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EX-32.2 - EXHIBIT 32.2 - GREENE COUNTY BANCORP INCbrhc10024501_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - GREENE COUNTY BANCORP INCbrhc10024501_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - GREENE COUNTY BANCORP INCbrhc10024501_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - GREENE COUNTY BANCORP INCbrhc10024501_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, 2021
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

Securities registered pursuant to Section 12(b) of the Act:

Title of class
Trading symbol
Name of exchange on which registered
Common Stock, $0.10 par value
GCBC
The Nasdaq Stock Market

Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)

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 every Interactive Data File required to be submitted 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   ☐
Emerging Growth Company   ☐
Non-accelerated filer   ☒
Smaller reporting 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 May 13, 2021, the registrant had 8,513,414 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)
 
 
*
3
 
*
4
 
*
5
 
*
6
 
*
7
 
*
8-33
     
Item 2.
34-50
     
Item 3.
50
     
Item 4.
50
     
PART II.
OTHER INFORMATION
 
     
Item 1.
51
     
Item 1A.
51
     
Item 2.
51
     
Item 3.
51
     
Item 4.
51
     
Item 5.
51
     
Item 6.
51
     
 
52

2

Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
At March 31, 2021 and June 30, 2020
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
 
March 31, 2021
   
June 30, 2020
 
Cash and due from banks
 
$
145,777
   
$
40,463
 
Federal funds sold
   
10
     
-
 
Total cash and cash equivalents
   
145,787
     
40,463
 
                 
Long term certificates of deposit
   
4,558
     
4,070
 
Securities available-for-sale, at fair value
   
404,186
     
226,709
 
Securities held-to-maturity, at amortized cost (fair value $464,419 at March 31, 2021; $405,512 at June 30, 2020)
   
444,073
     
383,657
 
Equity securities, at fair value
   
286
     
267
 
Federal Home Loan Bank stock, at cost
   
884
     
1,226
 
                 
Loans
   
1,090,880
     
1,012,660
 
Allowance for loan losses
   
(19,668
)
   
(16,391
)
Unearned origination fees and costs, net
   
(2,714
)
   
(2,747
)
Net loans receivable
   
1,068,498
     
993,522
 
                 
Premises and equipment, net
   
13,976
     
13,658
 
Bank owned life insurance
   
40,173
     
-
 
Accrued interest receivable
   
9,132
     
8,207
 
Foreclosed real estate
   
160
     
-
 
Prepaid expenses and other assets
   
11,110
     
5,024
 
Total assets
 
$
2,142,823
   
$
1,676,803
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Noninterest-bearing deposits
 
$
168,714
   
$
138,187
 
Interest-bearing deposits
   
1,791,315
     
1,362,888
 
Total deposits
   
1,960,029
     
1,501,075
 
                 
Borrowings from other banks, short-term
   
2,000
     
17,884
 
Borrowings from Federal Home Loan Bank, long-term
   
-
     
7,600
 
Subordinated notes payable, net
   
19,622
     
-
 
Accrued expenses and other liabilities
   
22,085
     
21,439
 
Total liabilities
   
2,003,736
     
1,547,998
 
                 
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; Outstanding – 8,513,414 shares at March 31, 2021, and June 30, 2020
   
861
     
861
 
Additional paid-in capital
   
11,017
     
11,017
 
Retained earnings
   
132,629
     
118,263
 
Accumulated other comprehensive loss
   
(4,512
)
   
(428
)
Treasury stock, at cost 97,926 shares at March 31, 2021, and June 30, 2020
   
(908
)
   
(908
)
Total shareholders’ equity
   
139,087
     
128,805
 
Total liabilities and shareholders’ equity
 
$
2,142,823
   
$
1,676,803
 

See notes to consolidated financial statements

3

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three and Nine Months Ended March 31, 2021 and 2020
(Unaudited)
(In thousands, except share and per share amounts)

   
For the three months ended
March 31,
   
For the nine months ended
March 31,
 
   
2021
   
2020
   
2021
   
2020
 
Interest income:
                       
Loans
 
$
11,567
   
$
9,955
   
$
33,525
   
$
29,161
 
Investment securities - taxable
   
200
     
178
     
526
     
509
 
Mortgage-backed securities
   
981
     
1,327
     
3,021
     
3,832
 
Investment securities - tax exempt
   
2,010
     
1,771
     
5,945
     
5,129
 
Interest-bearing deposits and federal funds sold
   
30
     
206
     
58
     
611
 
Total interest income
   
14,788
     
13,437
     
43,075
     
39,242
 
                                 
Interest expense:
                               
Interest on deposits
   
951
     
2,239
     
3,393
     
6,494
 
Interest on borrowings
   
267
     
57
     
687
     
196
 
Total interest expense
   
1,218
     
2,296
     
4,080
     
6,690
 
                                 
Net interest income
   
13,570
     
11,141
     
38,995
     
32,552
 
Provision for loan losses
   
1,434
     
1,425
     
3,939
     
2,666
 
Net interest income after provision for loan losses
   
12,136
     
9,716
     
35,056
     
29,886
 
                                 
Noninterest income:
                               
Service charges on deposit accounts
   
815
     
1,034
     
2,555
     
3,270
 
Debit card fees
   
951
     
698
     
2,761
     
2,196
 
Investment services
   
174
     
120
     
551
     
433
 
E-commerce fees
   
25
     
24
     
82
     
90
 
Bank owned life insurance
   
173
     
-
     
173
     
-
 
Other operating income
   
223
     
250
     
711
     
719
 
Total noninterest income
   
2,361
     
2,126
     
6,833
     
6,708
 
                                 
Noninterest expense:
                               
Salaries and employee benefits
   
4,788
     
4,412
     
13,966
     
12,346
 
Occupancy expense
   
605
     
496
     
1,584
     
1,403
 
Equipment and furniture expense
   
168
     
191
     
483
     
598
 
Service and data processing fees
   
674
     
626
     
1,958
     
1,838
 
Computer software, supplies and support
   
368
     
285
     
1,001
     
791
 
Advertising and promotion
   
108
     
115
     
328
     
373
 
FDIC insurance premiums
   
204
     
159
     
552
     
132
 
Legal and professional fees
   
386
     
274
     
981
     
878
 
Other
   
1,066
     
670
     
2,187
     
1,826
 
Total noninterest expense
   
8,367
     
7,228
     
23,040
     
20,185
 
                                 
Income before provision for income taxes
   
6,130
     
4,614
     
18,849
     
16,409
 
Provision for income taxes
   
872
     
563
     
2,521
     
2,382
 
Net income
 
$
5,258
   
$
4,051
   
$
16,328
   
$
14,027
 
                                 
Basic and diluted earnings per share
 
$
0.62
   
$
0.47
   
$
1.92
   
$
1.64
 
Basic and diluted average shares outstanding
   
8,513,414
     
8,531,304
     
8,513,414
     
8,535,391
 
Dividends per share
 
$
0.12
   
$
0.11
   
$
0.36
   
$
0.33
 

See notes to consolidated financial statements

4

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended March 31, 2021 and 2020
(Unaudited)
(In thousands)

   
For the three months
ended March 31,
   
For the nine months
ended March 31,
 
   
2021
   
2020
   
2021
   
2020
 
Net Income
 
$
5,258
   
$
4,051
   
$
16,328
   
$
14,027
 
Other comprehensive (loss) income:
                               
Unrealized holding (losses) gains on available-for-sale securities
   
(5,261
)
   
570
     
(5,528
)
   
49
 
Tax effect
   
(1,375
)
   
149
     
(1,444
)
   
13
 
Net of tax amount
   
(3,886
)
   
421
     
(4,084
)
   
36
 
                                 
Total other comprehensive (loss) income, net of taxes
   
(3,886
)
   
421
     
(4,084
)
   
36
 
                                 
Comprehensive income
 
$
1,372
   
$
4,472
   
$
12,244
   
$
14,063
 

See notes to consolidated financial statements.

5

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
(In thousands)

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders’
Equity
 
Balance at December 31, 2019
 
$
861
   
$
11,017
   
$
110,374
   
$
(1,391
)
 
$
(315
)
 
$
120,546
 
Stock repurchases
                                   
(593
)
   
(593
)
Dividends declared
                   
(432
)
                   
(432
)
Net income
                   
4,051
                     
4,051
 
Other comprehensive income, net of taxes
                           
421
             
421
 
Balance at March 31, 2020
 
$
861
   
$
11,017
   
$
113,993
   
$
(970
)
 
$
(908
)
 
$
123,993
 

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders’
Equity
 
Balance at December 31, 2020
 
$
861
   
$
11,017
   
$
128,392
   
$
(626
)
 
$
(908
)
 
$
138,736
 
Dividends declared
                   
(1,021
)
                   
(1,021
)
Net income
                   
5,258
                     
5,258
 
Other comprehensive loss, net of taxes
                           
(3,886
)
           
(3,886
)
Balance at March 31, 2021
 
$
861
   
$
11,017
   
$
132,629
   
$
(4,512
)
 
$
(908
)
 
$
139,087
 

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Nine Months Ended March 31, 2021 and 2020
(Unaudited)
(In thousands)

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders’
Equity
 
Balance at June 30, 2019
 
$
861
   
$
11,017
   
$
101,774
   
$
(1,006
)
 
$
(277
)
 
$
112,369
 
Stock repurchases
                                   
(631
)
   
(631
)
Dividends declared
                   
(1,808
)
                   
(1,808
)
Net income
                   
14,027
                     
14,027
 
Other comprehensive income, net of taxes
                           
36
             
36
 
Balance at March 31, 2020
 
$
861
   
$
11,017
   
$
113,993
   
$
(970
)
 
$
(908
)
 
$
123,993
 

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders’
Equity
 
Balance at June 30, 2020
 
$
861
   
$
11,017
   
$
118,263
   
$
(428
)
 
$
(908
)
 
$
128,805
 
Dividends declared
                   
(1,962
)
                   
(1,962
)
Net income
                   
16,328
                     
16,328
 
Other comprehensive loss, net of taxes
                           
(4,084
)
           
(4,084
)
Balance at March 31, 2021
 
$
861
   
$
11,017
   
$
132,629
   
$
(4,512
)
 
$
(908
)
 
$
139,087
 

See notes to consolidated financial statements.
6

Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2021 and 2020
(Unaudited)
(In thousands)
   
2021
   
2020
 
Cash flows from operating activities:
           
Net Income
 
$
16,328
   
$
14,027
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
573
     
539
 
Deferred income tax benefit
   
(535
)
   
(285
)
Net amortization of investment premiums and discounts
   
2,657
     
625
 
Net (accretion) amortization of deferred loan costs and fees
   
(2,498
)
   
386
 
Amortization of subordinated debt issuance costs
   
45
     
-
 
Provision for loan losses
   
3,939
     
2,666
 
Bank owned life insurance income
   
(173
)
   
-
 
Net (gain) loss on equity securities
   
(19
)
   
15
 
Net gain on sale of foreclosed real estate
   
(92
)
   
(19
)
Net (decrease) increase in accrued income taxes
   
(2,817
)
   
762
 
Net increase in accrued interest receivable
   
(925
)
   
(1,653
)
Net increase in prepaid expenses and other assets
   
(1,699
)
   
(1,944
)
Net increase in other liabilities
   
1,055
     
2,687
 
Net cash provided by operating activities
   
15,839
     
17,806
 
                 
Cash flows from investing activities:
               
Securities available-for-sale:
               
Proceeds from maturities
   
147,554
     
70,520
 
Purchases of securities
   
(349,067
)
   
(164,360
)
Principal payments on securities
   
17,105
     
7,329
 
Securities held-to-maturity:
               
Proceeds from maturities
   
21,478
     
22,873
 
Purchases of securities
   
(129,761
)
   
(121,783
)
Principal payments on securities
   
46,619
     
20,127
 
Net redemption of Federal Home Loan Bank Stock
   
342
     
563
 
Maturity of long term certificates of deposit
   
735
     
245
 
Purchase of long term certificates of deposit
   
(1,229
)
   
(1,441
)
Purchase of bank owned life insurance
   
(40,000
)
   
-
 
Net increase in loans receivable
   
(76,717
)
   
(101,264
)
Proceeds from sale of foreclosed real estate
   
232
     
287
 
Purchases of premises and equipment
   
(891
)
   
(650
)
Net cash used by investing activities
   
(363,600
)
   
(267,554
)
                 
Cash flows from financing activities
               
Net decrease in short-term FHLB advances
   
-
     
(8,000
)
Net (decrease) increase in short-term advances other banks
   
(15,884
)
   
4,000
 
Repayment of long-term FHLB advances
   
(7,600
)
   
(4,500
)
Net proceeds from subordinated notes payable
   
19,577
     
-
 
Payment of cash dividends
   
(1,962
)
   
(1,808
)
Purchase of treasury stock
   
-
     
(631
)
Net increase in deposits
   
458,954
     
308,963
 
Net cash provided by financing activities
   
453,085
     
298,024
 
                 
Net increase in cash and cash equivalents
   
105,324
     
48,276
 
Cash and cash equivalents at beginning of period
   
40,463
     
29,538
 
Cash and cash equivalents at end of period
 
$
145,787
   
$
77,814
 
                 
Non-cash investing activities:
               
Foreclosed loans transferred to foreclosed real estate
 
$
300
   
$
215
 
Cash paid during period for:
               
Interest
 
$
4,084
   
$
6,675
 
Income taxes
 
$
5,873
   
$
1,904
 

See notes to consolidated financial statements

7

Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
At and for the Three and Nine Months Ended March 31, 2021 and 2020

(1)          Basis of Presentation

Within the accompanying unaudited consolidated statement of financial condition, and related notes to the consolidated financial statements, June 30, 2020 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 and nine months ended March 31, 2021 and 2020 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, 2020, 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. The Company had no reclassifications from amounts in the prior year’s consolidated financial statements to conform to the current year’s presentation.  All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three and nine months ended March 31, 2021 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2021. These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued and should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K.

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 and nine months ended March 31, 2021, other than those implemented to respond to the coronavirus pandemic (“COVID-19”) as developed and initiated by governmental laws and programs as discussed throughout this document such as the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) including the Paycheck Protection Program (“PPP”) developed under this law.

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.

8

(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 17 full-service offices and an operations center and lending center located in its market area within the Hudson Valley and Capital District Regions 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. was formed as a New York corporation that has elected under the Internal Revenue Code to be a real estate investment trust, which holds mortgages and notes which were originated through and serviced by The Bank of Greene County.

During calendar year 2020, the world began and continues to respond to the pandemic.  COVID-19 has caused business shutdowns or slowdowns, limitations on commercial activity, increased unemployment and commercial property vacancy rates, reduced profitability and ability for borrowers to make mortgage or other lending commitments.  The overall economic and financial market instability has impacted households, individuals and businesses.   The Company continues to closely monitor the impact of the pandemic on our business and results of operations.  The Company recognizes and appreciates the staff who continue to assist retail customers, municipalities and businesses in the communities in which the Company operates as the country and world continue to work through the pandemic.  Management believes it is still well positioned to withstand the continued financial impact from this health crisis as it stands by and works hand in hand with local businesses, individuals and households to be stronger than ever.

Depending upon the duration of the COVID-19 pandemic and the adequacy of strategies put in place by local and federal governments, borrowers may not have the ability to repay their debts which may ultimately result in losses to the Company.  The fiscal stimulus and relief programs appear to have delayed any materially adverse financial impact to the Company.  Once these stimulus programs have been discontinued, the Company’s may experience deterioration in the credit portfolio and loan losses may materialize.  The risk of credit losses will be contingent upon efficacy of vaccines including distribution and customers and businesses ability to return to pre-pandemic routines.  Economic uncertainty remains high and volatility may continue.  Management continues to closely monitor credit relationships, particularly those on payment deferral or adversely classified discussed in more detail below.

(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.

9

(4)          Securities

Securities at March 31, 2021 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
 
$
13,081
   
$
-
   
$
448
   
$
12,633
 
U.S. Treasury securities
   
19,699
     
-
     
79
     
19,620
 
State and political subdivisions
   
209,639
     
375
     
-
     
210,014
 
Mortgage-backed securities-residential
   
39,492
     
273
     
349
     
39,416
 
Mortgage-backed securities-multi-family
   
122,425
     
610
     
3,672
     
119,363
 
Corporate debt securities
   
3,009
     
131
     
-
     
3,140
 
Total securities available-for-sale
   
407,345
     
1,389
     
4,548
     
404,186
 
Securities held-to-maturity:
                               
State and political subdivisions
   
294,382
     
15,963
     
426
     
309,919
 
Mortgage-backed securities-residential
   
32,908
     
695
     
202
     
33,401
 
Mortgage-backed securities-multi-family
   
103,448
     
4,381
     
110
     
107,719
 
Corporate debt securities
   
7,849
     
58
     
76
     
7,831
 
Other securities
   
5,486
     
63
     
-
     
5,549
 
Total securities held-to-maturity
   
444,073
     
21,160
     
814
     
464,419
 
Total securities
 
$
851,418
   
$
22,549
   
$
5,362
   
$
868,605
 

Securities at June 30, 2020 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
 
$
502
   
$
2
   
$
-
   
$
504
 
State and political subdivisions
   
176,064
     
1,043
     
-
     
177,107
 
Mortgage-backed securities-residential
   
15,148
     
380
     
-
     
15,528
 
Mortgage-backed securities-multi-family
   
28,116
     
798
     
4
     
28,910
 
Corporate debt securities
   
4,510
     
163
     
13
     
4,660
 
Total securities available-for-sale
   
224,340
     
2,386
     
17
     
226,709
 
Securities held-to-maturity:
                               
U.S. government sponsored enterprises
   
2,000
     
11
     
-
     
2,011
 
State and political subdivisions
   
210,535
     
14,286
     
3
     
224,818
 
Mortgage-backed securities-residential
   
38,884
     
1,002
     
15
     
39,871
 
Mortgage-backed securities-multi-family
   
127,582
     
6,680
     
21
     
134,241
 
Corporate debt securities
   
2,593
     
7
     
130
     
2,470
 
Other securities
   
2,063
     
38
     
-
     
2,101
 
Total securities held-to-maturity
   
383,657
     
22,024
     
169
     
405,512
 
Total securities
 
$
607,997
   
$
24,410
   
$
186
   
$
632,221
 

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 including subordinated debt of banks 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 March 31, 2021, 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 Company’s current securities investment strategy utilizes a risk management approach of diversified investing among three categories: short-, intermediate- and long-term. The emphasis of this approach is to increase overall investment securities yields while managing interest rate risk. The Company will only invest in high quality securities as determined by management’s analysis at the time of purchase. The Company generally does not engage in any derivative or hedging transactions, such as interest rate swaps or caps.

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 March 31, 2021.

   
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:
                                                     
U.S. Government sponsored enterprises
 
$
12,633
   
$
448
     
3
   
$
-
   
$
-
     
-
   
$
12,633
   
$
448
     
3
 
U.S. Treasury securities
   
19,620
     
79
     
2
     
-
     
-
     
-
     
19,620
     
79
     
2
 
Mortgage-backed securities-residential
   
24,844
     
349
     
6
     
-
     
-
     
-
     
24,844
     
349
     
6
 
Mortgage-backed securities-multi-family
   
89,334
     
3,672
     
31
     
-
     
-
     
-
     
89,334
     
3,672
     
31
 
Total securities available-for-sale
   
146,431
     
4,548
     
42
     
-
     
-
     
-
     
146,431
     
4,548
     
42
 
Securities held-to-maturity:
                                                                       
State and political subdivisions
   
33,767
     
426
     
78
     
-
     
-
     
-
     
33,767
     
426
     
78
 
Mortgage-backed securities-residential
   
13,553
     
202
     
3
     
-
     
-
     
-
     
13,553
     
202
     
3
 
Mortgage-backed securities-multi-family
   
3,507
     
110
     
2
     
-
     
-
     
-
     
3,507
     
110
     
2
 
Corporate debt securities
   
2,447
     
53
     
2
     
476
     
23
     
1
     
2,923
     
76
     
3
 
Total securities held-to-maturity
   
53,274
     
791
     
85
     
476
     
23
     
1
     
53,750
     
814
     
86
 
Total securities
 
$
199,705
   
$
5,339
     
127
   
$
476
   
$
23
     
1
   
$
200,181
   
$
5,362
     
128
 

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, 2020.

   
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-multi-family
 
$
1,051
   
$
4
     
1
   
$
-
   
$
-
     
-
   
$
1,051
   
$
4
     
1
 
Corporate debt securities
   
2,487
     
13
     
3
     
-
     
-
     
-
     
2,487
     
13
     
3
 
Total securities available-for-sale
   
3,538
     
17
     
4
     
-
     
-
     
-
     
3,538
     
17
     
4
 
Securities held-to-maturity:
                                                                       
State and political subdivisions
   
3,336
     
3
     
12
     
-
     
-
     
-
     
3,336
     
3
     
12
 
Mortgage-backed securities-residential
   
3,604
     
15
     
2
     
-
     
-
     
-
     
3,604
     
15
     
2
 
Mortgage-backed securities-multi-family
   
3,562
     
21
     
3
     
-
     
-
     
-
     
3,562
     
21
     
3
 
Corporate debt securities
   
1,103
     
2
     
2
     
361
     
128
     
1
     
1,464
     
130
     
3
 
Total securities held-to-maturity
   
11,605
     
41
     
19
     
361
     
128
     
1
     
11,966
     
169
     
20
 
Total securities
 
$
15,143
   
$
58
     
23
   
$
361
   
$
128
     
1
   
$
15,504
   
$
186
     
24
 

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.

11

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. 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, 2021. Management believes that the reasons for the decline in fair value are due to lower interest rates and partially due to COVID-19 uncertainty at the reporting date.

There were no transfers of securities available-for-sale to held-to-maturity during the three and nine months ended March 31, 2021 or 2020. During the three and nine months ended March 31, 2021 and 2020, 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 and nine months ended March 31, 2021 and 2020.

The estimated fair values of debt securities at March 31, 2021, 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
 
$
206,936
   
$
207,302
 
After one year through five years
   
6,160
     
6,271
 
After five years through ten years
   
30,832
     
30,316
 
After ten years
   
1,500
     
1,518
 
Total available-for-sale debt securities
   
245,428
     
245,407
 
Mortgage-backed securities
   
161,917
     
158,779
 
Total available-for-sale securities
   
407,345
     
404,186
 
                 
Held-to-maturity debt securities
               
Within one year
   
44,456
     
45,152
 
After one year through five years
   
110,214
     
114,874
 
After five years through ten years
   
75,884
     
81,133
 
After ten years
   
77,163
     
82,140
 
Total held-to-maturity debt securities
   
307,717
     
323,299
 
Mortgage-backed securities
   
136,356
     
141,120
 
Total held-to-maturity securities
   
444,073
     
464,419
 
Total debt securities
 
$
851,418
   
$
868,605
 

At March 31, 2021 and June 30, 2020, respectively, securities with an aggregate fair value of $852.6 million and $619.3 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. At March 31, 2021 and June 30, 2020, securities with an aggregate fair value of $3.1 million and $4.7 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 three and nine months ended March 31, 2021 or 2020, respectively.

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 and nine months ended March 31, 2021 or 2020.

12

(5)          Loans and Allowance for Loan Losses

Loan segments and classes at March 31, 2021 and June 30, 2020 are summarized as follows:
(In thousands)
 
March 31, 2021
   
June 30, 2020
 
Residential real estate:
           
Residential real estate
 
$
305,267
   
$
279,332
 
Residential construction and land
   
8,467
     
11,847
 
Multi-family
   
37,470
     
25,104
 
Commercial real estate:
               
Commercial real estate
   
454,792
     
381,415
 
Commercial construction
   
66,913
     
74,920
 
Consumer loan:
               
Home equity
   
18,957
     
22,106
 
Consumer installment
   
4,499
     
4,817
 
Commercial loans
   
194,515
     
213,119
 
Total gross loans
   
1,090,880
     
1,012,660
 
Allowance for loan losses
   
(19,668
)
   
(16,391
)
Unearned origination fees and costs, net
   
(2,714
)
   
(2,747
)
Loans receivable, net
 
$
1,068,498
   
$
993,522
 

The Bank of Greene County continues working with borrowers through the current pandemic. The Company instituted a loan deferment program in response to the COVID-19 pandemic whereby deferral of principal payments or principal and interest payments have been provided and correspond to the length of the National Emergency as defined under the CARES Act and extended under the Consolidated Appropriations Act which was signed into law on December 27, 2020.

Under Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), loans less than 30 days past due as of March 31, 2020 will be considered current for COVID-19 modifications. Provisions under Section 4013 of the CARES Act were extended as part of the Consolidated Appropriations Act signed into law on December 27, 2020. A financial institution can suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs. Lastly, prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.  The Company has worked with customers following the guidance and standards set forth in the various federal and state laws and regulatory guidance issued in response to the global pandemic.

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

13

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

The Bank primarily has four segments within its loan portfolio that it considers when measuring credit quality: 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 historically has been 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 85.0% of the appraised value of the property.  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 85.0% or less, The Bank of Greene County limits its risk of loss in the event of default.  However, the market values of the collateral may be adversely impacted by declines in the economy. Home equity loans may have an additional inherent risk if The Bank of Greene County does not hold the first mortgage. The Bank of Greene County may stand in a secondary position in the event of collateral liquidation resulting in a greater chance of insufficiency to meet all obligations.

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

Loans collateralized by 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. Over the past few years, The Bank of Greene County has shifted more focus on the origination of commercial loans including commercial real estate.  The Bank of Greene County has also formed relationships with other community banks within our region to participate in larger commercial loan relationships.  These types of loans are generally considered to be riskier due to the size and complexity of the loan relationship. By entering into a participation agreement with the other bank, The Bank of Greene County can obtain the loan relationship while limiting its exposure to credit loss. Management completes its due diligence in underwriting these loans and monitors the servicing of these loans.  During the quarter ended March 31, 2021, the Company had on average outstanding $77.6 million in PPP loans which are unsecured commercial loans and are 100% guaranteed by the Small Business Administration.

14

Loan balances by internal credit quality indicator at March 31, 2021 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential real estate
 
$
301,919
   
$
495
   
$
81
   
$
2,772
   
$
305,267
 
Residential construction and land
   
8,467
     
-
     
-
     
-
     
8,467
 
Multi-family
   
35,493
     
-
     
1,613
     
364
     
37,470
 
Commercial real estate
   
426,657
     
-
     
17,918
     
10,217
     
454,792
 
Commercial construction
   
63,913
     
-
     
2,000
     
1,000
     
66,913
 
Home equity
   
18,393
     
-
     
-
     
564
     
18,957
 
Consumer installment
   
4,499
     
-
     
-
     
-
     
4,499
 
Commercial loans
   
188,016
     
-
     
2,572
     
3,927
     
194,515
 
Total gross loans
 
$
1,047,357
   
$
495
   
$
24,184
   
$
18,844
   
$
1,090,880
 

Loan balances by internal credit quality indicator at June 30, 2020 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential real estate
 
$
274,973
   
$
626
   
$
996
   
$
2,737
   
$
279,332
 
Residential construction and land
   
11,847
     
-
     
-
     
-
     
11,847
 
Multi-family
   
23,336
     
-
     
1,645
     
123
     
25,104
 
Commercial real estate
   
364,884
     
-
     
13,189
     
3,342
     
381,415
 
Commercial construction
   
67,844
     
-
     
6,974
     
102
     
74,920
 
Home equity
   
21,466
     
-
     
-
     
640
     
22,106
 
Consumer installment
   
4,792
     
25
     
-
     
-
     
4,817
 
Commercial loans
   
210,031
     
50
     
2,675
     
363
     
213,119
 
Total gross loans
 
$
979,173
   
$
701
   
$
25,479
   
$
7,307
   
$
1,012,660
 

The Company had no loans classified doubtful or loss at March 31, 2021 and June 30, 2020. Loans classified as substandard or special mention totaled $43.0 million at March 31, 2021 and $32.8 million at June 30, 2020, an increase of $10.2 million.  Loans classified as substandard or special mention increased due to insufficient cash flows and revenues for commercial real estate and commercial loans related to the COVID-19 pandemic. These newly classified loans were all performing as of March 31, 2021.

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, 2021 and June 30, 2020. Loans on nonaccrual status totaled $2.7 million at March 31, 2021 of which $752,000 were in the process of foreclosure. At March 31, 2021, there were six residential loans in the process of foreclosure totaling $450,000 with the remainder in commercial loans. Included in nonaccrual loans were $1.6 million of loans which were less than 90 days past due at March 31, 2021, 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. Loans on nonaccrual status totaled $4.1 million at June 30, 2020 of which $1.3 million were in the process of foreclosure. At June 30, 2020, there were eight residential loans in the process of foreclosure totaling $1.0 million. Included in nonaccrual loans were $1.4 million of loans which were less than 90 days past due at June 30, 2020, but have a recent history of delinquency greater than 90 days past due. The decrease in nonaccrual loans during the nine months ended March 31, 2021, was primarily due to $1.4 million in loan repayments, $583,000 in charge-offs, $293,000 in loans returned to performing status, offset by $907,000 of loans placed into nonperforming status.
15

The following table sets forth information regarding delinquent and/or nonaccrual loans at March 31, 2021:

(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
 
$
2,078
   
$
306
   
$
453
   
$
2,837
   
$
302,430
   
$
305,267
   
$
1,582
 
Residential construction and land
   
-
     
-
     
-
     
-
     
8,467
     
8,467
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
37,470
     
37,470
     
-
 
Commercial real estate
   
5,012
     
127
     
345
     
5,484
     
449,308
     
454,792
     
529
 
Commercial construction
   
-
     
-
     
-
     
-
     
66,913
     
66,913
     
-
 
Home equity
   
14
     
101
     
128
     
243
     
18,714
     
18,957
     
243
 
Consumer installment
   
25
     
-
     
-
     
25
     
4,474
     
4,499
     
-
 
Commercial loans
   
991
     
117
     
118
     
1,226
     
193,289
     
194,515
     
312
 
Total gross loans
 
$
8,120
   
$
651
   
$
1,044
   
$
9,815
   
$
1,081,065
   
$
1,090,880
   
$
2,666
 

The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2020:

(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
 
$
871
   
$
345
   
$
1,691
   
$
2,907
   
$
276,425
   
$
279,332
   
$
2,513
 
Residential construction and land
   
-
     
-
     
-
     
-
     
11,847
     
11,847
     
-
 
Multi-family
   
-
     
-
     
151
     
151
     
24,953
     
25,104
     
151
 
Commercial real estate
   
393
     
189
     
374
     
956
     
380,459
     
381,415
     
781
 
Commercial construction
   
-
     
-
     
-
     
-
     
74,920
     
74,920
     
-
 
Home equity
   
29
     
-
     
238
     
267
     
21,839
     
22,106
     
319
 
Consumer installment
   
36
     
25
     
-
     
61
     
4,756
     
4,817
     
-
 
Commercial loans
   
48
     
72
     
245
     
365
     
212,754
     
213,119
     
313
 
Total gross loans
 
$
1,377
   
$
631
   
$
2,699
   
$
4,707
   
$
1,007,953
   
$
1,012,660
   
$
4,077
 

The Bank of Greene County had no accruing loans delinquent more than 90 days at March 31, 2021 or June 30, 2020, 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 and nine months ended March 31:

   
For the three months
ended March 31,
   
For the nine months
ended March 31
 
(In thousands)
 
2021
   
2020
   
2021
   
2020
 
Interest income that would have been recorded if loans had been performing in accordance with original terms
 
$
43
   
$
64
   
$
174
   
$
218
 
Interest income that was recorded on nonaccrual loans
   
36
     
51
     
116
     
143
 

In order to assist borrowers through the COVID-19 pandemic, the Company instituted a loan deferment program in response to the COVID-19 pandemic whereby deferral of principal and/or interest payments have been provided and correspond to the length of the National Emergency as defined under the CARES Act and extended under the Consolidated Appropriations Act which was signed into law on December 27, 2020. Payment deferrals consisted of either principal deferrals or full payment deferrals. Based on guidance provided by bank regulators on March 22, 2020 regarding deferrals granted due to COVID-19, these have not been reported as delinquent and we will continue to recognize interest income during the deferral period. At March 31, 2021, there were eight loans totaling $248,000 on nonaccrual that previously participated in this loan deferment program due to COVID-19.

16

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.

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

   
At March 31, 2021
   
For the three months ended
March 31, 2021
   
For the nine months ended
March 31, 2021
 
(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
 
$
378
   
$
378
   
$
-
   
$
381
   
$
1
   
$
392
   
$
11
 
Multi-family
   
-
     
-
     
-
     
-
     
-
     
40
     
-
 
Commercial real estate
   
300
     
300
     
-
     
307
     
-
     
321
     
3
 
Home equity
   
229
     
229
     
-
     
230
     
-
     
173
     
-
 
Commercial loans
   
103
     
103
     
-
     
105
     
-
     
164
     
8
 
Impaired loans with no allowance
   
1,010
     
1,010
     
-
     
1,023
     
1
     
1,090
     
22
 
                                                         
With an allowance recorded:
                                                       
Residential real estate
   
730
     
730
     
113
     
710
     
2
     
1,053
     
27
 
Commercial construction
   
102
     
102
     
27
     
102
     
-
     
102
     
-
 
Home equity
   
321
     
321
     
74
     
321
     
2
     
381
     
12
 
Commercial loans
   
1,756
     
1,756
     
73
     
1,235
     
85
     
417
     
110
 
Impaired loans with allowance
   
2,909
     
2,909
     
287
     
2,368
     
89
     
1,953
     
149
 
                                                         
Total impaired: