Edgar Filing: GREENE COUNTY BANCORP INC

form10qmarch312013.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, 2013

[ ] 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 10, 2013, the registrant had 4,192,654 shares of common stock outstanding at $ 0.10 par value per share.


	GREENE COUNTY BANCORP, INC.



	INDEX



PART I.	FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	* Consolidated Statements of Financial Condition	3
	* Consolidated Statements of Income	4-5
	* Consolidated Statements of Comprehensive Income	6
	* Consolidated Statements of Changes in Shareholders’ Equity	7
	* Consolidated Statements of Cash Flows	8
	* Notes to Consolidated Financial Statements	9-27

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28-38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

	Signatures	40
	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)	41 42 43 44

Greene County Bancorp, Inc.

Consolidated Statements of Financial Condition

As of March 31, 2013 and June 30, 2012

(Unaudited)

(In thousands, except share and per share amounts)


ASSETS	March 31, 2013			June 30, 2012
Cash and due from banks	$	38,078		$	7,519
Federal funds sold		350			223
Total cash and cash equivalents		38,428			7,742

Long term certificate of deposit		250			-
Securities available for sale, at fair value		76,840			87,528
Securities held to maturity, at amortized cost		162,207			146,389
Federal Home Loan Bank stock, at cost		979			1,744

Loans		356,425			332,450
Allowance for loan losses		(6,922	)		(6,177	)
Unearned origination fees and costs, net		592			478
Net loans receivable		350,095			326,751

Premises and equipment		14,503			14,899
Accrued interest receivable		2,875			2,688
Foreclosed real estate		435			260
Prepaid expenses and other assets		3,565			2,655
Total assets	$	650,177		$	590,656

LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest bearing deposits	$	52,688		$	52,783
Interest bearing deposits		534,030			459,154
Total deposits		586,718			511,937

Borrowings from FHLB, short term		-			14,000
Borrowings from FHLB, long term		4,000			7,000
Accrued expenses and other liabilities		3,624			5,055
Total liabilities		594,342			537,992

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 4,191,671 shares at March 31, 2013,
and 4,182,671 shares at June 30, 2012		431			431
Additional paid-in capital		11,163			11,119
Retained earnings		45,041			41,869
Accumulated other comprehensive income		60			173
Treasury stock, at cost 113,999 shares at March 31, 2013,
and 122,999 shares at June 30, 2012		(860	)		(928	)
Total shareholders’ equity		55,835			52,664
Total liabilities and shareholders’ equity	$	650,177		$	590,656
See notes to consolidated financial statements

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Nine Months Ended March 31, 2013 and 2012

(Unaudited)

(In thousands, except share and per share amounts)


	2013		2012
Interest income:
Loans	$	13,693	$	13,384
Investment securities - taxable		552		692
Mortgage-backed securities		2,696		3,273
Investment securities - tax exempt		1,254		996
Interest bearing deposits and federal funds sold		28		17
Total interest income		18,223		18,362

Interest expense:
Interest on deposits		1,974		2,463
Interest on borrowings		183		315
Total interest expense		2,157		2,778

Net interest income		16,066		15,584
Provision for loan losses		1,316		1,437
Net interest income after provision for loan losses		14,750		14,147

Noninterest income:
Service charges on deposit accounts		1,969		1,857
Debit card fees		996		1,026
Investment services		224		199
E-commerce fees		75		81
Net gain on sale of available-for-sale securities		10		11
Other operating income		442		425
Total noninterest income		3,716		3,599

Noninterest expense:
Salaries and employee benefits		6,254		6,047
Occupancy expense		927		916
Equipment and furniture expense		411		478
Service and data processing fees		1,217		1,158
Computer software, supplies and support		269		249
Advertising and promotion		254		235
FDIC insurance premiums		248		231
Legal and professional fees		506		583
Other		1,279		1,250
Total noninterest expense		11,365		11,147

Income before provision for income taxes		7,101		6,599
Provision for income taxes		2,131		2,112
Net income	$	4,970	$	4,487

Basic earnings per share	$	1.19	$	1.08
Basic average shares outstanding		4,185,707		4,150,978
Diluted earnings per share	$	1.18	$	1.07
Diluted average shares outstanding		4,224,814		4,192,567
Dividends per share	$	0.525	$	0.525
See notes to consolidated financial statements

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Three Months Ended March 31, 2013 and 2012

(Unaudited)

(In thousands, except share and per share amounts)


	2013		2012
Interest income:
Loans	$	4,525	$	4,441
Investment securities - taxable		181		222
Mortgage-backed securities		855		963
Investment securities - tax exempt		418		370
Interest bearing deposits and federal funds sold		6		3
Total interest income		5,985		5,999

Interest expense:
Interest on deposits		637		749
Interest on borrowings		44		88
Total interest expense		681		837

Net interest income		5,304		5,162
Provision for loan losses		331		541
Net interest income after provision for loan losses		4,973		4,621

Noninterest income:
Service charges on deposit accounts		584		602
Debit card fees		325		338
Investment services		55		62
E-commerce fees		25		26
Other operating income		152		149
Total noninterest income		1,141		1,177

Noninterest expense:
Salaries and employee benefits		2,181		2,103
Occupancy expense		334		303
Equipment and furniture expense		128		146
Service and data processing fees		408		388
Computer software, supplies and support		86		87
Advertising and promotion		81		90
FDIC insurance premiums		90		79
Legal and professional fees		165		174
Other		473		351
Total noninterest expense		3,946		3,721

Income before provision for income taxes		2,168		2,077
Provision for income taxes		631		594
Net income	$	1,537	$	1,483

Basic earnings per share	$	0.37	$	0.36
Basic average shares outstanding		4,187,671		4,159,093
Diluted earnings per share	$	0.36	$	0.35
Diluted average shares outstanding		4,227,166		4,197,430
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, 2013 and 2012

(Unaudited)


(In thousands)	2013			2012
Net Income	$	4,970		$	4,487
Other comprehensive (loss) income:
Unrealized holding losses on available for sale securities, arising
during the nine months ended March 31, 2013 and 2012, net of income taxes
of ($92) and ($88), respectively		(147	)		(139	)

Reclassification adjustment for gain on sale of securities realized in net income
net of income taxes of ($4) and ($4) respectively(3)		(6	)		(7	)

Accretion of unrealized loss on securities transferred to held to maturity,
net of income taxes of $11 and $18, respectively(1)		17			28

Pension actuarial gain, net of income taxes of $15 and $8(2)		23			12

Total other comprehensive loss		(113	)		(106	)

Comprehensive income	$	4,857		$	4,381

(1)	The accretion of the unrealized holding losses in accumulated other comprehensive income at the date of transfer partially offsets the amortization of the difference between the par value and fair value of the investment securities at the date of transfer, and is an adjustment of yield.

(2)	These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 10 for additional details)

(3)	Amounts are included in net gain on sale of available for sale securities on the Consolidated Statements of Income in total non-interest income.

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2013 and 2012

(Unaudited)


(In thousands)	2013			2012
Net Income	$	1,537		$	1,483
Other comprehensive (loss) income:
Unrealized holding losses on available for sale securities, arising
during the three months ended March 31, 2013 and 2012, net of income taxes
of ($55) and ($144), respectively		(87	)		(226	)

Accretion of unrealized loss on securities transferred to held to maturity,
net of income taxes of $3 and $6, respectively(1)		5			9

Pension actuarial gain, net of income taxes of $5 and $3(2)		8			4

Total other comprehensive loss		(74	)		(213	)

Comprehensive income	$	1,463		$	1,270
See notes to consolidated financial statements

(1)	The accretion of the unrealized holding losses in accumulated other comprehensive income at the date of transfer partially offsets the amortization of the difference between the par value and fair value of the investment securities at the date of transfer, and is an adjustment of yield.

(2)	These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 10 for additional details)

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended March 31, 2013 and 2012

(Unaudited)

(In thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total Shareholders' Equity
Balance at June 30, 2011	$	431	$	11,001	$	37,336		$	519		$	(1,206	)	$	48,081
Options exercised				94								159			253
Tax benefit of stock based compensation				4											4
Stock based compensation				19											19
Dividends declared						(970	)								(970	)
Net income						4,487									4,487
Other comprehensive loss, net of taxes									(106	)					(106	)
Balance at March 31, 2012	$	431	$	11,118	$	40,853		$	413		$	(1,047	)	$	51,768


	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total Shareholders' Equity
Balance at June 30, 2012	$	431	$	11,119	$	41,869		$	173		$	(928	)	$	52,664
Options exercised				44								68			112
Dividends declared						(1,798	)								(1,798	)
Net income						4,970									4,970
Other comprehensive loss, net of taxes									(113	)					(113	)
Balance at March 31, 2013	$	431	$	11,163	$	45,041		$	60		$	(860	)	$	55,835

See notes to consolidated financial statements.

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2013 and 2012

(Unaudited)


(In thousands)	2013			2012
Cash flows from operating activities:
Net Income	$	4,970		$	4,487
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		561			625
Deferred income tax benefit		(290	)		-
Net amortization of premiums and discounts		1,089			786
Net amortization of deferred loan costs and fees		199			199
Provision for loan losses		1,316			1,437
Stock option compensation		-			19
Net gain on sale of available-for-sale securities		(10	)		(11	)
Loss on sale of foreclosed real estate		26			121
Excess tax benefit from share-based payment arrangements		-			(4	)
Net decrease in accrued income taxes		(1,198	)		(996	)
Net increase in accrued interest receivable		(187	)		(86	)
Net decrease in prepaids and other assets		271			87
Net (decrease) increase in other liabilities		(1,015	)		157
Net cash provided by operating activities		5,732			6,821

Cash flows from investing activities:
Securities available for sale:
Proceeds from maturities		5,350			7,375
Proceeds from sale of securities		10			770
Purchases of securities		(9,286	)		(7,698	)
Principal payments on securities		13,827			14,912
Securities held to maturity:
Proceeds from maturities		18,315			9,642
Purchases of securities		(50,509	)		(32,858	)
Principal payments on securities		15,862			7,534
Net redemption of Federal Home Loan Bank Stock		765			778
Purchase of long term certificate of deposit		(250	)		-
Net increase in loans receivable		(25,334	)		(13,365	)
Proceeds from sale of foreclosed real estate		274			565
Purchases of premises and equipment		(165	)		(253	)
Net cash used by investing activities		(31,141	)		(12,598	)

Cash flows from financing activities
Net decrease in short-term FHLB advances		(14,000	)		(14,300	)
Net decrease in long-term FHLB advances		(3,000	)		(3,000	)
Payment of cash dividends		(1,798	)		(970	)
Proceeds from issuance of stock options		112			253
Excess tax benefit from share-based payment arrangements		-			4
Net increase in deposits		74,781			44,700
Net cash provided by financing activities		56,095			26,687

Net increase in cash and cash equivalents		30,686			20,910
Cash and cash equivalents at beginning of period		7,742			9,966
Cash and cash equivalents at end of period	$	38,428		$	30,876

Non-cash investing activites:
Foreclosed loans transferred to other real estate	$	475		$	653
Cash paid during period for:
Interest	$	2,188		$	2,778
Income taxes	$	3,619		$	3,108
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, 2013 and 2012

(1) Basis of Presentation

The accompanying consolidated statement of financial condition as of June 30, 2012 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 and Greene Property Holdings, Ltd. The consolidated financial statements at and for the three and nine months ended March 31, 2013 and 2012 are unaudited.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. To the extent that information and notes required by GAAP for complete financial statements are contained in or are consistent with the audited financial statements incorporated by reference to Greene County Bancorp, Inc.’s Annual Report on Form 10-K for the year ended June 30, 2012, such information and notes have not been duplicated herein. In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included. Amounts in the prior year’s consolidated financial statements have been reclassified whenever necessary to conform to the current year’s presentation. These reclassifications, if any, had no effect on net income or retained earnings as previously reported. All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three and nine months ended March 31, 2013 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2013. These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.

CRITICAL ACCOUNTING POLICIES

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

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

(2) Nature of Operations

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its two banking subsidiaries. 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.

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

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

(4) Securities

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, 2013, 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 high quality securities as determined by management’s analysis at the time of purchase. The Company does not engage in any derivative or hedging transactions, such as interest rate swaps or caps.

Securities at March 31, 2013 consisted of the following:


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available for sale:
U.S. government sponsored enterprises	$	14,750	$	582	$	-	$	15,332
State and political subdivisions		2,429		42		-		2,471
Mortgage-backed securities-residential		8,618		320		-		8,938
Mortgage-backed securities-multi-family		44,580		639		277		44,942
Asset-backed securities		17		-		1		16
Corporate debt securities		4,541		455		1		4,995
Total debt securities		74,935		2,038		279		76,694
Equity and other securities		67		79		-		146
Total securities available for sale		75,002		2,117		279		76,840
Securities held to maturity:
U.S. treasury securities		7,006		29		-		7,035
U.S. government sponsored enterprises		2,999		21		16		3,004
State and political subdivisions		63,516		641		64		64,093
Mortgage-backed securities-residential		32,371		1,969		13		34,327
Mortgage-backed securities-multi-family		55,381		1,362		353		56,390
Other securities		934		2		1		935
Total securities held to maturity		162,207		4,024		447		165,784
Total securities	$	237,209	$	6,141	$	726	$	242,624

Securities at June 30, 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	$	16,816	$	582	$	-	$	17,398
State and political subdivisions		4,783		116		-		4,899
Mortgage-backed securities-residential		18,625		482		1		19,106
Mortgage-backed securities-multi-family		40,077		604		18		40,663
Asset-backed securities		20		-		1		19
Corporate debt securities		5,053		263		-		5,316
Total debt securities		85,374		2,047		20		87,401
Equity and other securities		67		60		-		127
Total securities available for sale		85,441		2,107		20		87,528
Securities held to maturity:
U.S. treasury securities		11,029		61		-		11,090
U.S. government sponsored enterprises		998		31		-		1,029
State and political subdivisions		62,212		556		99		62,669
Mortgage-backed securities-residential		48,101		2,282		4		50,379
Mortgage-backed securities-multi-family		23,673		952		6		24,619
Other securities		376		-		-		376
Total securities held to maturity		146,389		3,882		109		150,162
Total securities	$	231,830	$	5,989	$	129	$	237,690

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, 2013.


	Less Than 12 Months				More Than 12 Months				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
Mortgage-backed securities-multi-family	$	8,468	$	277	$	-	$	-	$	8,468	$	277
Asset-backed securities		-		-		16		1		16		1
Corporate debt securities		501		1		-		-		501		1
Total securities available for sale		8,969		278		16		1		8,985		279
Securities held to maturity:
U.S. government sponsored enterprises		1,984		16		-		-		1,984		16
State and political subdivisions		7,097		63		682		1		7,779		64
Mortgage-backed securities-residential		1,584		13		-		-		1,584		13
Mortgage-backed securities-multi-family		33,230		353		-		-		33,230		353
Other securities		241		1		-		-		241		1
Total securities held to maturity		44,136		446		682		1		44,818		447
Total securities	$	53,105	$	724	$	698	$	2	$	53,803	$	726


	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:
Mortgage-backed securities-residential	$	340	$	1	$	-	$	-	$	340	$	1
Mortgage-backed securities-multi-family		8,837		18		-		-		8,837		18
Asset-backed securities		-		-		19		1		19		1
Total securities available for sale		9,177		19		19		1		9,196		20
Securities held to maturity:
State and political subdivisions		10,696		99		-		-		10,696		99
Mortgage-backed securities-residential		527		4		-		-		527		4
Mortgage-backed securities-multi-family		4,189		6		-		-		4,189		6
Total securities held to maturity		15,412		109		-		-		15,412		109
Total securities	$	24,589	$	128	$	19	$	1	$	24,608	$	129

At March 31, 2013, there were 7 securities which have been in a continuous unrealized loss position for more than 12 months and 44 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 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, 2013. Management believes that the reasons for the decline in fair value are due to interest rates and widening credit spreads at the end of the quarter.

During the three months ended March 31, 2013 there were no gains or losses recognized on the sale of securities. During the nine months ended March 31, 2013, a gain on sale of $10,000 was recognized on a security that was previously written off as an other-than-temporary impairment. 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. There was no other-than-temporary impairment loss recognized during the three and nine months ended March 31, 2013 and 2012.

The estimated fair values of debt securities at March 31, 2013, by contractual maturity are shown below. Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)


Available for sale debt securities	Amortized Cost		Fair Value
Within one year	$	3,905	$	3,919
After one year through five years		13,164		13,820
After five years through ten years		4,651		5,059
After ten years		-		-
Total available for sale debt securities		21,720		22,798
Mortgage-backed and asset-backed securities		53,215		53,896
Equity securities		67		146
Total available for sale securities		75,002		76,840

Held to maturity debt securities
Within one year		15,645		15,680
After one year through five years		23,282		23,478
After five years through ten years		25,377		25,730
After ten years		10,151		10,179
Total held to maturity debt securities		74,455		75,067
Mortgage-backed		87,752		90,717
Total held to maturity securities		162,207		165,784
Total securities	$	237,209	$	242,624

As of March 31, 2013 and June 30, 2012, securities with an aggregate fair value of $201.3 million and $181.6 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. As of March 31, 2013 and June 30, 2012, securities with an aggregate fair value of $5.0 million and $5.3 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. Greene County Bancorp, Inc. did not participate in any securities lending programs during the nine months ended March 31, 2013 or 2012.

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 periods ended March 31, 2013 or 2012.

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

The Bank primarily has four segments within its loan portfolio that it considers when measuring credit quality: real estate loans, home equity, 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. 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 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 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, 2013 are shown below.


(In thousands)	Performing		Watch		Special Mention		Substandard		Total
Residential mortgage	$	204,086	$	292	$	-	$	4,357	$	208,735
Nonresidential mortgage		84,238		156		998		2,248		87,640
Residential construction and land		2,007		-		-		-		2,007
Commercial construction		1,564		-		415		1,063		3,042
Multi-family		4,420		-		423		729		5,572
Home equity		21,164		25		-		28		21,217
Consumer installment		4,158		2		-		-		4,160
Commercial loans		22,583		115		353		1,001		24,052
Total gross loans	$	344,220	$	590	$	2,189	$	9,426	$	356,425

Loan balances by internal credit quality indicator as of June 30, 2012 are shown below.


(In thousands)	Performing		Watch		Special Mention		Substandard		Total
Residential mortgage	$	188,446	$	-	$	557	$	4,375	$	193,378
Nonresidential mortgage		77,761		-		588		2,445		80,794
Residential construction and land		2,156		-		-		-		2,156
Commercial construction		669		-		290		1,075		2,034
Multi-family		4,185		-		780		557		5,522
Home equity		22,708		-		-		100		22,808
Consumer installment		4,044		1		-		25		4,070
Commercial loans		20,045		39		762		842		21,688
Total gross loans	$	320,014	$	40	$	2,977	$	9,419	$	332,450

The Company had no loans classified Doubtful or Loss at March 31, 2013 or June 30, 2012.

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent. A nonaccrual loan is defined as a loan in which collectability is questionable and therefore interest on the loan will no longer be recognized on an accrual basis. A loan is not placed back on accrual status until the borrower has demonstrated the ability and willingness to make timely payments on the loan. A loan does not have to be 90 days delinquent in order to be classified as nonaccrual. Nonaccrual loans consisted primarily of loans secured by real estate at March 31, 2013 and June 30, 2012. 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 $6.9 million at March 31, 2013 of which $4.1 million were in the process of foreclosure. Included in nonaccrual loans, were $1.7 million of loans which were less than 90 days past due at March 31, 2013, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Included in total loans past due were $1.6 million of loans which were making payments pursuant to forbearance agreements. Under the forbearance agreements, the customers have made arrangements with the Bank to bring the loans current over a specified period of time (resulting in an insignificant delay in repayment). During this term of the forbearance agreement, the Bank has agreed not to continue foreclosure proceedings.

The following table sets forth information regarding delinquent and/or nonaccrual loans as of March 31, 2013:


(In thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total Loans		Loans on Non-accrual
Residential mortgage	$	1,407	$	423	$	3,489	$	5,319	$	203,416	$	208,735	$	4,094
Nonresidential mortgage		1,622		1,220		1,243		4,085		83,555		87,640		1,911
Residential construction and land		-		-		-		-		2,007		2,007		-
Commercial construction		-		-		-		-		3,042		3,042		-
Multi-family		-		146		463		609		4,963		5,572		463
Home equity		87		25		-		112		21,105		21,217		28
Consumer installment		48		2		-		50		4,110		4,160		-
Commercial loans		866		25		185		1,076		22,976		24,052		367
Total gross loans	$	4,030	$	1,841	$	5,380	$	11,251	$	345,174	$	356,425	$	6,863

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2012:


(In thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total Loans		Loans on Non-accrual
Residential mortgage	$	99	$	1,674	$	3,850	$	5,623	$	187,755	$	193,378	$	4,206
Nonresidential mortgage		424		1,088		1,041		2,553		78,241		80,794		1,868
Residential construction and land		-		-		-		-		2,156		2,156		-
Commercial construction		-		-		-		-		2,034		2,034		-
Multi-family		-		-		431		431		5,091		5,522		431
Home equity		52		-		100		152		22,656		22,808		60
Consumer installment		76		4		24		104		3,966		4,070		25
Commercial loans		3		596		257		856		20,832		21,688		303
Total gross loans	$	654	$	3,362	$	5,703	$	9,719	$	322,731	$	332,450	$	6,893

The Bank of Greene County had accruing loans delinquent 90 days or more as of March 31, 2013 totaling $178,000 and had accruing loans delinquent more than 90 days as of June 30, 2012 totaling $124,000. The loans delinquent more than 90 days and accruing consist of loans that are well collateralized and the borrowers have demonstrated the ability and willingness to pay. The borrowers have made arrangements with the Bank to bring the loan current within a specified time period and have made a series of payments as agreed.

The table below details additional information related to nonaccrual loans:


	For the nine months ended March 31,				For the three months ended March 31
(In thousands)	2013		2012		2013		2012
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	398	$	442	$	123	$	103
Interest income that was recorded on nonaccrual loans		180		211		54		88

Impaired Loan Analysis

The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment.” Management may consider a loan impaired once it is classified as nonaccrual and when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring. It should be noted that management does not evaluate all loans individually for impairment. Generally, The Bank of Greene County considers residential mortgages, home equity loans and installment loans as small, homogeneous loans, which are evaluated for impairment collectively based on historical loan experience and other factors. In contrast, large commercial mortgage, construction, multi-family, business loans and select larger balance residential mortgage loans are reviewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreement. The measurement of impaired loans is generally based on the fair value of the underlying collateral. The majority of The Bank of Greene County loans, including most nonaccrual loans, are small homogenous loan types adequately supported by collateral. Management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors. Loans that are either delinquent a minimum of 60 days or are on nonaccrual status, and are not individually evaluated for impairment, are either designated as Special Mention or Substandard, and the allocation of the allowance for loan loss is based upon the risk associated with such designation.

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


	As of March 31, 2013			For the nine months ended March 31, 2013		For the three months ended March 31, 2013
(In thousands)	Recorded Investment	Unpaid Principal	Related Allowance	Average Recorded Investment	Interest Income Recognized	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded:
Residential mortgage	$ 643	$ 643	$ -	$ 432	$ 32	$ 915	$ 14
Nonresidential mortgage	1,259	1,259	-	1,265	57	1,360	15
Commercial loans	-	-	-	108	13	77	3
	1,902	1,902	-	1,805	102	2,352	32
With an allowance recorded:
Residential mortgage	2,437	2,487	363	2,243	26	1,951	11
Nonresidential mortgage	1,082	1,082	291	1,015	13	985	5
Commercial construction	1,063	1,063	335	1,068	-	1,063	-
Multi-family	886	886	149	885	4	886	-
Home equity	-	-	-	257	4	-	-
Commercial loans	571	571	3	572	3	571	-
	6,039	6,089	1,141	6,040	50	5,456	16

Residential mortgage	3,080	3,130	363	2,675	58	2,866	25
Nonresidential mortgage	2,341	2,341	291	2,280	70	2,345	20
Commercial construction	1,063	1,063	335	1,068	-	1,063	-
Multi-family	886	886	149	885	4	886	-
Home equity	-	-	-	257	4	-	-
Commercial loans	571	571	3	680	16	648	3