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EX-32.2 - EXHIBIT 32.2 - GREENE COUNTY BANCORP INCex32_2.htm
EX-32.1 - EXHIBIT 32.1 - GREENE COUNTY BANCORP INCex32_1.htm
EX-31.2 - EXHIBIT 31.2 - GREENE COUNTY BANCORP INCex31_2.htm
EX-31.1 - EXHIBIT 31.1 - GREENE COUNTY BANCORP INCex31_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 SEPTEMBER 30, 2017

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
GREENE COUNTY BANCORP, INC.
(Exact name of registrant as specified in its charter)

Commission file number  0-25165

United States
 
14-1809721
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer  Identification Number)

302 Main Street, Catskill, New York
 
12414
(Address of principal executive office)
 
(Zip code)
 
Registrant's telephone number, including area code: (518) 943-2600

Check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    YES ☒         NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES ☒         NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☐
 
Accelerated filer ☐
Non-accelerated filer     ☐
 
Smaller reporting company ☒
Emerging Growth Company ☐
   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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 November 13, 2017, the registrant had 8,503,614 shares of common stock outstanding at $ 0.10 par value per share.
 


GREENE COUNTY BANCORP, INC.

 
INDEX
 
     
PART I.
FINANCIAL INFORMATION
 
   
Page
Item 1.
Financial Statements (unaudited)
 
 
3
 
4
 
5
 
6
 
7
 
8-28
     
Item 2.
29-41
     
Item 3.
42
     
Item 4.
42
     
PART II.
OTHER INFORMATION
 
     
Item 1.
43
     
Item 1A.
43
     
Item 2.
43
     
Item 3.
43
     
Item 4.
43
     
Item 5.
43
     
Item 6.
43
     
 
44
 
Exhibit 31.1 302 Certification of Chief Executive Officer
 
 
Exhibit 31.2 302 Certification of Chief Financial Officer
 
 
Exhibit 32.1 906 Statement of Chief Executive Officer
 
 
Exhibit 32.2 906 Statement of Chief Financial Officer
 
 
Exhibit 101 Extensible Business Reporting Language (XBRL)
 
 
2

Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
At September 30, 2017 and June 30, 2017
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
 
September 30, 2017
   
June 30, 2017
 
Total cash and cash equivalents
 
$
46,419
   
$
16,277
 
                 
Long term certificate of deposit
   
2,145
     
2,145
 
Securities available-for-sale, at fair value
   
100,809
     
91,483
 
Securities held-to-maturity, at amortized cost (fair value $231,860 at September 30, 2017; $228,452 at June 30, 2017)
   
225,694
     
223,830
 
Federal Home Loan Bank stock, at cost
   
1,575
     
2,131
 
                 
Loans
   
648,693
     
634,331
 
Allowance for loan losses
   
(11,098
)
   
(11,022
)
Unearned origination fees and costs, net
   
851
     
878
 
Net loans receivable
   
638,446
     
624,187
 
                 
Premises and equipment
   
13,559
     
13,615
 
Accrued interest receivable
   
4,374
     
4,033
 
Foreclosed real estate
   
752
     
799
 
Prepaid expenses and other assets
   
3,874
     
3,791
 
Total assets
 
$
1,037,647
   
$
982,291
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Noninterest-bearing deposits
 
$
103,819
   
$
95,929
 
Interest-bearing deposits
   
813,750
     
763,606
 
Total deposits
   
917,569
     
859,535
 
                 
Borrowings from Federal Home Loan Bank, short-term
   
-
     
6,900
 
Borrowings from other banks, short-term
   
700
     
-
 
Borrowings from Federal Home Loan Bank, long-term
   
20,150
     
22,650
 
Accrued expenses and other liabilities
   
12,373
     
9,685
 
Total liabilities
   
950,792
     
898,770
 
                 
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; Outstanding – 8,503,614 shares at September 30, 2017, and 8,502,614 shares at June 30, 2017
   
861
     
861
 
Additional paid-in capital
   
10,992
     
10,990
 
Retained earnings
   
76,165
     
73,072
 
Accumulated other comprehensive loss
   
(757
)
   
(992
)
Treasury stock, at cost 107,726 shares at September 30, 2017, and 108,726 shares at June 30, 2017
   
(406
)
   
(410
)
Total shareholders’ equity
   
86,855
     
83,521
 
Total liabilities and shareholders’ equity
 
$
1,037,647
   
$
982,291
 
 
See notes to consolidated financial statements
 
3

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30, 2017 and 2016
(Unaudited)
(In thousands, except share and per share amounts)

   
2017
   
2016
 
Interest income:
           
Loans
 
$
7,059
   
$
6,053
 
Investment securities - taxable
   
165
     
150
 
Mortgage-backed securities
   
817
     
784
 
Investment securities - tax exempt
   
1,036
     
824
 
Interest-bearing deposits and federal funds sold
   
12
     
3
 
Total interest income
   
9,089
     
7,814
 
                 
Interest expense:
               
Interest on deposits
   
809
     
606
 
Interest on borrowings
   
110
     
121
 
Total interest expense
   
919
     
727
 
                 
Net interest income
   
8,170
     
7,087
 
Provision for loan losses
   
347
     
543
 
Net interest income after provision for loan losses
   
7,823
     
6,544
 
                 
Noninterest income:
               
Service charges on deposit accounts
   
851
     
773
 
Debit card fees
   
566
     
491
 
Investment services
   
72
     
70
 
E-commerce fees
   
38
     
32
 
Other operating income
   
213
     
183
 
Total noninterest income
   
1,740
     
1,549
 
                 
Noninterest expense:
               
Salaries and employee benefits
   
2,927
     
2,668
 
Occupancy expense
   
356
     
380
 
Equipment and furniture expense
   
113
     
120
 
Service and data processing fees
   
487
     
448
 
Computer software, supplies and support
   
143
     
146
 
Advertising and promotion
   
55
     
123
 
FDIC insurance premiums
   
93
     
114
 
Legal and professional fees
   
231
     
198
 
Other
   
488
     
557
 
Total noninterest expense
   
4,893
     
4,754
 
                 
Income before provision for income taxes
   
4,670
     
3,339
 
Provision for income taxes
   
1,198
     
832
 
Net income
 
$
3,472
   
$
2,507
 
                 
Basic earnings per share
 
$
0.41
   
$
0.30
 
Basic average shares outstanding
   
8,502,734
     
8,483,179
 
Diluted earnings per share
 
$
0.41
   
$
0.30
 
Diluted average shares outstanding
   
8,531,242
     
8,497,669
 
Dividends per share
 
$
0.0975
   
$
0.0950
 
 
See notes to consolidated financial statements
 
4

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended September 30, 2017 and 2016
(Unaudited)
(In thousands)

   
2017
   
2016
 
Net Income
 
$
3,472
   
$
2,507
 
Other comprehensive income (loss):
               
Unrealized holding gains (losses) on available-for-sale securities, net of income tax expense (benefit) of $145 and ($101), respectively
   
235
     
(142
)
               
Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $- and $1, respectively
   
-
     
1
 
                 
Total other comprehensive income (loss), net of taxes
   
235
     
(141
)
                 
Comprehensive income
 
$
3,707
   
$
2,366
 
 
See notes to consolidated financial statements.
 
5

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Three Months Ended September 30, 2017 and 2016
(Unaudited)
(In thousands)

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at June 30, 2016
 
$
861
   
$
10,872
   
$
63,805
   
$
(725
)
 
$
(512
)
 
$
74,301
 
Options exercised
           
30
                     
45
     
75
 
Tax benefit of stock based compensation
           
41
                             
41
 
Dividends declared
                   
(369
)
                   
(369
)
Net income
                   
2,507
                     
2,507
 
Other comprehensive loss, net of taxes
                           
(141
)
           
(141
)
Balance at September 30, 2016
 
$
861
   
$
10,943
   
$
65,943
   
$
(866
)
 
$
(467
)
 
$
76,414
 
 
   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at June 30, 2017
 
$
861
   
$
10,990
   
$
73,072
   
$
(992
)
 
$
(410
)
 
$
83,521
 
Options exercised
           
2
                     
4
     
6
 
Dividends declared
                   
(379
)
                   
(379
)
Net income
                   
3,472
                     
3,472
 
Other comprehensive income, net of taxes
                           
235
             
235
 
Balance at September 30, 2017
 
$
861
   
$
10,992
   
$
76,165
   
$
(757
)
 
$
(406
)
 
$
86,855
 
 
See notes to consolidated financial statements.
 
6

Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2017 and 2016
(Unaudited)
(In thousands)
 
   
2017
   
2016
 
Cash flows from operating activities:
           
Net Income
 
$
3,472
   
$
2,507
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
157
     
159
 
Deferred income tax expense
   
1,214
     
801
 
Net amortization of premiums and discounts
   
213
     
223
 
Net amortization of deferred loan costs and fees
   
134
     
118
 
Provision for loan losses
   
347
     
543
 
Losses on sale of foreclosed real estate
   
37
     
47
 
Excess tax benefit from share based compensation
   
-
     
(41
)
Net decrease in accrued income taxes
   
(647
)
   
(1,554
)
Net increase in accrued interest receivable
   
(341
)
   
(90
)
Net decrease in prepaid and other assets
   
175
     
207
 
Net increase (decrease) in other liabilities
   
1,717
     
(81
)
Net cash provided by operating activities
   
6,478
     
2,839
 
                 
Cash flows from investing activities:
               
Securities available-for-sale:
               
Proceeds from maturities
   
17,594
     
24,481
 
Purchases of securities
   
(27,125
)
   
(16,443
)
Principal payments on securities
   
571
     
620
 
Securities held-to-maturity:
               
Proceeds from maturities
   
4,137
     
3,253
 
Purchases of securities
   
(12,050
)
   
(7,648
)
Principal payments on securities
   
5,851
     
1,525
 
Net redemption of Federal Home Loan Bank Stock
   
556
     
532
 
Maturity of long term certificate of deposit
   
-
     
65
 
Net increase in loans receivable
   
(14,768
)
   
(26,786
)
Proceeds from sale of foreclosed real estate
   
38
     
39
 
Purchases of premises and equipment
   
(101
)
   
(41
)
Net cash used by investing activities
   
(25,297
)
   
(20,403
)
                 
Cash flows from financing activities
               
Net decrease in short-term advances
   
(6,200
)
   
(11,800
)
Repayment of long-term FHLB advances
   
(2,500
)
   
-
 
Payment of cash dividends
   
(379
)
   
(369
)
Proceeds from issuance of stock options
   
6
     
75
 
Excess tax benefit from share based compensation
   
-
     
41
 
Net increase in deposits
   
58,034
     
33,708
 
Net cash provided by financing activities
   
48,961
     
21,655
 
                 
Net increase  in cash and cash equivalents
   
30,142
     
4,091
 
Cash and cash equivalents at beginning of period
   
16,277
     
15,895
 
Cash and cash equivalents at end of period
 
$
46,419
   
$
19,986
 
                 
Non-cash investing activities:
               
Foreclosed loans transferred to foreclosed real estate
 
$
28
   
$
-
 
Cash paid during period for:
               
Interest
 
$
931
   
$
729
 
Income taxes
 
$
630
   
$
1,585
 
 
See notes to consolidated financial statements
 
7

Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
At and for the Three Months Ended September 30, 2017 and 2016
 
(1)
Basis of Presentation

Within the accompanying unaudited consolidated statement of financial condition, and related notes to the consolidated financial statements, June 30, 2017 data 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 three months ended September 30, 2017 and 2016 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, 2017, such information and notes have not been duplicated herein.  In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included.   Amounts in the prior year’s consolidated financial statements have been reclassified whenever necessary to conform to the current year’s presentation.  These reclassifications, if any, had no effect on net income or retained earnings as previously reported.  All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three months ended September 30, 2017 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2018.   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 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 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, 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. There have been no significant changes in the application of this critical accounting policy during the three months ended September 30, 2017.

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 equity security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, the 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 write-downs to fair value 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 14 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.
 
8

(3)
Use of Estimates

The preparation of consolidated 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 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 through earnings.

(4)
Securities

Securities at September 30, 2017 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
 
$
4,561
   
$
137
   
$
-
   
$
4,698
 
State and political subdivisions
   
67,915
     
259
     
1
     
68,173
 
Mortgage-backed securities-residential
   
4,470
     
69
     
4
     
4,535
 
Mortgage-backed securities-multi-family
   
20,167
     
723
     
16
     
20,874
 
Corporate debt securities
   
2,262
     
75
     
2
     
2,335
 
Total debt securities
   
99,375
     
1,263
     
23
     
100,615
 
Equity securities
   
62
     
132
     
-
     
194
 
Total securities available-for-sale
   
99,437
     
1,395
     
23
     
100,809
 
Securities held-to-maturity:
                               
U.S. government sponsored enterprises
   
6,000
     
-
     
59
     
5,941
 
State and political subdivisions
   
120,168
     
3,714
     
136
     
123,746
 
Mortgage-backed securities-residential
   
8,136
     
339
     
-
     
8,475
 
Mortgage-backed securities-multi-family
   
88,879
     
2,453
     
150
     
91,182
 
Corporate debt securities
   
1,000
     
-
     
2
     
998
 
Other securities
   
1,511
     
20
     
13
     
1,518
 
Total securities held-to-maturity
   
225,694
     
6,526
     
360
     
231,860
 
Total securities
 
$
325,131
   
$
7,921
   
$
383
   
$
332,669
 
 
9

Securities at June 30, 2017 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
 
$
4,566
   
$
151
   
$
-
   
$
4,717
 
State and political subdivisions
   
57,885
     
227
     
-
     
58,112
 
Mortgage-backed securities-residential
   
4,868
     
72
     
27
     
4,913
 
Mortgage-backed securities-multi-family
   
20,344
     
483
     
62
     
20,765
 
Asset-backed securities
   
1
     
-
     
-
     
1
 
Corporate debt securities
   
2,765
     
29
     
3
     
2,791
 
Total debt securities
   
90,429
     
962
     
92
     
91,299
 
Equity securities
   
62
     
122
     
-
     
184
 
Total securities available-for-sale
   
90,491
     
1,084
     
92
     
91,483
 
Securities held-to-maturity:
                               
U.S. government sponsored enterprises
   
6,000
     
-
     
53
     
5,947
 
State and political subdivisions
   
115,805
     
3,434
     
95
     
119,144
 
Mortgage-backed securities-residential
   
10,798
     
274
     
2
     
11,070
 
Mortgage-backed securities-multi-family
   
88,702
     
1,259
     
199
     
89,762
 
Corporate debt securities
   
1,000
     
-
     
5
     
995
 
Other securities
   
1,525
     
21
     
12
     
1,534
 
Total securities held-to-maturity
   
223,830
     
4,988
     
366
     
228,452
 
Total securities
 
$
314,321
   
$
6,072
   
$
458
   
$
319,935
 

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.  At September 30, 2017, 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 September 30, 2017.

   
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
 
$
149
   
$
1
     
1
   
$
-
   
$
-
     
-
   
$
149
   
$
1
     
1
 
Mortgage-backed securities-residential
   
490
     
4
     
1
     
-
     
-
     
-
     
490
     
4
     
1
 
Mortgage-backed securities-multi-family
   
2,986
     
16
     
2
     
-
     
-
     
-
     
2,986
     
16
     
2
 
Corporate debt securities
   
261
     
1
     
2
     
499
     
1
     
1
     
760
     
2
     
3
 
Total securities available-for-sale
   
3,886
     
22
     
6
     
499
     
1
     
1
     
4,385
     
23
     
7
 
Securities held-to-maturity:
                                                                       
U.S. government sponsored enterprises
   
3,958
     
42
     
1
     
1,983
     
17
     
1
     
5,941
     
59
     
2
 
State and political subdivisions
   
10,455
     
81
     
74
     
2,526
     
55
     
28
     
12,981
     
136
     
102
 
Mortgage-backed securities-multi-family
   
13,660
     
125
     
12
     
1,421
     
25
     
2
     
15,081
     
150
     
14
 
Corporate debt securities
   
998
     
2
     
2
     
-
     
-
     
-
     
998
     
2
     
2
 
Other securities
   
595
     
1
     
2
     
453
     
12
     
1
     
1,048
     
13
     
3
 
Total securities held-to-maturity
   
29,666
     
251
     
91
     
6,383
     
109
     
32
     
36,049
     
360
     
123
 
Total securities
 
$
33,552
   
$
273
     
97
   
$
6,882
   
$
110
     
33
   
$
40,434
   
$
383
     
130
 
 
10

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2017.

   
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
 
$
1,164
   
$
27
     
1
   
$
-
   
$
-
     
-
   
$
1,164
   
$
27
     
1
 
Mortgage-backed securities-multi-family
   
6,488
     
62
     
4
     
-
     
-
     
-
     
6,488
     
62
     
4
 
Corporate debt securities
   
760
     
3
     
2
     
-
     
-
     
-
     
760
     
3
     
2
 
Total securities available for sale
   
8,412
     
92
     
7
     
-
     
-
     
-
     
8,412
     
92
     
7
 
Securities held to maturity:
                                                                       
U.S. government sponsored enterprises
   
5,947
     
53
     
2
     
-
     
-
     
-
     
5,947
     
53
     
2
 
State and political subdivisions
   
8,976
     
76
     
64
     
514
     
19
     
6
     
9,490
     
95
     
70
 
Mortgage-backed securities-residential
   
1,864
     
2
     
1
     
-
     
-
     
-
     
1,864
     
2
     
1
 
Mortgage-backed securities-multi-family
   
23,823
     
199
     
15
     
-
     
-
     
-
     
23,823
     
199
     
15
 
Corporate debt securities
   
995
     
5
     
1
     
-
     
-
     
-
     
995
     
5
     
1
 
Other securities
   
467
     
11
     
1
     
74
     
1
     
1
     
541
     
12
     
2
 
Total securities held to maturity
   
42,072
     
346
     
84
     
588
     
20
     
7
     
42,660
     
366
     
91
 
Total securities
 
$
50,484
   
$
438
     
91
   
$
588
   
$
20
     
7
   
$
51,072
   
$
458
     
98
 

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 before recovery of its amortized cost basis, (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 earnings while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“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 earnings.  Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2017.  Management believes that the reasons for the decline in fair value are due to interest rates, widening credit spreads and market illiquidity at the reporting date.

There were no transfers of securities available-for-sale to held-to-maturity during the three months ended September 30, 2017 or 2016. During the three months ended September 30, 2017 and 2016, there were no sales of securities and no gains or losses were recognized.  There was no other-than-temporary impairment loss recognized during the three months ended September 30, 2017 and 2016.
 
11

The estimated fair values of debt securities at September 30, 2017, 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
 
$
69,916
   
$
70,248
 
After one year through five years
   
4,822
     
4,958
 
After five years through ten years
   
-
     
-
 
After ten years
   
-
     
-
 
Total available-for-sale debt securities
   
74,738
     
75,206
 
Mortgage-backed and asset-backed securities
   
24,637
     
25,409
 
Equity securities
   
62
     
194
 
Total available-for-sale securities
   
99,437
     
100,809
 
                 
Held-to-maturity debt securities
               
Within one year
   
17,851
     
18,085
 
After one year through five years
   
60,032
     
61,409
 
After five years through ten years
   
38,678
     
39,787
 
After ten years
   
12,118
     
12,922
 
Total held-to-maturity debt securities
   
128,679
     
132,203
 
Mortgage-backed
   
97,015
     
99,657
 
Total held-to-maturity securities
   
225,694
     
231,860
 
Total securities
 
$
325,131
   
$
332,669
 

At September 30, 2017 and June 30, 2017, respectively, securities with an aggregate fair value of $319.1 million and $305.7 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank.  At September 30, 2017 and June 30, 2017, securities with an aggregate fair value of $2.3 million and $2.8 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 quarters ended September 30, 2017 or 2016.

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 three months ended September 30, 2017 or 2016.
 
12

(5)
Loans and Allowance for Loan Losses

Loan segments and classes at September 30, 2017 and June 30, 2017 are summarized as follows:
 
(In thousands)
 
September 30, 2017
   
June 30, 2017
 
Residential real estate:
           
Residential real estate
 
$
247,557
   
$
245,331
 
Residential construction and land
   
7,986
     
7,160
 
Multi-family
   
9,216
     
9,199
 
Commercial real estate:
               
Commercial real estate
   
261,462
     
257,964
 
Commercial construction
   
31,140
     
28,430
 
Consumer loan:
               
Home equity
   
21,058
     
21,076
 
Consumer installment
   
4,795
     
4,790
 
Commercial loans
   
65,479
     
60,381
 
Total gross loans
   
648,693
     
634,331
 
Allowance for loan losses
   
(11,098
)
   
(11,022
)
Deferred fees and costs
   
851
     
878
 
Loans receivable, net
 
$
638,446
   
$
624,187
 

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 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. 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.
 
13

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 at September 30, 2017 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential real estate
 
$
244,334
   
$
1,169
   
$
91
   
$
1,963
   
$
247,557
 
Residential construction and land
   
7,986
     
-
     
-
     
-
     
7,986
 
Multi-family
   
8,356
     
-
     
773
     
87
     
9,216
 
Commercial real estate
   
248,918
     
-
     
10,572
     
1,972
     
261,462
 
Commercial construction
   
30,964
     
-
     
-
     
176
     
31,140
 
Home equity
   
20,400
     
-
     
-
     
658
     
21,058
 
Consumer installment
   
4,763
     
23
     
-
     
9
     
4,795
 
Commercial loans
   
64,230
     
17
     
49
     
1,183
     
65,479
 
Total gross loans
 
$
629,951
   
$
1,209
   
$
11,485
   
$
6,048
   
$
648,693
 
 
14

Loan balances by internal credit quality indicator at June 30, 2017 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential real estate
 
$
242,592
   
$
813
   
$
91
   
$
1,835
   
$
245,331
 
Residential construction and land
   
7,160
     
-
     
-
     
-
     
7,160
 
Multi-family
   
9,110
     
-
     
-
     
89
     
9,199
 
Commercial real estate
   
255,090
     
419
     
404
     
2,051
     
257,964
 
Commercial construction
   
28,254
     
-
     
-
     
176
     
28,430
 
Home equity
   
20,858
     
-
     
-
     
218
     
21,076
 
Consumer installment
   
4,770
     
10
     
-
     
10
     
4,790
 
Commercial loans
   
59,030
     
-
     
60
     
1,291
     
60,381
 
Total gross loans
 
$
626,864
   
$
1,242
   
$
555
   
$
5,670
   
$
634,331
 

The Company had no loans classified doubtful or loss at September 30, 2017 or June 30, 2017.  The $10.9 million increase in loans designated as special mention at September 30, 2017 compared to June 30, 2017 represented loans which, based on updated annual review, indicated weaknesses in borrowers’ cash flow, warranting management’s closer monitoring.  At September 30, 2017, all of these loans were performing and management believes that the identified weaknesses do not expose the Company to sufficient risk to warrant a classification of substandard.

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent.  A nonaccrual loan is defined as a loan in which collectability is questionable and therefore interest on the loan will no longer be recognized on an accrual basis.  A loan is not placed back on accrual status until the borrower has demonstrated the ability and willingness to make timely payments on the loan.  A loan does not have to be 90 days delinquent in order to be classified as nonaccrual.   Nonaccrual loans consisted primarily of loans secured by real estate at September 30, 2017 and June 30, 2017.  Loans on nonaccrual status totaled $3.3 million at September 30, 2017 of which $1.6 million were in the process of foreclosure. At September 30, 2017, there were twelve residential loans in the process of foreclosure totaling $1.1 million.  Included in nonaccrual loans were $1.4 million of loans which were less than 90 days past due at September 30, 2017, 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 $228,000 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 $3.6 million at June 30, 2017 of which $1.6 million were in the process of foreclosure. At June 30, 2017, there were twelve residential loans in the process of foreclosure totaling $967,000. Included in nonaccrual loans were $1.9 million of loans which were less than 90 days past due at June 30, 2017, 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 at September 30, 2017:

(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
 
$
1,704
   
$
1,036
   
$
967
   
$
3,707
   
$
243,850
   
$
247,557
   
$
1,371
 
Residential construction and land
   
-
     
-
     
-
     
-
     
7,986
     
7,986
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
9,216
     
9,216
     
-
 
Commercial real estate
   
170
     
747
     
391
     
1,308
     
260,154
     
261,462
     
1,051
 
Commercial construction
   
-
     
-
     
176
     
176
     
30,964
     
31,140
     
176
 
Home equity
   
115
     
38
     
176
     
329
     
20,729
     
21,058
     
333
 
Consumer installment
   
48
     
23
     
9
     
80
     
4,715
     
4,795
     
9
 
Commercial loans
   
-
     
178
     
293
     
471
     
65,008
     
65,479
     
370
 
Total gross loans
 
$
2,037
   
$
2,022
   
$
2,012
   
$
6,071
   
$
642,622
   
$
648,693
   
$
3,310
 
 
15

The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2017:

(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
 
$
2,088
   
$
515
   
$
935
   
$
3,538
   
$
241,793
   
$
245,331
   
$
1,240
 
Residential construction and land
   
-
     
-
     
-
     
-
     
7,160
     
7,160
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
9,199
     
9,199
     
-
 
Commercial real estate
   
74
     
1,070
     
540
     
1,684
     
256,280
     
257,964
     
1,452
 
Commercial construction
   
-
     
176
     
-
     
176
     
28,254
     
28,430
     
176
 
Home equity
   
220
     
186
     
33
     
439
     
20,637
     
21,076
     
218
 
Consumer installment
   
22
     
10
     
10
     
42
     
4,748
     
4,790
     
10
 
Commercial loans
   
18
     
186
     
202
     
406
     
59,975
     
60,381
     
476
 
Total gross loans
 
$
2,422
   
$
2,143
   
$
1,720
   
$
6,285
   
$
628,046
   
$
634,331
   
$
3,572
 

The Bank of Greene County had accruing loans delinquent more than 90 days totaling $68,000 and $69,000 at September 30, 2017 and June 30, 2017, 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 borrower has made arrangements with the Bank to bring the loan current within a specified time period and has made a series of payments as agreed.

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

(In thousands)
 
2017
   
2016
 
Interest income that would have been recorded if loans had been performing in accordance with original terms
 
$
78
   
$
80
 
Interest income that was recorded on nonaccrual loans
   
34
     
28
 

Impaired Loan Analysis

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 residential mortgages, home equity 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, business loans and select larger balance residential mortgage loans are reviewed 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.  Based on this evaluation, a delinquent loan’s risk rating may be downgraded to either pass-watch, 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.
 
16

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

   
At September 30, 2017
   
For the three months ended
September 30, 2017
 
(In thousands)
 
Recorded
Investment
   
Unpaid
Principal
   
Related
Allowance
   
Average
Recorded
Investment
   
Interest
Income
Recognized
 
With no related allowance recorded:
                   
Commercial real estate
 
$
805
   
$
805
   
$
-
   
$
807
   
$
8
 
Home equity
   
181
     
181
     
-
     
183
     
-
 
Commercial loans
   
370
     
370
     
-
     
245
     
-
 
Total impaired loans with no allowance
   
1,356
     
1,356
     
-
     
1,235
     
8
 
                                         
With an allowance recorded:
                                       
Residential real estate
   
1,706
     
1,706
     
335
     
1,536
     
11
 
Commercial real estate
   
425
     
425
     
108
     
430
     
-
 
Commercial construction
   
176
     
176
     
22
     
176
     
-
 
Home equity
   
325
     
325
     
63
     
325
     
3
 
Total impaired loans with allowance
   
2,632
     
2,632
     
528
     
2,467
     
14
 
                                         
Total impaired:
                                       
Residential real estate
   
1,706
     
1,706
     
335
     
1,536
     
11
 
Commercial real estate
   
1,230
     
1,230
     
108
     
1,237
     
8
 
Commercial construction
   
176
     
176
     
22
     
176
     
-
 
Home equity
   
506
     
506
     
63
     
508
     
3
 
Commercial loans
   
370
     
370
     
-
     
245
     
-
 
Total impaired loans
 
$
3,988
   
$
3,988
   
$
528
   
$
3,702
   
$
22
 

   
At June 30, 2017
   
For the three months ended
September 30, 2016
 
(In thousands)
 
Recorded
Investment
   
Unpaid
Principal
   
Related
Allowance
   
Average
Recorded
Investment
   
Interest
Income
Recognized
 
With no related allowance recorded:
                   
Residential real estate
 
$
-
   
$
-
   
$
-
   
$
375
   
$
-
 
Commercial real estate
   
809
     
809
     
-
     
1,021
     
10
 
Home equity
   
186
     
186
     
-
     
5
     
-
 
Commercial loans
   
186
     
186
     
-
     
-
     
-
 
Total impaired loans with no allowance
   
1,181
     
1,181
     
-
     
1,401
     
10
 
                                         
With an allowance recorded:
                                       
Residential real estate
   
1,455
     
1,455
     
278
     
1,345
     
12
 
Commercial real estate
   
440
     
440
     
135
     
402
     
4
 
Commercial construction
   
176
     
176
     
23
     
-
     
-
 
Commercial loans
   
-
     
-
     
-
     
83
     
2
 
Total impaired loans with allowance
   
2,071
     
2,071
     
436
     
1,830
     
18
 
                                         
Total impaired loans:
                                       
Residential real estate
   
1,455
     
1,455
     
278
     
1,720
     
12
 
Commercial real estate
   
1,249
     
1,249
     
135
     
1,423
     
14
 
Commercial construction
   
176
     
176
     
23
     
-
     
-
 
Home equity
   
186
     
186
     
-
     
5
     
-
 
Commercial loans
   
186
     
186
     
-
     
83
     
2
 
Total impaired loans
 
$
3,252
   
$
3,252
   
$
436
   
$
3,231
   
$
28
 
 
17

The table below details loans that have been modified as a troubled debt restructuring during the three months ended September 30, 2017 or 2016.

(Dollars in thousands)
 
Number of
Contracts
   
Pre-Modification
Outstanding
Recorded
Investment
   
Post-Modification
Outstanding
Recorded
Investment