Edgar Filing: GREENE COUNTY BANCORP INC

form10qsept302009.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

-----------------------------------

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT

GREENE COUNTY BANCORP, INC.

(Exact name of small business issuer as specified in its charter)

Commission file number 0-25165

United States 14-1809721

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

302 Main Street, Catskill, New York 12414

(Address of principal executive office) (Zip code)

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

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

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

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

Large accelerated filer _____ Accelerated filer _____

Non-accelerated filer _____ Smaller reporting company X

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

As of November 13, 2009, the registrant had 4,107,562 shares of common stock outstanding at $ .10 par value.

	GREENE COUNTY BANCORP, INC.



	INDEX



PART I.	FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	* Consolidated Statements of Financial Condition	3
	* Consolidated Statements of Income	4
	* Consolidated Statements of Comprehensive Income	5
	* Consolidated Statements of Changes in Shareholders’ Equity	6
	* Consolidated Statements of Cash Flows	7
	* Notes to Consolidated Financial Statements	8-19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	19-31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4T.	Controls and Procedures	31

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Submission of Matters to a Vote of Security Holders	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

	Signatures	33
	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	34 35 36 37

Greene County Bancorp, Inc.

Consolidated Statements of Financial Condition

As of September 30, 2009 and June 30, 2009

(Unaudited)

(In thousands, except share and per share amounts)

ASSETS	September 30, 2009			June 30, 2009
Cash and due from banks	$	9,905		$	8,639
Federal funds sold		5,237			804
Total cash and cash equivalents		15,142			9,443

Long term certificate of deposit		1,000			1,000
Securities available for sale, at fair value		93,450			98,271
Securities held to maturity, at amortized cost		65,777			63,336
Federal Home Loan Bank stock, at cost		1,495			1,495

Loans		279,441			271,001
Allowance for loan losses		(3,632	)		(3,420	)
Unearned origination fees and costs, net		355			321
Net loans receivable		276,164			267,902

Premises and equipment		15,125			15,274
Accrued interest receivable		2,569			2,448
Prepaid expenses and other assets		993			1,152
Foreclosed real estate		---			215
Total assets	$	471,715		$	460,536

LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest bearing deposits	$	38,544		$	39,772
Interest bearing deposits		370,827			358,957
Total deposits		409,371			398,729

Borrowings from FHLB, long-term		19,000			19,000
Accrued expenses and other liabilities		1,710			2,543
Total liabilities		430,081			420,272

Shareholders’ equity:
Preferred stock,
Authorized - 1,000,000 shares; Issued - none		---			---
Common stock, par value $.10 per share;
Authorized - 12,000,000 shares
Issued - 4,305,670 shares
Outstanding - 4,105,312 shares at September 30, 2009
and June 30, 2009;		431			431
Additional paid-in capital		10,564			10,508
Retained earnings		30,923			30,045
Accumulated other comprehensive income		1,228			792
Treasury stock, at cost, 200,358 shares at September 30, 2009
and June 30, 2009		(1,512	)		(1,512	)
Total shareholders’ equity		41,634			40,264
Total liabilities and shareholders’ equity	$	471,715		$	460,536

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Three Months Ended September 30, 2009 and 2008

(Unaudited)

(In thousands, except share and per share amounts)

	2009		2008
Interest income:
Loans	$	4,167	$	3,910
Investment securities - taxable		316		362
Mortgage-backed securities		920		807
Investment securities - tax exempt		249		231
Interest bearing deposits and federal funds sold		4		26
Total interest income		5,656		5,336

Interest expense:
Interest on deposits		1,250		1,447
Interest on borrowings		167		170
Total interest expense		1,417		1,617

Net interest income		4,239		3,719
Provision for loan losses		248		195
Net interest income after provision for loan losses		3,991		3,524

Non-interest income:
Service charges on deposit accounts		748		786
Debit card fees		248		230
Investment services		59		82
E-commerce fees		30		70
Write-down of impairment of available-for-sale security		---		(221	)
Other operating income		118		99
Total non-interest income		1,203		1,046

Non-interest expense:
Salaries and employee benefits		1,806		2,004
Occupancy expense		302		267
Equipment and furniture expense		153		164
Service and data processing fees		343		303
Computer software, supplies and support		82		80
Advertising and promotion		78		83
FDIC insurance premiums		135		18
Legal and professional fees		75		66
Other		410		375
Total non-interest expense		3,384		3,360

Income before provision for income taxes		1,810		1,210
Provision for income taxes		626		401
Net income	$	1,184	$	809

Basic EPS	$	0.29	$	0.20
Basic average shares outstanding		4,105,312		4,096,149
Diluted EPS	$	0.29	$	0.20
Diluted average shares outstanding		4,132,766		4,119,313
Dividends per share	$	0.17	$	0.17

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended September 30, 2009 and 2008

(Unaudited)

(In thousands)

	2009		2008

Net income	$	1,184	$	809

Other comprehensive income (loss):
Securities:
Unrealized holding gains (losses) on available for sale securities, arising
during the three months ended September 30, 2009 and 2008,
net of income taxes of $266 and ($182), respectively.		421		(286	)

Accretion of unrealized loss on securities transferred to held-to-maturity,
net of income taxes of $9 and $0, respectively		15		---

Reclassification adjustment for impairment write-down on securities
available for sale realized in net income net of income taxes of $0, and $86,
respectively.		---		135

Other comprehensive income (loss)		436		(151	)

Comprehensive income	$	1,620	$	658

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended September 30, 2009 and 2008

(Unaudited)

(In thousands)

				Accumulated
		Additional		Other		Unearned	Total
	Common	Paid – In	Retained	Comprehensive	Treasury	ESOP	Shareholders’
	Stock	Capital	Earnings	Income (Loss)	Stock	Shares	Equity

Balance at
June 30, 2008	$431	$10,267	$27,183	($9)	($1,586)	($19)	$36,267

ESOP shares earned		18				9	27

Options exercised		(19)			41		22

Stock options compensation		37					37

Dividends declared			(305)				(305)

Net income			809				809

Total other comprehensive loss, net of taxes				(151)			(151)
Balance at
September 30, 2008	$431	$10,303	$27,687	($160)	($1,545)	($10)	$36,706

Balance at

June 30, 2009	$431	$10,508	$30,045	$792	($1,512)	$---	$40,264

Stock options compensation		56					56

Dividends declared			(306)				(306)

Net income			1,184				1,184

Total other comprehensive income, net of taxes				436			436
Balance at
September 30, 2009	$431	$10,564	$30,923	$1,228	($1,512)	$---	$41,634

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2009 and 2008

(Unaudited)

(In thousands)	2009			2008
Cash flows from operating activities:
Net Income	$	1,184		$	809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		233			220
Net amortization of premiums and discounts		200			24
Net amortization of deferred loan costs and fees		49			32
Provision for loan losses		248			195
ESOP compensation earned		---			27
Stock option compensation		56			37
Write-down of impairment of available-for-sale security		---			221
Net loss on sale of foreclosed real estate		8			---
Net increase (decrease) in accrued income taxes		80			(99	)
Net increase in accrued interest receivable		(121	)		(378	)
Net (increase) decrease in prepaid and other assets		(177	)		19
Net decrease in other liabilities		(850	)		(185	)
Net cash provided by operating activities		910			922

Cash flows from investing activities:
Securities available-for-sale:
Proceeds from maturities		3,000			2,004
Purchases of securities		---			(46,242	)
Principal payments on securities		2,412			2,281
Securities held-to-maturity:
Proceeds from maturities		844			235
Purchases of securities		(4,277	)		(872	)
Principal payments on securities		910			665
Net purchase of Federal Home Loan Bank Stock		---			(292	)
Net increase in loans receivable		(8,559	)		(14,628	)
Proceeds from sale of foreclosed real estate		207			---
Purchases of premises and equipment		(84	)		(381	)
Net cash used in investing activities		(5,547	)		(57,230	)

Cash flows from financing activities:
Net increase in short-term FHLB advances		---			6,500
Payment of cash dividends		(306	)		(305	)
Proceeds from stock options exercised		---			22
Net increase in deposits		10,642			52,126
Net cash provided by financing activities		10,336			58,343

Net increase in cash and cash equivalents		5,699			2,035

Cash and cash equivalents at beginning of period		9,443			8,662

Cash and cash equivalents at end of period	$	15,142		$	10,697

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Notes to Consolidated Financial Statements

As of and for the Three Months Ended September 30, 2009 and 2008

(1) Basis of Presentation

The accompanying consolidated statement of financial condition as of June 30, 2009 was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, The Bank of Greene County (the “Bank”) and the Bank’s wholly owned subsidiary, Greene County Commercial Bank. The consolidated financial statements at and for the three months ended September 30, 2009 and 2008 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 footnotes required by GAAP for complete financial statements. To the extent that information and footnotes 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, 2009, such information and footnotes 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 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, 2009 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2010. These consolidated financial statements consider events that occurred through November 13, 2009, the date the consolidated financial statements were issued.

REFERENCING GAAP

Beginning with periods ending after September 15, 2009, the Financial Accounting Standards Board (“FASB”) has implemented the FASB Accounting Standards Codification™ (“Codification” or “ASC”) as the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.

Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates, which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

GAAP is not intended to be changed as a result of the FASB's Codification project, but it will change the way the guidance is organized and presented. As a result, these changes will have a significant impact on how companies reference GAAP in their financial statements and in their accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has updated references to GAAP in its consolidated financial statements issued for the period ended September 30, 2009.

CRITICAL ACCOUNTING POLICIES

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

Securities are evaluated for other-than-temporary impairment by performing periodic reviews of individual securities in the investment portfolio. Greene County Bancorp, Inc. makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis. The Company considers many factors, including the severity and duration of the impairment; the intent and ability of the Company to hold the 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, 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 has eleven full-service offices and an operations center located in its market area consisting of Greene County, Columbia County and southern Albany County, New York. The Bank of Greene County is primarily engaged in the business of attracting deposits from the general public in The Bank of Greene County’s market area, and investing such deposits, together with other sources of funds, in loans and investment securities. Greene County Commercial Bank’s primary business is to attract deposits from and provide banking services to local municipalities.

(3) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could 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 our Allowance. Such authorities may require us to recognize additions to the Allowance based on their judgments of information available to them at the time of their examination.

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

(4) Securities

Securities at September 30, 2009 consisted of the following:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
(In thousands)
Securities available-for-sale:
U.S. government sponsored enterprises	$	16,956	$	186	$	1	$	17,141
State and political subdivisions		9,299		437		---		9,736
Mortgage-backed securities-residential		30,381		1,001		---		31,382
Mortgage-backed securities-multi-family		25,180		1,208		---		26,388
Asset-backed securities		41		---		2		39
Corporate debt securities		8,751		80		163		8,668
Total debt securities		90,608		2,912		166		93,354
Equity securities and other		67		29		---		96
Total securities available-for-sale		90,675		2,941		166		93,450
Securities held-to-maturity:
U.S. government sponsored enterprises		7,038		27		---		7,065
State and political subdivisions		26,190		19		---		26,209
Mortgage-backed securities-residential		29,613		689		---		30,302
Mortgage-backed securities-multi-family		2,266		90		---		2,356
Other securities		670		---		---		670
Total securities held-to-maturity		65,777		825		---		66,602
Total securities	$	156,452	$	3,766	$	166	$	160,052

Securities at June 30, 2009 consisted of the following:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
(In thousands)
Securities available-for-sale:
U.S. government sponsored enterprises	$	19,985	$	164	$	22	$	20,127
State and political subdivisions		9,303		284		1		9,586
Mortgage-backed securities-residential		32,468		952		---		33,420
Mortgage-backed securities-multi-family		25,556		1,153		---		26,709
Asset-backed securities		46		---		2		44
Corporate debt securities		8,759		13		480		8,292
Total debt securities		96,117		2,566		505		98,178
Equity securities and other		68		25		---		93
Total securities available-for-sale		96,185		2,591		505		98,271
Securities held-to-maturity:
U.S. government sponsored enterprises		7,049		1		9		7,041
State and political subdivisions		23,303		3		6		23,300
Mortgage-backed securities-residential		30,034		553		8		30,579
Mortgage-backed securities-multi-family		2,285		68		---		2,353
Other securities		665		---		---		665
Total securities held-to-maturity		63,336		625		23		63,938
Total securities	$	159,521	$	3,216	$	528	$	162,209

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, 2009. There were no unrealized losses on securities held-to-maturity at September 30, 2009.

	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
(in thousands)
Securities available-for-sale:
U.S. government sponsored enterprises	$	1,003	$	1	$	---	$	---	$	1,003	$	1
Asset-backed securities		---		---		39		2		39		2
Corporate debt securities		---		---		3,413		163		3,413		163
Total securities	$	1,003	$	1	$	3,452	$	165	$	4,455	$	166

	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
(in thousands)
Securities available-for-sale:
U.S. government sponsored enterprises	$	6,038	$	22	$	---	$	---	$	6,038	$	22
State and political subdivisions		202		1		---		---		202		1
Asset-backed securities		---		---		44		2		44		2
Corporate debt securities		---		---		7,220		480		7,220		480
Total securities available-for-sale		6,240		23		7,264		482		13,504		505
Securities held-to-maturity:
U.S. government sponsored enterprises		6,010		9		---		---		6,010		9
State and political subdivisions		668		6		---		---		668		6
Mortgage-backed securities-residential		2,581		8		---		---		2,581		8
Total securities held-to-maturity		9,259		23		---		---		9,259		23
Total securities	$	15,499	$	46	$	7,264	$	482	$	22,763	$	528

At September 30, 2009, there was one security which has been in a continuous unrealized loss position for less than 12 months and 11 securities with a continuous unrealized loss position of more than 12 months. At September 30, 2009, the Company had $8.7 million in corporate debt securities of which $3.4 million had an unrealized loss of $163,000 for more than 12 months. When the fair value of a held to maturity or available for sale security is less than its amortized cost basis, an assessment is made as to whether other-than-temporary impairment (“OTTI”) is present. The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover. The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issuer (and guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a rating agency, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

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

For debt securities, credit-related OTTI is recognized in income while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”). Credit- related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis. Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized. For securities classified as held to maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods. For equity securities, the entire amount of OTTI is recognized in income. Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2009. Management believes that the reasons for the decline in fair value are due to interest rates, widening credit spreads and market illiquidity at the end of the quarter

During the quarters ended September 30, 2009 and 2008, there were no sales of available-for-sale or held-to-maturity securities. During the quarter ended September 30, 2008, a loss of $221,000 ($135,000 net of tax) related to the other-than-temporary impairment of a Lehman Brothers Holdings, Inc. debt security held by the Company was recognized. The loss on this debt security was determined by obtaining a market quote as of the date of impairment. The decline in the value of this security was solely due to credit losses, and therefore the entire loss was recognized in income. There was no other-than-temporary impairment loss recognized during the quarter ended September 30, 2009.

The estimated fair value of debt securities at September 30, 2009, 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.

			After		After
	In		One Year		Five Years
	One Year		Through		Through		After
	Or Less		Five Years		Ten Years		Ten Years		Total
(Dollars in thousands)
Securities available-for-sale:
U.S. Government sponsored enterprises	$	1,020	$	14,089	$	2,032	$	---	$	17,141
State and political subdivisions		909		7,838		989		---		9,736
Mortgage-backed securities-residential		1,176		4,462		10,376		15,368		31,382
Mortgage-backed securities-multi-family		---		19,311		7,077		---		26,388
Asset-backed securities		---		---		---		39		39
Corporate debt securities		---		4,130		4,538		---		8,668
Total debt securities		3,105		49,830		25,012		15,407		93,354
Equity securities		---		---		---		96		96
Total securities available-for-sale		3,105		49,830		25,012		15,503		93,450
Securities held-to-maturity:
U.S. government sponsored enterprises		1,023		6,042		---		---		7,065
State and political subdivisions		8,864		10,776		3,806		2,763		26,209
Mortgage-backed securities-residential		---		2,669		12,431		15,202		30,302
Mortgage-backed securities-multi-family		---		2,356		---		---		2,356
Other securities		300		8		---		362		670
Total securities held-to-maturity		10,187		21,851		16,237		18,327		66,602
Total securities	$	13,292	$	71,681	$	41,249	$	33,830	$	160,052

As of September 30, 2009, securities with an aggregate fair value of $97.6 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. Greene County Bancorp, Inc. did not participate in any securities lending programs during the quarters ended September 30, 2009 or 2008.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is carried at cost. FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position. After evaluating these considerations, Greene County Bancorp, Inc. concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no other-than-temporary impairment charge was recorded during the fiscal quarter ended September 30, 2009.

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

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of September 30, 2009 and June 30, 2009 and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

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

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

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

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

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

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

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

		Fair Value Measurements Using
		Quoted Prices	Significant	Significant
		In Active Markets	Other Observable	Unobservable
		For Identical Assets	Inputs	Inputs
(In thousands)	September 30, 2009	(Level 1)	(Level 2)	(Level 3)
Assets:
Securities available-for-sale	$93,450	$52,599	$40,851	$---

		Fair Value Measurements Using
		Quoted Prices	Significant	Significant
		In Active Markets	Other Observable	Unobservable
		For Identical Assets	Inputs	Inputs
(In thousands)	June 30, 2009	(Level 1)	(Level 2)	(Level 3)
Assets:
Securities available-for-sale	$98,271	$56,320	$41,951	$---

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

In addition to disclosures of the fair value of assets on a recurring basis, FASB ASC Topic on “Fair Value Measurement” requires disclosures for assets and liabilities measured at fair value on a nonrecurring basis, such as impaired assets, in the period in which a re-measurement at fair value is performed. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated as required by the “Receivables –Loan Impairment” subtopic of the FASB ASC when establishing the allowance for credit losses. Impaired loans are those loans for which the Company has re-measured impairment generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. At September 30, 2009, loans subject to nonrecurring fair value measurement had a gross carrying amount of $98,000 and a fair value of $88,000 with an associated valuation allowance of $10,000, which was unchanged from June 30, 2009. These loans were classified as a Level 3 valuation. No other financial assets or liabilities (such as Foreclosed Real Estate) were re-measured during the quarter on a nonrecurring basis.

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

The fair value of commitments to extend credit is estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the credit-worthiness of the potential borrowers. At September 30, 2009 and June 30, 2009, the estimated fair values of these off-balance sheet financial instruments were immaterial, and are therefore excluded from the table below.

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

(in thousands)	September 30, 2009				June 30, 2009
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and cash equivalents	$	15,142	$	15,142	$	9,443	$	9,443
Long term certificate of deposit		1,000		1,000		1,000		1,000
Securities available-for-sale		93,450		93,450		98,271		98,271
Securities held-to-maturity		65,777		66,602		63,336		63,938
Federal Home Loan Bank stock		1,495		1,495		1,495		1,495
Net loans		276,164		284,011		267,902		275,369
Accrued interest receivable		2,569		2,569		2,448		2,448
Deposits		409,371		410,342		398,729		399,796
Federal Home Loan Bank borrowings		19,000		19,634		19,000		19,632
Accrued interest payable		117		117		114		114

(6) Earnings Per Share (“EPS”)

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding under the treasury stock method if all potentially dilutive common shares (such as stock options) issued became vested during the period. The 164,500 options granted during the quarter ended September 30, 2008 (see note 11) were anti-dilutive in the quarter ended September 30, 2008. There were no anti-dilutive securities or contracts outstanding during the quarter ended September 30, 2009. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for either the basic or diluted earnings per share calculations.

			Weighted Average Number
	Net Income		Of Shares Outstanding		Earnings per Share
Three months ended
September 30, 2009	$	1,184,000
Basic				4,105,312	$	0.29
Effect of dilutive stock options				27,454		(0.00)
Diluted				4,132,766	$	0.29

Three months ended
September 30, 2008	$	809,000
Basic				4,096,149	$	0.20
Effect of dilutive stock options				23,164		(0.00)
Diluted				4,119,313	$	0.20

(7) Dividends

On July 21, 2009, the Board of Directors declared a quarterly dividend of $0.17 per share of Greene County Bancorp, Inc.’s common stock. The dividend reflected an annual cash dividend rate of $0.68 cents per share, was unchanged from the dividend declared during the previous quarter. The dividend was payable to stockholders of record as of August 14, 2009, and was paid on September 2, 2009. It should be noted that Greene County Bancorp, Inc.’s mutual holding company continued to waive receipt of dividends for the current period.

(8) Impact of Inflation and Changing Prices

The consolidated financial statements of Greene County Bancorp, Inc. and notes thereto, presented elsewhere herein, have been prepared in accordance with generally accepted accounting principles in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of Greene County Bancorp, Inc.’s operations. Unlike most industrial companies, nearly all the assets and liabilities of Greene County Bancorp, Inc. are monetary. As a result, interest rates have a greater impact on Greene County Bancorp, Inc.’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

(9) Impact of Recent Accounting Pronouncements

In June 2009, the FASB issued its first Accounting Standards Update, ÒGenerally Accepted Accounting PrinciplesÓ, which establishes the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of the new Codification, the Company has updated references to GAAP in its consolidated financial statements issued for the period ended September 30, 2009. The adoption of the new Codification did not impact the Company’s consolidated financial position or consolidated results of operations.

In December 2008, the FASB issued an amendment to its guidance on “Compensation – Retirement Benefits”. This amendment requires that information about plan assets of a postretirement benefit plan be disclosed, on an annual basis, based on the fair value disclosure requirements of “Fair Value Measurement”. The disclosures about plan assets required by this amendment shall be provided for fiscal years ending after December 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In June 2009, the FASB issued an amendment to its guidance on “Transfers and Servicing”. This guidance prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferor’s continuing involvement in transferred financial assets. Specifically, among other aspects, the guidance removes the concept of a qualifying special-purpose entity. It also modifies the financial-components approach used in this standard. The new guidance is effective for fiscal years beginning after November 15, 2009. We have not determined the effect that the adoption of this guidance will have on our consolidated results of operations or financial position.

In June 2009, the FASB issued an amendment to its guidance on “Consolidation of Variable Interest Entities”, to require an enterprise to determine whether it’s variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This amendment also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This new guidance is effective for fiscal years beginning after November 15, 2009. We have not determined the effect that the adoption of this guidance will have on our consolidated financial position or results of operations.

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (“IASB”). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

(10) Retirement Benefits

The components of net periodic pension costs related to the defined benefit pension plan for the three months ended September 30, 2009 and 2008 were as follows:

	Three months ended September 30,
(in thousands)	2009			2008
Interest cost	$	52		$	--
Expected return on plan assets		(55	)		--
Amortization of net loss		2			--
Net periodic pension cost	$	(1	)	$	--

The Company does not expect to make any contributions to the defined benefit pension plan during fiscal 2010.

(11) Stock-Based Compensation

At September 30, 2009, Greene County Bancorp, Inc. had three stock-based compensation plans, which are described more fully in Note 9 of the consolidated financial statements and notes thereto for the year ended June 30, 2009.

The Company recognized $56,000 and $37,000 in compensation costs and related income tax benefit of $17,000 and $4,000 related to the 2008 Option Plan for the quarters ended September 30, 2009 and 2008, respectively. At September 30, 2009, there was $408,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted. That cost is expected to be recognized over a weighted-average period of 1.75 years.

A summary of the Company’s stock option activity and related information for its option plans for the three months ended September 30, 2009 and 2008 is as follows:

	2009				2008
			Weighted Average					Weighted Average
			Exercise					Exercise
			Price					Price
	Shares		Per Share		Shares			Per Share
Outstanding at beginning of year		196,660	$	11.33		41,944		$	5.00
Options granted		---		---		164,500		$	12.50
Exercised		---		---		(5,400	)	$	3.94
Outstanding at period end		196,660	$	11.33		201,044		$	11.17
Exercisable at period end		86,995	$	9.85		36,544		$	5.16

The following table presents stock options outstanding and exercisable at September 30, 2009:

Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$3.94	23,660	0.50	$3.94
$9.20	8,500	2.50	$9.20
$12.50	54,835	9.00	$12.50
$3.94-$12.50	86,995		$9.85

The total intrinsic value of the options exercised during the three months ended September 30, 2008, was approximately $52,000. No options were exercised during the three months ended September 30, 2009. There were no stock options granted during the three months ended September 30, 2009. The Company had 109,665 non-vested options outstanding at September 30, 2009 and 164,500 non-vested options outstanding at September 30, 2008.

(12) Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income as of September 30, 2009 and 2008 are presented in the following table:

Accumulated other comprehensive income (loss), at September 30,	2009			2008
Unrealized gains (losses) on available-for-sale securities, net of tax	$	1,701		$	(160	)
Unrealized loss on securities transferred to held-to-maturity, net of tax		(164	)		---
Net losses and past service liability for defined benefit plan, net of tax		(309	)		---
Accumulated other comprehensive income	$	1,228		$	(160	)

(13) Subsequent events

On October 20, 2009, the Board of Directors declared a quarterly dividend of $0.17 per share on Greene County Bancorp, Inc.’s common stock. The dividend reflects an annual cash dividend rate of $0.68 per share, which was the same as the dividend declared during the previous quarter. The dividend will be payable to stockholders of record as of November 15, 2009, and will be paid on December 1, 2009. It should be noted that Greene County Bancorp, Inc.’s mutual holding company continues to waive receipt of dividends on the shares it owns.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Overview of the Company’s Activities and Risks

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

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

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

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

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

Special Note Regarding Forward Looking Statements

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

(a)	changes in general market interest rates,

(b)	general economic conditions, including unemployment rates and real estate values,

(c)	legislative and regulatory changes,

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

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

(f)	deposit flows,

(g)	competition, and

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

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

Comparison of Financial Condition as of September 30, 2009 and June 30, 2009

ASSETS

Total assets of the Company were $471.7 million at September 30, 2009 as compared to $460.5 million at June 30, 2009, an increase of $11.2 million, or 2.4%. Securities available for sale and held to maturity amounted to $159.2 million, or 33.8% of assets, at September 30, 2009 as compared to $161.6 million, or 35.1% of assets, at June 30, 2009, a decrease of $2.4 million or 1.5%. Net loans grew by $8.3 million or 3.1% to $276.2 million at September 30, 2009 as compared to $267.9 million at June 30, 2009.

CASH AND CASH EQUIVALENTS

Total cash and cash equivalents increased to $15.1 million at September 30, 2009 as compared to $9.4 million at June 30, 2009, an increase of $5.7 million or 60.6%. The level of cash and cash equivalents is a function of the daily account clearing needs and deposit levels as well as activities associated with securities transactions and loan funding. All of these items can cause cash levels to fluctuate significantly on a daily basis.

SECURITIES

Securities, including both available-for-sale and held-to-maturity issues, decreased $2.4 million or 1.5% to $159.2 million at September 30, 2009 as compared to $161.6 million at June 30, 2009. Securities purchases totaled $4.3 million during the quarter ended September 30, 2009 and consisted of state and political subdivision securities. Principal pay-downs and maturities amounted to $7.2 million, of which $2.8 million were mortgage-backed securities, $1.4 million were state and political subdivision securities and $3.0 million were U.S. government agency securities. Additionally, during the quarter ended September 30, 2009, unrealized net gains on available for sale securities increased $687,000. Greene County Bancorp, Inc. holds 22.5% of the securities portfolio at September 30, 2009 in state and political subdivision securities to take advantage of tax savings and to promote Greene County Bancorp, Inc.’s participation in the communities in which it operates. Mortgage-backed securities and asset-backed securities held within the portfolio do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

	Carrying Value at
	September 30, 2009					June 30, 2009
(Dollars in thousands)	Balance		Percentage of Portfolio			Balance		Percentage of Portfolio
	Balance		Percentage of Portfolio			Balance		Percentage of Portfolio
Securities available-for-sale:
U.S. government sponsored enterprises	$	17,141		10.8	%	$	20,127		12.4	%
State and political subdivisions		9,736		6.1			9,586		5.9
Mortgage-backed securities		57,770		36.3			60,129		37.2
Asset-backed securities		39		0.1			44		0.1
Corporate debt securities		8,668		5.4			8,292		5.1
Total debt securities		93,354		58.7			98,178		60.7
Equity securities and other		96		0.1			93		0.1
Total securities available-for-sale		93,450		58.8			98,271		60.8
Securities held-to-maturity:
U.S. government sponsored enterprises		7,038		4.4			7,049		4.4
State and political subdivisions		26,190		16.4			23,303		14.4
Mortgage-backed securities		31,879		20.0			32,319		20.0
Other securities		670		0.4			665		0.4
Total securities held-to-maturity		65,777		41.2			63,336		39.2
Total securities	$	159,227		100.0	%	$	161,607		100.0	%

LOANS

Net loans receivable increased to $276.2 million at September 30, 2009 from $267.9 million at June 30, 2009, an increase of $8.3 million, or 3.1%. The loan growth experienced during the quarter primarily consisted of $6.0 million in residential mortgages, $2.8 million in commercial real estate loans, and $468,000 in non-mortgage loans, which was partially offset by a $1.1 million decrease in home equity loans. The continued low interest rate environment and strong customer satisfaction from personal service continued to enhance loan growth. If long term rates begin to rise, the Company anticipates some slow down in new loan demand as well as refinancing activities. The Bank of Greene County continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products. It should be noted however that the Company is subject to the effects of any downturn, and especially, a significant decline in home values in the Company’s markets could have a negative effect on the consolidated results of operations. A significant decline in home values would likely lead to a decrease in residential real estate loans and new home equity loan originations and increased delinquencies and defaults in both the consumer home equity loan and the residential real estate loan portfolios and result in increased losses in these portfolios. As of September 30, 2009, declines in home values have been modest in the Company’s market area. However, updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status. Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy.


	September 30, 2009						June 30, 2009
(Dollars in thousands)	Balance			Percentage of Portfolio			Balance			Percentage of Portfolio

Real estate mortgages:
Residential	$	178,020			63.7	%	$	172,038			63.5	%
Commercial		49,858			17.8			47,029			17.3
Construction and land		7,985			2.9			7,806			2.9
Multifamily		1,251			0.4			1,140			0.4
Total real estate mortgages		237,114			84.8			228,013			84.1
Home equity loans		25,054			9.0			26,183			9.7
Commercial loans		12,871			4.6			12,631			4.7
Installment loans		3,954			1.4			3,827			1.4
Passbook loans		448			0.2			347			0.1
Total gross loans		279,441			100.0	%		271,001			100.0	%
Unearned origination fees and costs, net		355						321
Allowance for loan losses		(3,632	)					(3,420	)
Total net loans	$	276,164					$	267,902

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions. Such evaluation, which includes a review of all loans on which full collectibility may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an allowance for loan loss. In addition, various regulatory agencies, as an integral part of their examination process, periodically review The Bank of Greene County’s allowance for loan losses and valuation of foreclosed real estate (“FRE”). Such agencies may require The Bank of Greene County to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The Bank of Greene County considers residential mortgages, home equity loans and installment loans to customers as small, homogeneous loans, which are evaluated for impairment collectively based on historical loss experience. Commercial mortgage and business loans are viewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements. The measurement of impaired loans is generally based on the fair value of the underlying collateral. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries of loans previously charged off and is reduced by net charge-offs.

Analysis of allowance for loan losses activity

(Dollars in thousands)	Three months ended
	September 30, 2009		September 30, 2008

Balance at the beginning of the period	$	3,420	$	1,888
Charge-offs:
Residential real estate mortgages		--		31
Commercial loans		8		---
Installment loans		9