 2016, the Company announced that its Board of Directors has declared a two-for-one stock split on the Company’s common stock. The stock split was paid on March 15, 2016 to stockholders of record as of March 7, 2016. Weighted-average number of shares and earnings per share have been restated in all periods presented as if the new shares had been issued and outstanding at the same time as the original shares.

	Net Income		Weighted Average Number Of Shares Outstanding		Earnings per Share

Nine months ended March 31, 2016	$	6,631,000
Basic				8,454,147	$	0.78
Effect of dilutive stock options				15,585		-
Diluted				8,469,732	$	0.78

Nine months ended March 31, 2015	$	5,370,000
Basic				8,434,894	$	0.64
Effect of dilutive stock options				61,220		(.01	)
Diluted				8,496,114	$	0.63

Three months ended March 31, 2016	$	2,161,000
Basic				8,464,392	$	$ 0.26
Effect of dilutive stock options				19,817		(.01	)
Diluted				8,484,209	$	$ 0.25

Three months ended March 31, 2015	$	1,784,000
Basic				8,441,880	$	$ 0.21
Effect of dilutive stock options				59,166		-
Diluted				8,501,046	$	$ 0.21

(8)

Dividends

On February 17, 2016, the Board of Directors declared a two-for-one stock split on the Company’s common stock. The stock split was paid on March 15, 2016 to stockholders of record as of March 7, 2016.

On January 19, 2016, the Board of Directors declared a cash dividend for the quarter ended December 31, 2015 of $0.0925 per share on Greene County Bancorp, Inc.’s common stock, adjusted for the stock split. The dividend reflects an annual cash dividend rate of $0.37 per share, adjusted for the stock split, which was the same rate as the dividend declared during the previous quarter. The dividend was payable to stockholders of record as of February 12, 2016, and was paid on March 1, 2016. The MHC waived its receipt of this dividend.

(9)	Impact of Recent Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board (“FASB”) issued an amendment (ASU 2014-04) to its guidance on “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”. This Update has been issued to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The adoption of these amendments did not have an effect on our consolidated results of operations or financial position.

Index

In May 2014, the FASB issued an amendment (ASU 2014-09) to its guidance on “Revenue from Contracts with Customers (Topic 606). The objective of the ASU is to align the recognition of revenue with the transfer of promised goods or services provided to customers in an amount that reflects the consideration which the entity expects to be entitled in exchange for those goods or services. This ASU will replace most existing revenue recognition guidance under GAAP when it becomes effective. In August, 2015, the FASB issued an amendment (ASU 2015-14) which defers the effective date of this new guidance by one year. The amendments in this ASU are effective for public business entities for annual periods, beginning after December 15, 2017. The Company has not yet determined the effect of the standard on its ongoing financial reporting.

In August 2014, the FASB issued an amendment (ASU 2014-14) to its guidance on “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40)”. The objective of the ASU is to reduce the diversity in how creditors classify government-guaranteed mortgage loans, including FHA or VA guaranteed loans, upon foreclosure, to provide more decision-useful information about a creditor’s foreclosed mortgage loans that are expected to be recovered, at least in part, through government guarantees. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Public entities would be permitted to elect to early adopt for annual reporting periods beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

In January 2015, the FASB issued an Update (ASU 2015-01) to its guidance on “Income Statement-Extraordinary and Unusual Items (Subtopic 225-20)”. The objective of the ASU is to simplify the income statement presentation by eliminating the concept of extraordinary items, and will align GAAP more closely with International Accounting Standards which prohibits the presentation and disclosure of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

In January 2016, the FASB issued an Update (ASU 2016-01) to its guidance on “Financial Instruments (Subtopic 825-10)”. This amendment addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. These amendments require equity securities to be measured at fair value with changes in the fair value to be recognized through net income. The amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this Update is not permitted. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

In February 2016, the FASB issued an Update (ASU 2016-02) to its guidance on “Leases (Topic 842)”. The new leases standard applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. The new leases standard requires a lessor to classify leases as either sales-type, direct financing or operating, similar to existing U.S. GAAP. Classification depends on the same five criteria used by lessees plus certain additional factors. The subsequent accounting treatment for all three lease types is substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases, and operating leases. However, the new standard updates certain aspects of the lessor accounting model to align it with the new lessee accounting model, as well as with the new revenue standard under Topic 606. Lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact on our consolidated results of operations or financial position.

In March 2016, the FASB issued an Update (ASU 2016-09) to its guidance on “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This amendment is intended to simplify the accounting for stock compensation. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

Index

(10)	Employee Benefit Plans

Defined Benefit Plan

The components of net periodic pension cost related to the defined benefit pension plan for the nine and three months ended March 31, 2016 and 2015 were as follows:

	Nine months ended March 31,						Three months ended March 31,
(In thousands)	2016			2015			2016			2015
Interest cost	$	174		$	165		$	58		$	55
Expected return on plan assets		(231	)		(243	)		(77	)		(81	)
Amortization of net loss		102			78			34			26
Net periodic pension cost	$	45		$	-		$	15		$	-

The Company does not anticipate that it will make any additional contributions to the defined benefit pension plan during fiscal 2016.

SERP

The Board of Directors of The Bank of Greene County adopted The Bank of Greene County Supplemental Executive Retirement Plan (the “SERP Plan”), effective as of July 1, 2010. The SERP Plan benefits certain key senior executives of the Bank who have been selected by the Board to participate.

The SERP Plan is intended to provide a benefit from the Bank upon retirement, death or disability or voluntary or involuntary termination of service (other than “for cause”). Accordingly, the SERP Plan obligates the Bank to make an allocation to each executive’s account on the first business day of each July and permits each executive to defer up to 50% of his or her base salary and 100% of his or her annual bonus to the SERP Plan, subject to the requirements of Section 409A of the Internal Revenue Code (“Code”). In addition, the Bank may, but is not required to, make additional discretionary contributions to the executives’ accounts from time to time. An executive becomes vested in the Bank’s contributions after 10 calendar years of service following the effective date of the SERP Plan, and is fully vested immediately for all deferral of salary and bonus. However, the Executive will vest in the present value of his or her account in the event of death, disability or a change in control of the Bank or the Company. In the event the executive is terminated involuntarily or resigns for good reason following a change in control, the present value of all remaining Bank contributions is accelerated and paid to the executive’s account, subject to potential reduction to avoid an excess parachute payment under Code Section 280G. In the event of the executive’s death, disability or termination within two years after a change in control, executive’s account will be paid in a lump sum to the executive or his beneficiary, as applicable. In the event the executive is entitled to a benefit from the SERP Plan due to retirement or other termination of employment, the benefit will be paid in 10 annual installments.

The net periodic pension costs related to the SERP Plan for the nine and three months ended March 31, 2016 were $183,000 and $63,000, respectively, and for the nine and three months ended March 31, 2015 were $151,000 and $52,000, respectively, consisting primarily of service costs and interest costs. The total liability for the SERP Plan was $1.8 million and $1.4 million as of March 31, 2016 and June 30, 2015, respectively.

(11)	Stock-Based Compensation

At March 31, 2016, Greene County Bancorp, Inc. had two stock-based compensation plans, which are described more fully in Note 10 of the consolidated financial statements and notes thereto for the year ended June 30, 2015.

Stock Option Plan

At March 31, 2016 and 2015, all granted shares related to the 2008 Option Plan were fully vested, with no remaining compensation cost to be recognized.

A summary of the Company’s stock option activity and related information for its option plan for the nine months ended March 31, 2016 and 2015 is as follows (all share and per share data has been restated in all periods presented to reflect the 2-for-1 stock split, which was paid on March 15, 2016, as if the new share options had been granted at the same time as the original share options):

Index

	2016					2015
	Shares			Weighted Average Exercise Price Per Share		Shares			Weighted Average Exercise Price Per Share
Outstanding at beginning of year		95,670		$	6.25		118,870		$	6.25
Exercised		(29,700	)	$	6.25		(17,200	)	$	6.25
Outstanding at period end		65,970		$	6.25		101,670		$	6.25

Exercisable at period end		65,970		$	6.25		101,670		$	6.25

The following table presents stock options outstanding and exercisable at March 31, 2016:

Options Outstanding and Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$	6.25		65,970		2.50	$	6.25

The total intrinsic value of the options exercised during the nine and three months ended March 31, 2016 was approximately $325,000 and $210,000, respectively. The total intrinsic value of the options exercised during the nine and three months ended March 31, 2015 was approximately $135,000 and $58,000, respectively. There were no stock options granted during the nine months ended March 31, 2016 or 2015. All outstanding options were fully vested at March 31, 2016 and 2015.

Phantom Stock Option Plan and Long-term Incentive Plan

The Greene County Bancorp, Inc. 2011 Phantom Stock Option and Long-term Incentive Plan (the “Plan”) was adopted effective July 1, 2011, to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, to retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s shareholders. Effective July 1, 2014, the Plan was amended to increase the number of phantom stock options available for awards from 900,000 to 1,800,000. Effective March 15, 2016, as a result of a two-for-one stock split, the number of phantom stock options available for awards was increased to 3,600,000. The Plan is intended to provide benefits to employees and directors of the Company or any subsidiary as designated by the Compensation Committee of the Board of Directors of the Company (“Committee”). A phantom stock option represents the right to receive a cash payment on the date the award vests. The participant receives an amount equal to the positive difference between the strike price on the grant date and the book value of a share of the Company stock on the determination date, which is the last day of the plan year that is the end of the third plan year after the grant date of the award, unless otherwise specified by the Committee. The strike price will be the price established by the Committee, which will not be less than 100% of the book value of a share on a specified date, as determined under generally accepted accounting principles (GAAP) as of the last day of the quarter ending on or immediately preceding the valuation date with adjustments made, in the sole discretion of the Committee, to exclude accumulated other comprehensive income (loss).

A summary of the Company’s phantom stock option activity and related information for its option plan for the nine months ended March 31, 2016 and 2015 is as follows (adjusted for our 2-for-1 stock split):

	2016			2015
Number of options outstanding at beginning of year		1,257,508			1,330,852
Options granted		493,760			470,760

Options paid in cash upon vesting		(396,714	)		(516,744	)
Number of options outstanding at period end		1,354,554			1,284,868

The Company paid out $710,500 and $808,600 in cash during the nine months ended March 31, 2016 and 2015, respectively, on options vested. There were no option payments made during the three months ended March 31, 2016 and payments of $50,900 in cash made during the three months ended March 31, 2015 on options vested. The Company recognized $710,000 and $290,000 in compensation costs related to the phantom stock option plan during the nine and three months ended March 31, 2016, respectively. The Company recognized $570,000 and $190,000 in compensation costs related to the phantom stock option plan during the nine and three months ended March 31, 2015, respectively. The total liability for the long-term incentive plan was $1.1 million as of March 31, 2016 and June 30, 2015.

Index

(12)	Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of March 31, 2016 and June 30, 2015 are presented in the following table:

(In thousands)
Accumulated other comprehensive (loss) income:	March 31, 2016			June 30, 2015
Unrealized gain on available-for-sale securities, net of tax	$	1,009		$	704
Unrealized loss on securities transferred to held-to-maturity, net of tax		(3	)		(11	)
Net losses and past service liability for defined benefit plan, net of tax		(1,491	)		(1,491	)
Accumulated other comprehensive loss	$	(485	)	$	(798	)

(13)	Subsequent events

On April 19, 2016, the Board of Directors declared a cash dividend for the quarter ended March 31, 2016 of $0.0925 per share on Greene County Bancorp, Inc.’s common stock. The dividend reflects an annual cash dividend rate of $0.37 per share, which was the same rate as the dividend declared during the previous quarter. The dividend will be payable to stockholders of record as of May 13, 2016, and is expected to be paid on or about June 1, 2016. The MHC has historically waived its right to receive cash dividends from the Company. However, for purposes of cash flow and liquidity, the MHC does not intend to waive its receipt of these dividends to be paid by the Company for the quarter ended March 31, 2016.

(14)	Foreclosed Real Estate

The following table sets forth information regarding foreclosed real estate as of March 31, 2016 and June 30, 2015:

(in thousands)	March 31, 2016		June 30, 2015
Residential real estate	$	61	$	847
Land		65		-
Commercial real estate		244		-
Total foreclosed real estate	$	370	$	847

Index

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Overview of the Company’s Activities and Risks

Greene County Bancorp, Inc.’s results of operations depend primarily on its net interest income, which is the difference between the income earned on Greene County Bancorp, Inc.’s loan and securities portfolios and its cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by Greene County Bancorp, Inc.’s provision for loan losses, gains and losses from sales of securities, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges. Greene County Bancorp, Inc.’s noninterest expense consists principally of compensation and employee benefits, occupancy, equipment and data processing, and other operating expenses. Results of operations are also significantly affected by general economic and competitive conditions, changes in interest rates, as well as government policies and actions of regulatory authorities. Additionally, future changes in applicable law, regulations or government policies may materially affect Greene County Bancorp, Inc.

To operate successfully, the Company must manage various types of risk, including but not limited to, market or interest rate risk, credit risk, transaction risk, liquidity risk, security risk, strategic risk, reputation risk and compliance risk. While all of these risks are important, the risks of greatest significance to the Company relate to market or interest rate risk and credit risk.

Market risk is the risk of loss from adverse changes in market prices and/or interest rates. Since net interest income (the difference between interest earned on loans and investments and interest paid on deposits and borrowings) is the Company’s primary source of revenue, interest rate risk is the most significant non-credit related market risk to which the Company is exposed. Net interest income is affected by changes in interest rates as well as fluctuations in the level and duration of the Company’s assets and liabilities.

Interest rate risk is the exposure of the Company’s net interest income to adverse movements in interest rates. In addition to directly impacting net interest income, changes in interest rates can also affect the amount of new loan originations, the ability of borrowers and debt issuers to repay loans and debt securities, the volume of loan repayments and refinancings, and the flow and mix of deposits.

Credit risk is the risk to the Company’s earnings and shareholders’ equity that results from customers, to whom loans have been made and to the issuers of debt securities in which the Company has invested, failing to repay their obligations. The magnitude of risk depends on the capacity and willingness of borrowers and debt issuers to repay and the sufficiency of the value of collateral obtained to secure the loans made or investments purchased.

Special Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements. Greene County Bancorp, Inc. desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all such forward-looking statements. These forward-looking statements, which are included in this Management’s Discussion and Analysis and elsewhere in this quarterly report, describe future plans or strategies and include Greene County Bancorp, Inc.’s expectations of future financial results. The words “believe,” “expect,” “anticipate,” “project,” and similar expressions identify forward-looking statements. Greene County Bancorp, Inc.’s ability to predict results or the effect of future plans or strategies or qualitative or quantitative changes based on market risk exposure is inherently uncertain. Factors that could affect actual results include but are not limited to:

(a)

changes in general market interest rates,

(b)

general economic conditions, including unemployment rates and real estate values,

(c)

legislative and regulatory changes,

(d)

monetary and fiscal policies of the U.S. Treasury and the Federal Reserve,

(e)

changes in the quality or composition of The Bank of Greene County’s loan portfolio or the consolidated investment portfolios of The Bank of Greene County and Greene County Bancorp, Inc.,

(f)

deposit flows,

(g)

competition, and

(h)

demand for financial services in Greene County Bancorp, Inc.’s market area.

These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements, since results in future periods may differ materially from those currently expected because of various risks and uncertainties.

Index

Non-GAAP Financial Measures

Regulation G, a rule adopted by the Securities and Exchange Commission (SEC), applies to certain SEC filings, including earnings releases, made by registered companies that contain “non-GAAP financial measures.” GAAP is generally accepted accounting principles in the United States of America. Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure (if a comparable GAAP measure exists) and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required. Financial institutions like the Company and its subsidiary banks are subject to an array of bank regulatory capital measures that are financial in nature but are not based on GAAP and are not easily reconcilable to the closest comparable GAAP financial measures, even in those cases where a comparable measure exists. The Company follows industry practice in disclosing its financial condition under these various regulatory capital measures, including period-end regulatory capital ratios for itself and its subsidiary banks, in its periodic reports filed with the SEC, and does so without compliance with Regulation G, on the widely-shared assumption that the SEC regards such non-GAAP measures to be exempt from Regulation G. The Company uses in this Report additional non-GAAP financial measures that are commonly utilized by financial institutions and have not been specifically exempted by the SEC from Regulation G. The Company provides, as supplemental information, such non-GAAP measures included in this Report as described immediately below.

Tax-Equivalent Net Interest Income and Net Interest Margin: Net interest income, as a component of the tabular presentation by financial institutions of Selected Financial Information regarding their recently completed operations, as well as disclosures based on that tabular presentation, is commonly presented on a tax-equivalent basis. That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total. This adjustment is considered helpful in comparing one financial institution's net interest income to that of another institution or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations. Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets. For purposes of this measure as well, tax-equivalent net interest income is generally used by financial institutions, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time. While we present net interest income and net interest margin utilizing GAAP measures (no tax-equivalent adjustments) as a component of the tabular presentation within our disclosures, we do provide as supplemental information net interest income and net interest margin on a tax-equivalent basis.

Index

Comparison of Financial Condition as of March 31, 2016 and June 30, 2015

ASSETS

Total assets of the Company were $851.4 million at March 31, 2016 as compared to $738.6 million at June 30, 2015, an increase of $112.8 million, or 15.3%. Securities available-for-sale and held-to-maturity amounted to $294.8 million, or 34.6% of assets, at March 31, 2016 as compared to $255.0 million, or 34.5% of assets, at June 30, 2015, an increase of $39.8 million, or 15.6%. Net loans grew by $49.6 million, or 11.2%, to $493.1 million at March 31, 2016 as compared to $443.5 million at June 30, 2015.

CASH AND CASH EQUIVALENTS

Total cash and cash equivalents increased $23.6 million to $39.1 million at March 31, 2016 from $15.5 million at June 30, 2015. The level of cash and cash equivalents is a function of the daily account clearing needs and deposit levels as well as activities associated with securities transactions and loan funding. All of these items can cause cash levels to fluctuate significantly on a daily basis.

SECURITIES

Securities available-for-sale and held-to-maturity increased $39.8 million, or 15.6%, to $294.8 million at March 31, 2016 as compared to $255.0 million at June 30, 2015. Securities purchases totaled $87.1 million during the nine months ended March 31, 2016 and consisted of $74.1 million of state and political subdivision securities, $1.0 million of corporate debt securities, $10.5 million of mortgage-backed securities and $1.5 million of other securities. Principal pay-downs and maturities during the nine months amounted to $47.3 million, of which $9.7 million were mortgage-backed securities, $34.1 million were state and political subdivision securities, and $3.0 million were U.S. government sponsored enterprises securities, and $500,000 were corporate debt securities. At March 31, 2016, 54.6% of our securities portfolio consisted of state and political subdivision securities to take advantage of tax savings and to promote Greene County Bancorp, Inc.’s participation in the communities in which it operates. Mortgage-backed securities and asset-backed securities held within the portfolio do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

	March 31, 2016					June 30, 2015
(Dollars in thousands)	Balance		Percentage of portfolio			Balance		Percentage of portfolio
Securities available-for-sale:
U.S. government sponsored enterprises	$	4,885		1.7	%	$	7,855		3.1	%
State and political subdivisions		63,246		21.4			39,582		15.5
Mortgage-backed securities-residential		6,884		2.3			7,942		3.1
Mortgage-backed securities-multifamily		23,891		8.1			25,735		10.1
Asset-backed securities		4		0.0			9		0.0
Corporate debt securities		4,181		1.4			4,774		1.9
Total debt securities		103,091		34.9			85,897		33.7
Equity securities		155		0.1			137		0.1
Total securities available-for-sale		103,246		35.0			86,034		33.8
Securities held-to-maturity:
U.S. government sponsored enterprises		2,000		0.7			2,000		0.8
State and political subdivisions		97,729		33.2			81,501		31.9
Mortgage-backed securities-residential		15,072		5.1			17,468		6.8
Mortgage-backed securities-multifamily		73,587		25.0			67,239		26.4
Corporate debt securities		1,000		0.3			-		-
Other securities		2,188		0.7			792		0.3
Total securities held-to-maturity		191,576		65.0			169,000		66.2
Total securities	$	294,822		100.0	%	$	255,034		100.0	%

LOANS

Net loans receivable increased $49.6 million, or 11.2%, to $493.1 million at March 31, 2016 from $443.5 million at June 30, 2015. The loan growth experienced during the nine-month period consisted primarily of $33.9 million in commercial real estate loans, $5.7 million in residential real estate loans, $4.9 million in construction loans, and $6.2 million in commercial loans. We believe that the continued low interest rate environment and strong customer satisfaction from personal service continued to enhance loan growth. If long term rates begin to rise, the Company anticipates some slowdown in new loan demand as well as refinancing activities. The Bank of Greene County continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products. A significant decline in home values, however, in the Company’s markets could have a negative effect on the consolidated results of operations, as any such decline in home values would likely lead to a decrease in residential real estate loans and new home equity loan originations and increased delinquencies and defaults in both the consumer home equity loan and the residential real estate loan portfolios and result in increased losses in these portfolios. Updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status. Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy.

Index

(Dollars in thousands)	March 31, 2016						June 30, 2015
	Balance			Percentage of Portfolio			Balance			Percentage of Portfolio
Residential real estate	$	232,330			46.4	%	$	226,648			50.3	%
Residential construction and land		5,267			1.1			3,621			0.8
Multi-family		3,848			0.8			4,287			0.9
Commercial real estate		176,210			35.2			142,323			31.6
Commercial construction		12,140			2.4			8,936			2.0
Home equity		21,322			4.2			21,019			4.7
Consumer installment		4,084			0.8			4,123			0.9
Commercial loans		45,981			9.1			39,798			8.8
Total gross loans		501,182			100.0	%		450,755			100.0	%
Allowance for loan losses		(8,988	)					(8,142	)
Deferred fees and costs		937						883
Total net loans	$	493,131					$	443,496

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 an allowance for loan loss. 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 and installment loans to customers as small, homogeneous loans, which are evaluated for impairment collectively based on historical loss experience. Larger balance residential and 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 loan 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 allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries of loans previously charged off and is reduced by charge-offs.

Index

Analysis of allowance for loan losses activity

	At or for the Nine Months Ended March 31,
(Dollars in thousands)	2016			2015
Balance at the beginning of the period	$	8,142		$	7,419
Charge-offs:
Residential real estate		-			295
Commercial real estate		162			127
Home equity		-			121
Consumer installment		193			194
Commercial loans		19			48
Total loans charged off		374			785

Recoveries:
Residential real estate		-			6
Commercial real estate		17			-
Consumer installment		65			44
Commercial loans		-			8
Total recoveries		82			58

Net charge-offs		292			727

Provisions charged to operations		1,138			1,132
Balance at the end of the period	$	8,988		$	7,824

Net charge-offs to average loans outstanding		0.08	%		0.23	%
Net charge-offs to nonperforming assets		9.46	%		14.17	%
Allowance for loan losses to nonperforming loans		239.94	%		134.04	%
Allowance for loan losses to total loans receivable		1.79	%		1.77	%

Nonaccrual Loans and Nonperforming Assets

Loans are reviewed on a regular basis to assess collectability of all principal and interest payments due. Management determines that a loan is impaired or nonperforming when it is probable at least a portion of the principal or interest will not be collected in accordance with contractual terms of the note. When a loan is determined to be impaired, the measurement of the loan is based on present value of estimated future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral.

Generally, management places loans on nonaccrual status once the loans have become 90 days or more delinquent or sooner if there is a significant reason for management to believe the collectability is questionable and, therefore, interest on the loan will no longer be recognized on an accrual basis. The Company identifies impaired loans and measures the impairment in accordance with FASB 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. Generally, The Bank of Greene County considers smaller balance residential mortgages, home equity loans, commercial 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, business loans and select larger balance residential mortgage 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 considered impaired, 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. A loan does not have to be 90 days delinquent in order to be classified as nonperforming. Foreclosed real estate is considered to be a nonperforming asset.

Index

Analysis of Nonaccrual Loans and Nonperforming Assets

(Dollars in thousands)	At March 31, 2016			At June 30, 2015
Nonaccruing loans:
Residential real estate	$	1,214		$	1,087
Commercial real estate		2,231			2,964
Home equity		18			169
Commercial		205			388
Total nonaccruing loans		3,668			4,608
90 days & accruing
Residential real estate		78			84
Total 90 days & accruing		78			84
Total nonperforming loans		3,746			4,692
Foreclosed real estate:
Residential real estate		61			847
Residential construction and land		66			-
Commercial real estate		243			-
Total foreclosed real estate		370			847
Total nonperforming assets	$	4,116		$	5,539

Troubled debt restructuring:
Nonperforming (included above)	$	1,654		$	2,002
Performing (accruing and excluded above)		939			965

Total nonperforming assets as a percentage of total assets		0.48	%		0.75	%
Total nonperforming loans to net loans		0.76	%		1.06	%

The table below details additional information related to nonaccrual loans for the nine and three months ended March 31:

	For the nine months ended March 31,				For the three months ended March 31,
(In thousands)	2016		2015		2016		2015
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	222	$	246	$	63	$	47
Interest income that was recorded on nonaccrual loans		137		127		38		42

The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment”. A loan is considered impaired 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.

The table below details additional information on impaired loans as of the dates indicated:

(In thousands)	March 31, 2016		June 30, 2015
Balance of impaired loans, with a valuation allowance	$	1,958	$	2,399
Allowances relating to impaired loans included in allowance for loan losses		336		451
Balance of impaired loans, without a valuation allowance		1,298		1,792

	For the nine months ended March 31,				For the three months ended March 31,
(In thousands)	2016		2015		2016		2015
Average balance of impaired loans for the periods ended	$	3,401	$	6,516	$	3,101	$	6,167
Interest income recorded on impaired loans during the periods ended		98		204		35		69

Index

Nonperforming assets amounted to $4.1 million at March 31, 2016 and $5.5 million as of June 30, 2015, a decrease of $1.4 million, or 25.5%, and total impaired loans amounted to $3.3 million at March 31, 2016 compared to $4.2 million at June 30, 2015, a decrease of $935,000, or 22.3%. Loans on nonaccrual status totaled $3.7 million at March 31, 2016, of which $1.5 million were in the process of foreclosure. Included in nonaccrual loans were $2.2 million of loans which were less than 90 days past due at March 31, 2016, 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 $78,000 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. 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 grown substantially over the past several years. The growth in nonperforming assets is 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.

DEPOSITS

Total deposits increased $127.6 million, or 20.5%, to $750.3 million at March 31, 2016 from $622.7 million at June 30, 2015. Noninterest-bearing checking accounts increased $11.3 million, or 15.4%, to $84.7 million at March 31, 2016 as compared to $73.4 million at June 30, 2015. Interest-bearing checking accounts (NOW accounts) increased $91.7 million, or 38.4%, to $330.3 million at March 31, 2016 as compared to $238.6 million at June 30, 2015. Money market deposits increased $21.5 million between June 30, 2015 and March 31, 2016. Savings deposits increased $5.1 million from $163.9 million at June 30, 2015 to $169.0 million at March 31, 2016, and certificates of deposit decreased $2.1 million from $43.1 million at June 30, 2015 to $41.0 million at March 31, 2016. Of the $127.6 million increase in deposits, $77.0 million consisted of deposits from municipalities at Greene County Commercial Bank. This increase was the result of growth in new account relationships as well as tax collection. The remainder of the increase was the result of growth in new deposit relationships from our newest branch location in Kingston. Also, as the result of merger activity of competitors within our market, the Company has been able to acquire new account relationships.

(In thousands)	At March 31, 2016		Percentage of Portfolio			At June 30, 2015		Percentage of Portfolio
Noninterest-bearing deposits	$	84,688		11.3	%	$	73,359		11.8	%
Certificates of deposit		40,995		5.5			43,121		6.9
Savings deposits		169,035		22.5			163,927		26.3
Money market deposits		125,259		16.7			103,724		16.7
NOW deposits		330,332		44.0			238,586		38.3
Total deposits	$	750,309		100.0	%	$	622,717		100.0	%

BORROWINGS

At March 31, 2016, The Bank of Greene County had pledged approximately $210.0 million of its residential mortgage portfolio as collateral for borrowing and stand-by letters of credit at the Federal Home Loan Bank of New York (“FHLB”). The maximum amount of funding available from the FHLB was $173.6 million at March 31, 2016, of which $20.3 million in borrowings were outstanding at March 31, 2016. There were no short term borrowings outstanding at March 31, 2016. Interest rates on short term borrowings are determined at the time of borrowing. Long-term fixed rate, fixed term advances totaled $20.3 million with a weighted average rate of 1.48% and a weighted average maturity of 36 months. The Bank has recently increased its level of long-term borrowing to strengthen its overall interest rate risk position, to help mitigate the potential negative impact of rising interest rates. The Bank of Greene County has established an Irrevocable Letter of Credit Reimbursement Agreement with the FHLB, whereby upon The Bank of Greene County’s request, on behalf of Greene County Commercial Bank, an irrevocable stand-by letter of credit is issued to secure municipal transactional deposit accounts. At March 31, 2016, there were no outstanding letters of credit.

The Bank of Greene County also pledges securities as collateral at the Federal Reserve Bank discount window for overnight borrowings. At March 31, 2016, approximately $4.2 million of collateral was available to be pledged against potential borrowings at the Federal Reserve Bank discount window. There were no balances outstanding with the Federal Reserve Bank at March 31, 2016 or at June 30, 2015.

The Bank of Greene County has established unsecured lines of credit with Atlantic Central Bankers Bank and another financial institution for $6.0 million and $5.0 million, respectively. Greene County Bancorp, Inc. has also established an unsecured line of credit with Atlantic Central Bankers Bank for $5.0 million. The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. At March 31, 2016 and June 30, 2015, there were no balances outstanding on either of these lines of credit.

Index

Scheduled maturities of long-term borrowings at March 31, 2016 were as follows:

(In thousands)
Within the twelve months ended March 31,
2017	$	2,500
2018		4,500
2019		5,500
2020		4,500
2021		3,300
Due after 2021		-
	$	20,300

EQUITY

Shareholders’ equity increased to $73.0 million at March 31, 2016 from $66.9 million at June 30, 2015, as net income of $6.6 million and a decrease in the accumulated other comprehensive loss of $313,000 was partially offset by dividends declared and paid of $1.1 million. Other changes in equity, reflecting an increase of $192,000, were the result of options exercised with the Company’s 2008 Stock Option Plan.

Selected Equity Data:
	At March 31, 2016			At June 30, 2015
Shareholders’ equity to total assets, at end of period		8.57	%		9.06	%

Book value per share³	$	8.61		$	7.93
Closing market price of common stock³	$	17.57		$	14.25

	For the nine months ended
	March 31, 2016			March 31, 2015
Average shareholders’ equity to average assets		8.97	%		9.13	%
Dividend payout ratio¹		35.58	%		42.52	%
Actual dividends paid to net income²		16.15	%		27.06	%

¹The dividend payout ratio has been calculated based on the dividends declared per share divided by basic earnings per share. No adjustments have been made for dividends waived by Greene County Bancorp, MHC (“MHC”), the owner of 54.4% of the Company’s shares outstanding.

²Dividends declared divided by net income. The MHC waived its right to receive dividends declared during the nine months ended March 31, 2016 and the six months ended December 31, 2014. Dividends were paid to the MHC during the three months ended March 31, 2015. 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.

³ June 30, 2015 amount restated for comparability to reflect the 2-for-1 stock split effective March 15, 2016.

Index

Comparison of Operating Results for the Nine and Three Months Ended March 31, 2016 and 2015

Average Balance Sheet

The following table sets forth certain information relating to Greene County Bancorp, Inc. for the nine and three months ended March 31, 2016 and 2015. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances were based on daily averages. Average loan balances include nonperforming loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields.

Nine Months Ended March 31, 2016 and 2015

	2016								2015
(Dollars in thousands)	Average Outstanding Balance			Interest Earned / Paid		Average Yield / Rate			Average Outstanding Balance			Interest Earned / Paid		Average Yield / Rate
Interest-earning Assets:
Loans receivable, net¹	$	475,599		$	16,337		4.58	%	$	421,737		$	14,779		4.67	%
Securities²		271,983			4,828		2.37			248,865			4,274		2.29
Interest-bearing bank balances and federal funds		10,082			38		0.50			5,441			13		0.32
FHLB stock		1,806			59		4.36			1,738			49		3.76
Total interest-earning assets		759,470			21,262		3.73	%		677,781			19,115		3.76	%
Cash and due from banks		8,168								7,533
Allowance for loan losses		(8,486	)							(7,650	)
Other noninterest-earning assets		18,727								18,313
Total assets	$	777,879							$	695,977

Interest-Bearing Liabilities:
Savings and money market deposits	$	276,982		$	649		0.31	%	$	260,479		$	614		0.31	%
NOW deposits		277,302			766		0.37			229,069			654		0.38
Certificates of deposit		43,989			230		0.70			46,608			236		0.68
Borrowings		26,416			247		1.25			25,355			200		1.05
Total interest-bearing liabilities		624,689			1,892		0.40	%		561,511			1,704		0.40	%
Noninterest-bearing deposits		77,970								67,104
Other noninterest-bearing liabilities		5,472								3,847
Shareholders' equity		69,748								63,515
Total liabilities and equity	$	777,879							$	695,977

Net interest income				$	19,370							$	17,411
Net interest rate spread							3.33	%							3.36	%
Net earnings assets	$	134,781							$	116,270
Net interest margin							3.40	%							3.43	%
Average interest-earning assets to average interest-bearing liabilities		121.58	%							120.71	%

¹Calculated net of deferred loan fees and costs, loan discounts, and loans in process.

²Includes tax-free securities, mortgage-backed securities, and asset-backed securities.

Taxable-equivalent net interest income and net interest margin

	For the nine months ended
(Dollars in thousands)	March 31, 2016			March 31, 2015
Net interest income (GAAP)	$	19,370		$	17,411
Tax-equivalent adjustment⁽¹⁾		1,398			1,120
Net interest income (fully taxable-equivalent)	$	20,768		$	18,531

Average interest-earning assets	$	759,470		$	677,781
Net interest margin (fully taxable-equivalent)		3.65	%		3.65	%

¹Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. The rate used for this adjustment was approximately 34% for federal income taxes and 3.63% for New York State income taxes.

Index

Three Months Ended March 31, 2016 and 2015

	2016								2015
(Dollars in thousands)	Average Outstanding Balance			Interest Earned / Paid		Average Yield / Rate			Average Outstanding Balance			Interest Earned / Paid		Average Yield / Rate
Interest-earning Assets:
Loans receivable, net¹	$	491,360		$	5,565		4.53	%	$	434,940		$	4,996		4.59	%
Securities²		278,837			1,642		2.36			251,727			1,450		2.30
Interest-bearing bank balances and federal funds		27,301			34		0.50			6,263			3		0.19
FHLB stock		1,601			22		5.50			2,007			18		3.59
Total interest-earning assets		799,099			7,263		3.64	%		694,937			6,467		3.72	%
Cash and due from banks		9,298								8,370
Allowance for loan losses		(8,700	)							(7,737	)
Other noninterest-earning assets		20,623								20,388
Total assets	$	820,320							$	715,958

Interest-Bearing Liabilities:
Savings and money market deposits	$	286,515		$	221		0.31	%	$	265,146		$	204		0.31	%
NOW deposits		304,758			277		0.36			236,020			224		0.38
Certificates of deposit		43,580			76		0.70			45,093			75		0.67
Borrowings		21,862			78		1.43			31,817			76		0.96
Total interest-bearing liabilities		656,715			652		0.40	%		578,076			579		0.40	%
Noninterest-bearing deposits		82,518								66,700
Other noninterest-bearing liabilities		9,244								6,104
Shareholders' equity		71,843								65,078
Total liabilities and equity	$	820,320							$	715,958

Net interest income				$	6,611							$	5,888
Net interest rate spread							3.24	%							3.32	%
Net earnings assets	$	142,384							$	116,861
Net interest margin							3.31	%							3.39	%
Average interest-earning assets to average interest-bearing liabilities		121.68	%							120.22	%

¹Calculated net of deferred loan fees and costs, loan discounts, and loans in process.

²Includes tax-free securities, mortgage-backed securities, and asset-backed securities.

Taxable-equivalent net interest income and net interest margin

	For the three months ended
(Dollars in thousands)	March 31, 2016			March 31, 2015
Net interest income (GAAP)	$	6,611		$	5,888
Tax-equivalent adjustment⁽¹⁾		494			388
Net interest income (fully taxable-equivalent)	$	7,105		$	6,276

Average interest-earning assets	$	799,099		$	694,937
Net interest margin (fully taxable-equivalent)		3.56	%		3.61	%

Index

Rate / Volume Analysis

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Greene County Bancorp, Inc.’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to:

(i)

Change attributable to changes in volume (changes in volume multiplied by prior rate);

(ii)

Change attributable to changes in rate (changes in rate multiplied by prior volume); and

(iii)

The net change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

(Dollars in thousands)	Nine Months Ended March 31, 2016 versus 2015									Three Months Ended March 31, 2016 versus 2015
	Increase/(Decrease) Due To						Total Increase/			Increase/(Decrease) Due To						Total Increase/
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
Interest Earning Assets:
Loans receivable, net¹	$	1,848		$	(290	)	$	1,558		$	635		$	(66	)	$	569
Securities²		403			151			554			155			37			192
Interest-bearing bank balances and federal funds		15			10			25			21			10			31
FHLB stock		2			8			10			(4	)		8			4
Total interest-earning assets		2,268			(121	)		2,147			807			(11	)		796

Interest-Bearing Liabilities:
Savings and money market deposits		35			-			35			17			-			17
NOW deposits		130			(18	)		112			65			(12	)		53
Certificates of deposit		(13	)		7			(6	)		(2	)		3			1
Borrowings		8			39			47			(28	)		30			2
Total interest-bearing liabilities		160			28			188			52			21			73
Net change in net interest income	$	2,108		$	(149	)	$	1,959		$	755		$	(32	)	$	723

¹ Calculated net of deferred loan fees, loan discounts, and loans in process.

² Includes tax-free securities, mortgage-backed securities, and asset-backed securities.

GENERAL

Return on average assets and return on average equity are common methods of measuring operating results. Annualized return on average assets increased to 1.14% for the nine months ended March 31, 2016 as compared to 1.03% for the nine months ended March 31, 2015, and was 1.05% and 1.00% for the three months ended March 31, 2016 and 2015, respectively. Annualized return on average equity increased to 12.68% for the nine months and 12.03% for the three months ended March 31, 2016 as compared to 11.27% for the nine months and 10.97% for the three months ended March 31, 2015. The increase in return on average assets and return on average equity was primarily the result of increased net income. Net income amounted to $6.6 million and $5.4 million for the nine months ended March 31, 2016 and 2015, respectively, an increase of $1.2 million or 22.2% and amounted to $2.2 million and $1.8 million for the three months ended March 31, 2016 and 2015, respectively, an increase of $377,000, or 21.1%. Average assets increased $81.9 million, or 11.8%, to $777.9 million for the nine months ended March 31, 2016 as compared to $696.0 million for the nine months ended March 31, 2015. Average equity increased $6.2 million, or 9.8%, to $69.7 million for the nine months ended March 31, 2016 as compared to $63.5 million for the nine months ended March 31, 2015. Average assets increased $104.3 million, or 14.6%, to $820.3 million for the three months ended March 31, 2016 as compared to $716.0 million for the three months ended March 31, 2015. Average equity increased $6.7 million, or 10.3%, to $71.8 million for the three months ended March 31, 2016 as compared to $65.1 million for the three months ended March 31, 2015.

Index

INTEREST INCOME

Interest income amounted to $21.3 million for the nine months ended March 31, 2016 as compared to $19.1 million for the nine months ended March 31, 2015, an increase of $2.2 million, or 11.5%. Interest income amounted to $7.3 million for the three months ended March 31, 2016 as compared to $6.5 million for the three months ended March 31, 2015, an increase of $796,000, or 12.3%. The increase in average loan and securities balances and the increase in securities yields had the greatest impact on interest income when comparing the nine and three months ended March 31, 2016 and 2015, which was offset by a decrease in the yield on loans. Average loan balances increased $53.9 million and $56.4 million while the yield on loans decreased 9 basis points and 6 basis points when comparing the nine and three months ended March 31, 2016 and 2015, respectively. Average securities increased $23.1 million and $27.1 million and the yield on such securities increased 8 basis points and 6 basis points when comparing the nine and three months ended March 31, 2016 and 2015, respectively.

INTEREST EXPENSE

Interest expense amounted to $1.9 million for the nine months ended March 31, 2016 as compared to $1.7 million for the nine months ended March 31, 2015, a decrease of $188,000, or 11.0%. Interest expense amounted to $652,000 for the three months ended March 31, 2016 as compared to $579,000 for the three months ended March 31, 2015, an increase of $73,000, or 12.6%. Increases in average balances on interest-bearing liabilities contributed to the increase in overall interest expense. As illustrated in the rate/volume table, interest expense increased $160,000 and $52,000 when comparing the nine and three months ended March 31, 2016 and 2015, respectively, due to a $63.2 million and $78.6 million increase in the average balances on interest-bearing liabilities when comparing these same periods. The average rate paid on interest-bearing liabilities remained unchanged at 0.40% when comparing the nine and three months ended March 31, 2016 and 2015, respectively.

The average rate paid on NOW deposits decreased 1 basis point and 2 basis points when comparing the nine and three months ended March 31, 2016 and 2015, respectively, and the average balance of such accounts grew by $48.2 million and $68.7 million when comparing these same periods, respectively. The average balance of savings and money market deposits increased by $16.5 million and $21.4 million and the rate paid remained unchanged at 0.31% when comparing the nine and three months ended March 31, 2016 and 2015, respectively. The average balance of certificates of deposit decreased $2.6 million and $1.5 million when comparing the nine and three months ended March 31, 2016 and 2015, respectively. The average rate paid on certificate of deposits increased 2 basis points when comparing the nine months ended March 31, 2016 and 2015, and increased 3 basis point when comparing the three months ended March 31, 2016 and 2015. This increase in rate paid on certificates of deposit for the nine months is the result of the promotion of a five year certificate product.

The average balance on borrowings increased $1.1 million and the rate increased 20 basis points when comparing the nine months ended March 31, 2016 and 2015. This was the result of locking in long-term borrowings during the fiscal years ended June 30, 2015 and 2014 as well as funding loan growth during the fiscal year ended June 30, 2015 and the nine months ended March 31, 2016. The average balance on borrowings decreased $10.0 million and the rate increased 47 basis points when comparing the three months ended March 31, 2016 and 2015. The decrease in balances was the result of a decrease in overnight borrowings. This shift in the mix of borrowings to primarily long term borrowings has resulted in the increase in the rate paid.

NET INTEREST INCOME

Net interest income increased $2.0 million to $19.4 million for the nine months ended March 31, 2016 from $17.4 million for the nine months ended March 31, 2015. Net interest income increased $723,000 to $6.6 million for the three months ended March 31, 2016 from $5.9 million for the three months ended March 31, 2015. These increases in net interest income were primarily the result of the growth in the average interest-earning asset balances. Net interest spread and margin decreased 3 basis points to 3.33% and 3.40%, respectively, for the nine months ended March 31, 2016 compared to 3.36% and 3.43%, respectively, for the nine months ended March 31, 2015. Net interest spread and margin decreased 8 basis points to 3.24% and 3.31%, respectively, for the three months ended March 31, 2016 compared to 3.32% and 3.39%, respectively, for the three months ended March 31, 2015.

Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. Tax equivalent net interest margin was 3.65% and 3.56% for the nine and three months ended March 31, 2016 compared to 3.65% and 3.61% for the nine and three months ended March 31, 2015.

Due to the large portion of fixed-rate residential mortgages in the Company’s portfolio, interest rate risk is a concern and the Company will continue to monitor and adjust the asset and liability mix as much as possible to take advantage of the benefits and reduce the risks or potential negative effects of a rising rate environment. Management attempts to mitigate the interest rate risk through balance sheet composition. Several strategies are used to help manage interest rate risk such as maintaining a high level of liquid assets such as short-term federal funds sold and various investment securities and maintaining a high concentration of less interest-rate sensitive and lower-costing core deposits.

Index

PROVISION FOR LOAN LOSSES

Management continues to closely monitor asset quality and adjust the level of the allowance for loan losses when necessary. The amount recognized for the provision for loan losses is determined by management based on its ongoing analysis of the adequacy of the allowance for loan losses. The provision for loan losses amounted to $1.1 million for the nine months ended March 31, 2016 and 2015. The provision for loan losses amounted to $421,000 and $416,000 for the three months ended March 31, 2016 and 2015, respectively. Allowance for loan losses to total loans receivable decreased to 1.79% as of March 31, 2016 as compared to 1.81% as of June 30, 2015. Nonperforming loans amounted to $3.7 million and $4.7 million at March 31, 2016 and June 30, 2015, respectively. Net charge-offs amounted to $292,000 and $727,000 for the nine months ended March 31, 2016 and 2015, respectively, and amounted to $44,000 and $388,000 for the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016, nonperforming assets were 0.48% of total assets and nonperforming loans were 0.76% of net loans. The Company has not been an originator of “no documentation” mortgage loans, and the loan portfolio does not include any mortgage loans that the Company classifies as sub-prime.

NONINTEREST INCOME

	For the nine months ended March 31,				Change from Prior Year
Noninterest income:	2016		2015		Amount			Percent
Service charges on deposit accounts	$	2,153	$	2,069	$	84			4.06	%
Debit card fees		1,343		1,248		95			7.61
Investment services		260		284		(24	)		(8.45	)
E-commerce fees		70		76		(6	)		(7.89	)
Other operating income		560		483		77			15.94
Total noninterest income	$	4,386	$	4,160	$	226			5.43	%

Noninterest income increased $226,000, or 5.4%, to $4.4 million for the nine months ended March 31, 2016 as compared to $4.2 million for the nine months ended March 31, 2015, primarily due to increases in debit card fees and service charges on deposit accounts resulting from continued growth in the number of checking accounts with debit cards. The increase in other operating income was primarily the result of income generated by Greene Risk Management, Inc., a captive insurance subsidiary established on December 28, 2014.

	For the three months ended March 31,				Change from Prior Year
Noninterest income:	2016		2015		Amount			Percent
Service charges on deposit accounts	$	670	$	623	$	47			7.54	%
Debit card fees		438		404		34			8.42
Investment services		89		95		(6	)		(6.32	)
E-commerce fees		29		23		6			26.09
Other operating income		136		106		30			28.30
Total noninterest income	$	1,362	$	1,251	$	111			8.87	%

Noninterest income increased $111,000, or 8.9%, to $1.4 million for the three months ended March 31, 2016 as compared to $1.3 million for the three months ended March 31, 2015, primarily due to increases in debit card fees and service charges on deposit accounts resulting from continued growth in the number of checking accounts with debit cards. The increase in other operating income was primarily the result of income generated by Greene Risk Management, Inc., a captive insurance subsidiary established on December 28, 2014.

Index

NONINTEREST EXPENSE

	For the nine months ended March 31,				Change from Prior Year
Noninterest expense:	2016		2015		Amount			Percent
Salaries and employee benefits	$	7,674	$	7,196	$	478			6.64	%
Occupancy expense		1,079		1,126		(47	)		(4.17	)
Equipment and furniture expense		376		403		(27	)		(6.70	)
Service and data processing fees		1,417		1,272		145			11.40
Computer software, supplies and support		335		429		(94	)		(21.91	)
Advertising and promotion		266		220		46			20.91
FDIC insurance premiums		307		293		14			4.78
Legal and professional fees		806		800		6			0.75
Other		1,735		1,488		247			16.60
Total noninterest expense	$	13,995	$	13,227	$	768			5.81	%

Noninterest expense increased $768,000, or 5.8%, to $14.0 million for the nine months ended March 31, 2016 as compared to $13.2 million for the nine months ended March 31, 2015. The increase in noninterest expense is primarily the result of an increase in other expenses which included costs related to foreclosed real estate (primarily real estate taxes) as well as write-downs of several of the properties within foreclosed real estate based on pending sales or a decrease in the list price. Salaries and employee benefits expenses also increased and were primarily due to the opening of a new branch in Kingston during the third quarter of fiscal 2015 as well as additional staffing within our lending department and customer service center. Service and data processing fees increased as a result of a conversion to a new online banking platform during the nine months ended March 31, 2016. Partially offsetting the aforementioned increases were decreases in computer software, supplies and support. During the nine months ended March 31, 2015, a one-time fee was paid to one of the Company’s vendors related to the renegotiation of the contract for support services.

	For the three months ended March 31,				Change from Prior Year
Noninterest expense:	2016		2015		Amount			Percent
Salaries and employee benefits	$	2,736	$	2,439	$	297			12.18	%
Occupancy expense		383		458		(75	)		(16.38	)
Equipment and furniture expense		138		150		(12	)		(8.00	)
Service and data processing fees		499		430		69			16.05
Computer software, supplies and support		106		90		16			17.78
Advertising and promotion		71		88		(17	)		(19.32	)
FDIC insurance premiums		103		101		2			1.98
Legal and professional fees		269		208		61			29.33
Other		443		490		(47	)		(9.59	)
Total noninterest expense	$	4,748	$	4,454	$	294			6.60	%

Noninterest expense increased $294,000, or 6.6%, to $4.7 million for the three months ended March 31, 2016 as compared to $4.5 million for the three months ended March 31, 2015. Salaries and employee benefits expenses increased primarily due to the opening of a new branch in Kingston during the third quarter of fiscal 2015 as well as additional staffing within our lending department and customer service center. Service and data processing fees increased when comparing the three months ended March 31, 2016 and 2015 which was the result of an upgrade to a new online banking platform during the second quarter of fiscal 2016. Legal and professional fees increased as a result of audit fees related to Greene Risk Management, Inc. which was formed in December 2014, as well as incurring other consulting fees. Partially offsetting these increases was a decrease in occupancy expense which was primarily due to lower fuel prices and lower snow removal costs as a result of a mild winter season, as well as a decrease in other noninterest expense which was due to lower costs related to foreclosed real estate.

INCOME TAXES

The provision for income taxes directly reflects the expected tax associated with the pre-tax income generated for the given period and certain regulatory requirements. The effective tax rate was 23.1% and 22.9% for the nine and three months ended March 31, 2016, compared to 25.5% and 21.4% for the nine and three months ended March 31, 2015. The effective tax rate has continued to decline as a result of increased income derived from tax exempt bonds and loans as well as continued loan growth within the Company’s real estate investment trust subsidiary. Also contributing to the lower effective income tax rate is the tax benefits derived from the Company’s pooled captive insurance company, as premium income received by the pooled captive insurance company is exempt from income taxes. The premiums paid to the pooled captive insurance company by the Company and its banking subsidiaries are tax deductible.

Index

LIQUIDITY AND CAPITAL RESOURCES

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates or prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. Greene County Bancorp, Inc.’s most significant form of market risk is interest rate risk since the majority of Greene County Bancorp, Inc.’s assets and liabilities are sensitive to changes in interest rates. Greene County Bancorp, Inc.’s primary sources of funds are deposits and proceeds from principal and interest payments on loans, mortgage-backed securities and debt securities, with lines of credit available through the Federal Home Loan Bank and Atlantic Central Bankers Bank as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition.

The Bank of Greene County’s unfunded loan commitments are as follows at March 31, 2016:

(In thousands)	At March 31, 2016
Residential real estate loan commitments	$	4,459
Construction and land loan commitments		20,801
Commercial real estate loan commitments		14,002
Home equity available lines of credit		8,472
Consumer overdraft available lines of credit		695
Commercial loan available lines of credit		21,419
Commercial loan commitments		890
Total commitments	$	70,738

Greene County Bancorp, Inc. anticipates that it will have sufficient funds available to meet current loan commitments based on the level of cash and cash equivalents as well as the available-for-sale investment portfolio and borrowing capacity.

The Bank of Greene County and Greene County Commercial Bank met all applicable regulatory capital requirements at March 31, 2016 and June 30, 2015. Consolidated shareholders’ equity represented 8.6% of total assets at March 31, 2016 and 9.1% of total assets of June 30, 2015.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4.

Controls and Procedures

Under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and in timely altering them to material information relating to the Company (or its consolidated subsidiaries) required to be filed in its periodic SEC filings.

There has been no change in the Company's internal control over financial reporting in connection with the quarterly evaluation that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Index

Part II.

Other Information

Item 1.

Legal Proceedings

Greene County Bancorp, Inc. and its subsidiaries are not engaged in any material legal proceedings at the present time.

Item 1A.

Risk Factors

Not applicable to smaller reporting companies.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3.

Defaults Upon Senior Securities

Not applicable

Item 4.

Mine Safety Disclosures

Not applicable

Item 5.

Other Information

Not applicable

There were no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors during the period covered by this Form 10-Q.

Item 6.

Exhibits

	Exhibits
	31.1	Certification of Chief Executive Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a)
	31.2	Certification of Chief Financial Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a)
	32.1	Statement of Chief Executive Officer, furnished pursuant to U.S.C. Section 1350
	32.2	Statement of Chief Financial Officer, furnished pursuant to U.S.C. Section 1350
	101	The following materials from Greene County Bancorp, Inc. Form 10-Q for the quarter ended March 31, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Financial Condition, (iii) Consolidated Statements of Cash Flows and (iv) related notes, tagged as blocks of text.

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.

Greene County Bancorp, Inc.

Date: May 13, 2016

By: /s/ Donald E. Gibson

Donald E. Gibson

President and Chief Executive Officer

Date: May 13, 2016

By: /s/ Michelle M. Plummer

Michelle M. Plummer, CPA

Executive Vice President, Chief Financial Officer, and Chief Operating Officer

GREENE COUNTY BANCORP INC - FORM 10-Q - May 13, 2016

Attached files

GREENE COUNTY BANCORP INC Reports