Edgar Filing: GREENE COUNTY BANCORP INC

form10qmarch312012.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 MARCH 31, 2012

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

GREENE COUNTY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Commission file number 0-25165

United States 14-1809721

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

302 Main Street, Catskill, New York 12414

(Address of principal executive office) (Zip code)

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

Check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: 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: X 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 May 8, 2012, the registrant had 4,167,854 shares of common stock outstanding at $ 0.10 par value per share.

	GREENE COUNTY BANCORP, INC.



	INDEX



PART I.	FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	* Consolidated Statements of Financial Condition	3
	* Consolidated Statements of Income	4-5
	* Consolidated Statements of Comprehensive Income	6
	* Consolidated Statements of Changes in Shareholders’ Equity	7
	* Consolidated Statements of Cash Flows	8-9
	* Notes to Consolidated Financial Statements	10-31

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32-45

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	47

	Signatures	48
	Exhibit 31.1 302 Certification of Chief Executive Officer Exhibit 31.2 302 Certification of Chief Financial Officer Exhibit 32.1 906 Statement of Chief Executive Officer Exhibit 32.2 906 Statement of Chief Financial Officer Exhibit 101 Extensible Business Reporting Language (XBRL)	49 50 51 52

Greene County Bancorp, Inc.

Consolidated Statements of Financial Condition

As of March 31, 2012 and June 30, 2011

(Unaudited)

(In thousands, except share and per share amounts)

ASSETS	March 31, 2012			June 30, 2011
Cash and due from banks	$	30,576		$	9,245
Federal funds sold		300			721
Total cash and cash equivalents		30,876			9,966

Securities available for sale, at fair value		74,205			90,117
Securities held to maturity, at amortized cost		139,444			124,177
Federal Home Loan Bank stock, at cost		1,138			1,916

Loans		317,675			305,620
Allowance for loan losses		(5,967	)		(5,069	)
Unearned origination fees and costs, net		414			495
Net loans receivable		312,122			301,046

Premises and equipment		15,035			15,407
Accrued interest receivable		2,802			2,716
Foreclosed real estate		410			443
Prepaid expenses and other assets		2,648			1,737
Total assets	$	578,680		$	547,525

LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest bearing deposits	$	49,807		$	49,313
Interest bearing deposits		464,790			420,584
Total deposits		514,597			469,897

Borrowings from FHLB, short-term		---			14,300
Borrowings from FHLB, long-term		9,000			12,000
Accrued expenses and other liabilities		3,315			3,247
Total liabilities		526,912			499,444

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 - 4,166,854 shares at March 31, 2012
and 4,145,828 shares at June 30, 2011;		431			431
Additional paid-in capital		11,118			11,001
Retained earnings		40,853			37,336
Accumulated other comprehensive income		413			519
Treasury stock, at cost 138,816 shares at March 31, 2012
and 159,842 shares at June 30, 2011		(1,047	)		(1,206	)
Total shareholders’ equity		51,768			48,081
Total liabilities and shareholders’ equity	$	578,680		$	547,525

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Nine Months Ended March 31, 2012 and 2011

(Unaudited)

(In thousands, except share and per share amounts)

	2012		2011
Interest income:
Loans	$	13,384	$	13,434
Investment securities - taxable		692		875
Mortgage-backed securities		3,273		2,821
Investment securities - tax exempt		996		879
Interest bearing deposits and federal funds sold		17		32
Total interest income		18,362		18,041

Interest expense:
Interest on deposits		2,463		3,007
Interest on borrowings		315		422
Total interest expense		2,778		3,429

Net interest income		15,584		14,612
Provision for loan losses		1,437		1,179
Net interest income after provision for loan losses		14,147		13,433

Noninterest income:
Service charges on deposit accounts		1,857		1,733
Debit card fees		1,026		925
Investment services		199		199
E-commerce fees		81		83
Net gain on sale of available-for-sale securities		11		233
Other operating income		425		390
Total noninterest income		3,599		3,563

Noninterest expense:
Salaries and employee benefits		6,047		6,025
Occupancy expense		916		973
Equipment and furniture expense		478		401
Service and data processing fees		1,158		1,111
Computer software, supplies and support		249		207
Advertising and promotion		235		245
FDIC insurance premiums		231		468
Legal and professional fees		583		480
Other		1,250		1,151
Total noninterest expense		11,147		11,061

Income before provision for income taxes		6,599		5,935
Provision for income taxes		2,112		2,020
Net income	$	4,487	$	3,915

Basic EPS	$	1.08	$	0.95
Basic average shares outstanding		4,150,978		4,131,052
Diluted EPS	$	1.07	$	0.94
Diluted average shares outstanding		4,192,567		4,162,716
Dividends per share	$	0.525	$	0.725

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Three Months Ended March 31, 2012 and 2011

(Unaudited)

(In thousands, except share and per share amounts)

	2012		2011
Interest income:
Loans	$	4,441	$	4,388
Investment securities - taxable		222		298
Mortgage-backed securities		963		998
Investment securities - tax exempt		370		303
Interest bearing deposits and federal funds sold		3		12
Total interest income		5,999		5,999

Interest expense:
Interest on deposits		749		962
Interest on borrowings		88		117
Total interest expense		837		1,079

Net interest income		5,162		4,920
Provision for loan losses		541		343
Net interest income after provision for loan losses		4,621		4,577

Noninterest income:
Service charges on deposit accounts		602		560
Debit card fees		338		306
Investment services		62		51
E-commerce fees		26		28
Net gain on sale of available-for-sale securities		--		21
Other operating income		149		136
Total noninterest income		1,177		1,102

Noninterest expense:
Salaries and employee benefits		2,103		2,054
Occupancy expense		303		362
Equipment and furniture expense		146		121
Service and data processing fees		388		413
Computer software, supplies and support		87		72
Advertising and promotion		90		55
FDIC insurance premiums		79		187
Legal and professional fees		174		161
Other		351		391
Total noninterest expense		3,721		3,816

Income before provision for income taxes		2,077		1,863
Provision for income taxes		594		624
Net income	$	1,483	$	1,239

Basic EPS	$	0.36	$	0.30
Basic average shares outstanding		4,159,093		4,142,160
Diluted EPS	$	0.35	$	0.30
Diluted average shares outstanding		4,197,430		4,172,127
Dividends per share	$	0.175	$	0.175

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Nine Months Ended March 31, 2012 and 2011

(Unaudited)

(In thousands)

	2012			2011
Net income	$	4,487		$	3,915

Other comprehensive income (loss):
Securities:
Unrealized holding losses on available for sale securities, arising
during the nine months ended March 31, 2012 and 2011,
net of income taxes of ($88) and ($469), respectively.		(139	)		(742	)

Reclassification adjustment for gain on sale of available-for-sale securities
realized in net income, net of income taxes of ($4) and ($90), respectively		(7	)		(143	)

Accretion of unrealized loss on securities transferred to held-to-maturity,
net of income taxes of $18 and $21, respectively		28			34

Pension, actuarial gain, net of income tax of $8 and $3		12			7

Other comprehensive loss		(106	)		(844	)

Comprehensive income	$	4,381		$	3,071

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2012 and 2011

(Unaudited)

(In thousands)

	2012			2011
Net income	$	1,483		$	1,239

Other comprehensive income (loss):
Securities:
Unrealized holding losses on available for sale securities, arising
during the three months ended March 31, 2012 and 2011,
net of income taxes of ($144) and ($172), respectively.		(226	)		(272	)

Reclassification adjustment for gain on sale of available-for-sale securities
realized in net income, net of income taxes of $-- and ($8), respectively		---			(13	)

Accretion of unrealized loss on securities transferred to held-to-maturity,
net of income taxes of $6 and $7, respectively		9			11

Pension, actuarial gain, net of income tax of $3 and $1		4			2

Other comprehensive loss		(213	)		(272	)

Comprehensive income	$	1,270		$	967

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended December 31, 2011 and 2010

(Unaudited)

(In thousands)

								Accumulated
			Additional					Other						Total
	Common		Paid – In		Retained			Comprehensive			Treasury			Shareholders’
	Stock		Capital		Earnings			Income			Stock			Equity

Balance at
June 30, 2010	$	431	$	10,666	$	33,692		$	1,123		$	(1,409	)	$	44,503

Stock options exercised				109								203			312

Tax effect of stock options				3											3

Stock options compensation				167											167

Dividends declared						(1,325	)								(1,325	)

Net income						3,915									3,915

Total other comprehensive loss, net of taxes									(844	)					(844	)
Balance at
March 31, 2011	$	431	$	10,945	$	36,282		$	279		$	(1,206	)	$	46,731

Balance at

June 30, 2011	$	431	$	11,001	$	37,336		$	519		$	(1,206	)	$	48,081

Stock options exercised				94								159			253

Tax effect of stock options				4											4

Stock options compensation				19											19

Dividends declared						(970	)								(970	)

Net income						4,487									4,487

Total other comprehensive loss, net of taxes									(106	)					(106	)
Balance at
March 31, 2012	$	431	$	11,118	$	40,853		$	413		$	(1,047	)	$	51,768

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2012 and 2011

(Unaudited)

(In thousands)	2012			2011
Cash flows from operating activities:
Net Income	$	4,487		$	3,915
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		625			536
Net amortization of premiums and discounts		786			767
Net amortization of deferred loan costs and fees		199			175
Provision for loan losses		1,437			1,179
Stock option compensation		19			167
Net gain on sale of available-for-sale securities		(11	)		(233	)
Loss on sale of foreclosed real estate		121			---
Excess tax benefit from share-based payment arrangements		(4	)		---
Net increase in accrued income taxes		(996	)		(432	)
Net increase in accrued interest receivable		(86	)		(97	)
Net decrease in prepaid and other assets		87			320
Net increase in other liabilities		157			421
Net cash provided by operating activities		6,821			6,718

Cash flows from investing activities:
Securities available-for-sale:
Proceeds from maturities		7,375			7,411
Proceeds from sale of securities		770			7,729
Purchases of securities		(7,698	)		(30,308	)
Principal payments on securities		14,912			8,497
Securities held-to-maturity:
Proceeds from maturities		9,642			13,827
Purchases of securities		(32,858	)		(58,412	)
Principal payments on securities		7,534			4,086
Net redemption of Federal Home Loan Bank Stock		778			634
Maturity of long term certificate of deposit		---			1,000
Net increase in loans receivable		(13,365	)		(2,986	)
Proceeds from sale of foreclosed real estate		565			---
Purchases of premises and equipment		(253	)		(1,247	)
Net cash used in investing activities		(12,598	)		(49,769	)

Cash flows from financing activities:
Net decrease in short-term FHLB advances		(14,300	)		(9,100	)
Repayment of long-term borrowings		(3,000	)		(5,000	)
Payment of cash dividends		(970	)		(1,325	)
Proceeds from stock options exercised		253			312
Excess tax benefit from share-based payment arrangements		4			---
Net increase in deposits		44,700			77,117
Net cash provided by financing activities		26,687			62,004

Net increase in cash and cash equivalents		20,910			18,953
Cash and cash equivalents at beginning of period		9,966			9,643
Cash and cash equivalents at end of period	$	30,876		$	28,596

Non-cash investing activities:
Foreclosed loans transferred to foreclosed real estate	$	653		$	563
Cash paid during the period:
Interest	$	2,778		$	3,434
Income taxes		3,108			2,453
See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Notes to Consolidated Financial Statements

As of and for the Three and Nine Months Ended March 31, 2012 and 2011

(1) Basis of Presentation

The accompanying consolidated statement of financial condition as of June 30, 2011 was derived from the audited consolidated financial statements as of and for the year then ended 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 subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd. In June 2011, 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. Greene Property Holdings, Ltd. is a subsidiary of The Bank of Greene County. The Company received regulatory approvals to commence operation of this subsidiary during the quarter ended December 31, 2011. Certain mortgages and notes currently held by The Bank of Greene County were transferred and beneficially owned by Greene Property Holdings, Ltd. as of January 4, 2012. The Bank of Greene County will continue to service these loans. Greene Property Holdings financial statements will be consolidated with The Bank of Greene County, and therefore, the impact to the consolidated financial statement of Greene County Bancorp, Inc. was not material. The consolidated financial statements at and for the three and nine months ended March 31, 2012 and 2011 are unaudited.

The accompanying consolidated 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, 2011, such information and notes have not been duplicated herein. In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included. Amounts in the prior year’s consolidated financial statements have been reclassified whenever necessary to conform to the current year’s presentation. These reclassifications, if any, had no effect on net income or shareholders’ equity 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 and nine months ended March 31, 2012 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2012. These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.

CRITICAL ACCOUNTING POLICIES

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

Securities are evaluated for other-than-temporary impairment by performing periodic reviews of individual securities in the investment portfolio. Greene County Bancorp, Inc. makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis. The Company considers many factors, including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, intent to sell the security, the likelihood to be required to sell the security before it recovers the entire amortized cost, external credit ratings and recent downgrades. The Company is required to record other-than-temporary impairment charges through earnings, if it has the intent to sell, or will more likely than not be required to sell an impaired debt security before a recovery of its amortized cost basis. In addition, the Company is required to record other-than-temporary impairment charges through earnings for the amount of credit losses, regardless of the intent or requirement to sell. Credit loss is measured as the difference between the present value of an impaired debt security’s cash flows and its amortized cost basis. Non-credit related impairment must be recorded as decreases to accumulated other comprehensive income as long as the Company has no intent or requirement to sell an impaired security before a recovery of amortized cost basis.

(2) Nature of Operations

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its wholly owned subsidiary, The Bank of Greene County (the “Bank”) and the Bank’s wholly owned subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd.. The Bank of Greene County has twelve 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. Greene Property Holdings, Ltd., another subsidiary of The Bank of Greene County, operates as a real estate investment trust that holds residential mortgages, providing additional flexibility and planning opportunities for the business of the Bank.

(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 the Company to recognize additions to the Allowance based on their judgments of information available to them at the time of their examination.

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

(4) Securities

Greene County Bancorp, Inc.’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations and certain mutual funds. In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations. As of March 31, 2012, 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 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 securities rated “A” or higher by at least one nationally recognized rating agency (or securities attaining such rating as a result of guarantees by insurance companies), with the exception of investments in smaller non-rated local bonds. The Company does not engage in any derivative or hedging transactions, such as interest rate swaps or caps.

Securities at March 31, 2012 consisted of the following:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	19,839	$	346	$	92	$	20,093
State and political subdivisions		5,439		153		---		5,592
Mortgage-backed securities-residential		23,926		511		4		24,433
Mortgage-backed securities-multi-family		17,032		577		29		17,580
Asset-backed securities		21		---		1		20
Corporate debt securities		6,101		260		---		6,361
Total debt securities		72,358		1,847		126		74,079
Equity and other securities		67		59		---		126
Total securities available-for-sale		72,425		1,906		126		74,205
Securities held-to-maturity:
U.S. treasury securities		11,037		74		---		11,111
U.S. government sponsored enterprises		998		29		---		1,027
State and political subdivisions		53,197		494		115		53,576
Mortgage-backed securities-residential		52,184		2,202		50		54,336
Mortgage-backed securities-multi-family		21,643		606		5		22,244
Other securities		385		---		---		385
Total securities held-to-maturity		139,444		3,405		170		142,679
Total securities	$	211,869	$	5,311	$	296	$	216,884

Securities at June 30, 2011 consisted of the following:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	25,909	$	171	$	377	$	25,703
State and political subdivisions		6,819		243		---		7,062
Mortgage-backed securities-residential		28,214		773		73		28,914
Mortgage-backed securities-multi-family		20,184		912		---		21,096
Asset-backed securities		24		---		1		23
Corporate debt securities		6,881		325		---		7,206
Total debt securities		88,031		2,424		451		90,004
Equity and other securities		67		46		---		113
Total securities available-for-sale		88,098		2,470		451		90,117
Securities held-to-maturity:
U.S. treasury securities		11,062		70		---		11,132
U.S. government sponsored enterprises		997		30		---		1,027
State and political subdivisions		34,933		200		9		35,124
Mortgage-backed securities-residential		57,347		1,737		35		59,049
Mortgage-backed securities-multi-family		19,434		47		14		19,467
Other securities		404		2		---		406
Total securities held-to-maturity		124,177		2,086		58		126,205
Total securities	$	212,275	$	4,556	$	509	$	216,322

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, 2012.

	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
Securities available-for-sale:
U.S. government sponsored enterprises	$	3,990	$	92	$	---	$	---	$	3,990	$	92
Mortgage-backed securities-residential		1,179		4		---		---		1,179		4
Mortgage-backed securities-multi-family		1,532		29		---		---		1,532		29
Asset-backed securities		---		---		20		1		20		1
Total securities available-for-sale		6,701		125		20		1		6,721		126
Securities held-to-maturity:
State and political subdivisions		7,578		115		---		---		7,578		115
Mortgage-backed securities-residential		2,475		39		2,614		11		5,089		50
Mortgage-backed securities-multifamily		722		5		---		---		722		5
Total securities held-to-maturity		10,775		159		2,614		11		13,389		170
Total securities	$	17,476	$	284	$	2,634	$	12	$	20,110	$	296

	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
Securities available-for-sale:
U.S. government sponsored enterprises	$	13,446	$	377	$	---	$	---	$	13,446	$	377
Mortgage-backed security-residential		6,571		73		---		---		6,571		73
Asset-backed securities		---		---		22		1		22		1
Total securities available-for-sale		20,017		450		22		1		20,039		451
Securities held-to-maturity:
State and political subdivisions		1,610		9		---		---		1,610		9
Mortgage-backed securities-residential		7,680		35		---		---		7,680		35
Mortgage-backed securities-multifamily		10,670		14		---		---		10,670		14
Total securities held-to-maturity		19,960		58		---		---		19,960		58
Total securities	$	39,977	$	508	$	22	$	1	$	39,999	$	509

At March 31, 2012, there were two securities which has been in a continuous unrealized loss position for more than 12 months and 29 securities in a continuous unrealized loss position of less 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 in an unrealized loss position at March 31, 2012 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, 2012. Management believes that the reasons for the decline in fair value are due to interest rates and widening credit spreads during the reporting period.

Gross realized gains and losses on sales of securities or other-than-temporary impairment of securities recognized in income during the nine months ended March 31, 2012 and 2011 are as follows:

	Nine months ended March 31,
(in thousands)	2012		2011
Gross realized gains	$	11	$	233
Gross realized losses		---		---
Net gains (losses) recognized	$	11	$	233

During the nine months ended March 31, 2012 the Company sold $759,000 of corporate debt securities within its available-for-sale portfolio at a gain of $11,000. During the nine months ended March 31, 2011, the Company sold $6.4 million of securities issued by U.S. Government sponsored enterprises, and $1.1 million of mortgage-backed securities, which resulted in the recognition of a net gain of $233,000. There were no realized losses or other-than-temporary impairment losses recognized during the three and nine months ended March 31, 2012 and 2011.

The estimated fair values of debt securities at March 31, 2012, 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. Mortgage-backed securities and asset-backed securities are shown separately since they are not due at a single maturity date. The effective lives of these securities are expected to be significantly shorter than their contractual due dates due to prepayments of the underlying loans.

Available for sale debt securities	Amortized Cost		Fair Value
Within one year	$	5,000	$	5,052
After one year through five years		16,672		17,111
After five years through ten years		7,707		7,893
After ten years		2,000		1,990
Total available for sale debt securities		31,379		32,046
Mortgage-backed and asset-backed securities		40,979		42,033
Equity securities		67		126
Total available for sale securities		72,425		74,205

Held to maturity debt securities
Within one year		17,341		17,365
After one year through five years		24,377		24,638
After five years through ten years		15,933		16,116
After ten years		7,966		7,980
Total held to maturity debt securities		65,617		66,099
Mortgage-backed and asset-backed securities		73,827		76,580
Total held to maturity securities		139,444		142,679

Total securities	$	211,869	$	216,884

As of March 31, 2012, securities with an aggregate fair value of $155.7 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 and nine months ended March 31, 2012 or 2011.

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, 2012 or 2011.

(5) Credit Quality of Loans and Allowance for Loan Losses

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

When The Bank of Greene County classifies problem assets as either Substandard, Doubtful or Loss, 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 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, 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 three segments within its loan portfolio that it considers when measuring credit quality: real estate loans, consumer installment and commercial loans. The real estate portfolio consists of residential, nonresidential, and construction loan classes. The inherent risk within the loan portfolio varies depending upon each of these loan types.

The Bank of Greene County’s primary lending activity is the origination of residential mortgage loans, including home equity loans, which are collateralized by residences. Generally, residential mortgage loans are made in amounts up to 80.0% of the appraised value of the property. However, The Bank of Greene County will originate residential mortgage loans with loan-to-value ratios of up to 95.0%, with private mortgage insurance. In the event of default by the borrower, The Bank of Greene County will acquire and liquidate the underlying collateral. By originating the loan at a loan-to-value ratio of 80% or less or obtaining private mortgage insurance, The Bank of Greene County limits its risk of loss in the event of default. However, the market values of the collateral may be adversely impacted by declines in the economy. Home equity loans may have an additional inherent risk if The Bank of Greene County does not hold the first mortgage since The Bank of Greene County may stand in a secondary position in the event of collateral liquidation resulting in a greater chance of insufficiency to meet all obligations.

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

Loans collateralized by nonresidential mortgage loans, and multi-family loans, such as apartment buildings generally are larger than residential loans and involve a greater degree of risk. Commercial mortgage loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on the results of operations and management of the properties or underlying businesses, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of nonresidential mortgage loans makes them more difficult for management to monitor and evaluate.

Consumer installment loans generally have shorter terms and higher interest rates than residential mortgage loans. In addition, consumer loans expand the products and services offered by The Bank of Greene County to better meet the financial services needs of its customers. Consumer loans generally involve greater credit risk than residential mortgage loans because of the difference in the nature of the underlying collateral. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation in the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections depend on the borrower's personal financial stability. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and nonresidential mortgage lending. Real estate lending is generally considered to be collateral based, with loan amounts based on fixed-rate loan-to-collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.

Loan balances by internal credit quality indicator as of March 31, 2012 are shown below.

(in thousands)	Performing		Watch		Special Mention		Substandard		Total
Residential mortgage	$	182,157	$	---	$	563	$	4,101	$	186,821
Nonresidential mortgage		67,669		7		592		2,641		70,909
Residential construction & land		2,829		---		---		---		2,829
Commercial construction		2,014		---		290		1,069		3,373
Multi-family		4,235		---		784		562		5,581
Home equity		23,576		---		---		101		23,677
Consumer installment		4,036		52		---		19		4,107
Commercial loans		18,793		10		834		741		20,378
Total gross loans	$	305,309	$	69	$	3,063	$	9,234	$	317,675

Loan balances by internal credit quality indicator as of June 30, 2011 are shown below.

(in thousands)	Performing		Watch		Special Mention		Substandard		Total
Residential mortgage	$	176,615	$	1,782	$	95	$	3,120	$	181,612
Nonresidential mortgage		59,633		1,017		602		2,608		63,860
Residential construction & land		3,718		---		---		13		3,731
Commercial construction		1,789		---		---		225		2,014
Multi-family		5,036		---		434		578		6,048
Home equity		25,446		64		---		49		25,559
Consumer installment		3,960		7		---		41		4,008
Commercial loans		17,149		274		680		685		18,788
Total gross loans	$	293,346	$	3,144	$	1,811	$	7,319	$	305,620

The Company had no loans classified Doubtful or Loss at March 31, 2012 or June 30, 2011.

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent. Nonaccrual 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, 2012 and June 30, 2011. While the Bank makes every reasonable effort to work with the borrowers to collect amounts due, the number of loans in process of foreclosure has grown substantially over the past several years. This growth has been the result of adverse changes within the economy and increases in local unemployment. The growth is also due in part to the extended length of time required to meet all of the legal requirements mandated by New York State law prior to a foreclosure sale, which may be in excess of two years. Loans on nonaccrual status totaled $6.8 million at March 31, 2012 of which $2.9 million were in the process of foreclosure. Of the remaining $3.9 million in nonaccrual loans, $2.8 million were less than 90 days past due, or were current at March 31, 2012, 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. Of total delinquent loans, $922,000 were making payments pursuant to forbearance agreements. Under the forbearance agreements, the customers have made arrangements with the Bank to bring the loans current over a specified period of time (resulting in an insignificant delay in repayment). During this term of the forbearance agreement, the Bank has agreed not to continue foreclosure proceedings.

The following table sets forth information regarding delinquent and/or nonaccrual loans as of March 31, 2012:

(in thousands)	30-59 days past due		60-89 days past due		More than 90 days past due		Total past due		Current		Total Loans		Loans on Non-accrual
Residential mortgage	$	2,402	$	---	$	3,248	$	5,650	$	181,171	$	186,821	$	4,015
Nonresidential mortgage		1,615		---		1,073		2,688		68,221		70,909		2,062
Residential construction & land		---		---		---		---		2,829		2,829		---
Commercial construction		---		---		---		---		3,373		3,373		---
Multi-family		---		---		434		434		5,147		5,581		434
Home equity		---		23		101		124		23,553		23,677		60
Consumer installment		46		52		20		118		3,989		4,107		19
Commercial loans		674		---		249		923		19,455		20,378		202
Total gross loans	$	4,737	$	75	$	5,125	$	9,937	$	307,738	$	317,675	$	6,792

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2011:

(in thousands)	30-59 days past due		60-89 days past due		More than 90 days past due		Total past due		Current		Total Loans		Loans on Non-accrual
Residential mortgage	$	1,766	$	1,292	$	2,294	$	5,352	$	176,260	$	181,612	$	3,074
Nonresidential mortgage		1,163		687		1,799		3,649		60,211		63,860		2,171
Residential construction & land		---		---		13		13		3,718		3,731		13
Commercial construction		225		---		---		225		1,789		2,014		225
Multi-family		128		---		449		577		5,471		6,048		577
Home equity		168		64		43		275		25,284		25,559		49
Consumer installment		31		25		13		69		3,939		4,008		41
Commercial loans		69		546		82		697		18,091		18,788		144
Total gross loans	$	3,550	$	2,614	$	4,693	$	10,857	$	294,763	$	305,620	$	6,294

The Bank of Greene County had one accruing loan delinquent more than 90 days as of March 31, 2012 totaling $41,000 and had no accruing loans delinquent more than 90 days as of June 30, 2011. The loan delinquent more than 90 days and accruing consists of a loan that is well collateralized and the borrower has 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 nine months ended March 31:


(In thousands)		2012