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 DECEMBER 31, 2013

OR

o 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 o

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 o

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   o
Accelerated filer
o
Non-accelerated filer     o
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 o NO x

As of February 14, 2014, the registrant had 4,210,257 shares of common stock outstanding at $ 0.10 par value per share.


GREENE COUNTY BANCORP, INC.

INDEX

PART I.
FINANCIAL INFORMATION
 
Page
Item 1.
Financial Statements (unaudited)
3
4
6
7
8
9-26
 
Item 2.
27-37
 
Item 3.
38
 
Item 4.
38
 
PART II.
OTHER INFORMATION
 
Item 1.
39
 
Item 1A.
39
 
Item 2.
39
 
Item 3.
39
 
Item 4.
39
 
Item 5.
39
 
Item 6.
39
 
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)
 

2

Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of December 31, 2013 and June 30, 2013
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
 
December 31, 2013
   
June 30, 2013
 
Total cash and cash equivalents
 
$
11,676
   
$
6,222
 
 
               
Long term certificate of deposit
   
250
     
250
 
Securities available for sale, at fair value
   
52,301
     
69,644
 
Securities held to maturity, at amortized cost
   
178,658
     
176,519
 
Federal Home Loan Bank stock, at cost
   
2,540
     
1,388
 
 
               
Loans
   
393,438
     
365,839
 
Allowance for loan losses
   
(7,171
)
   
(7,040
)
Unearned origination fees and costs, net
   
816
     
627
 
Net loans receivable
   
387,083
     
359,426
 
 
               
Premises and equipment
   
14,354
     
14,349
 
Accrued interest receivable
   
2,754
     
2,663
 
Foreclosed real estate
   
600
     
296
 
Prepaid expenses and other assets
   
2,478
     
2,848
 
Total assets
 
$
652,694
   
$
633,605
 
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Noninterest bearing deposits
 
$
59,198
   
$
57,926
 
Interest bearing deposits
   
490,237
     
500,513
 
Total deposits
   
549,435
     
558,439
 
 
               
Borrowings from Federal Home Loan Bank, short-term
   
31,700
     
10,600
 
Borrowings from Federal Home Loan Bank, long-term
   
8,500
     
4,000
 
Accrued expenses and other liabilities
   
4,651
     
4,458
 
Total liabilities
   
594,286
     
577,497
 
 
               
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 4,208,571 shares at December 31, 2013,and 4,192,654 shares at June 30, 2013
   
431
     
431
 
Additional paid-in capital
   
11,182
     
11,168
 
Retained earnings
   
48,923
     
46,112
 
Accumulated other comprehensive loss
   
(1,395
)
   
(750
)
Treasury stock, at cost 97,099 shares at December 31, 2013,and 113,016 shares at June 30, 2013
   
(733
)
   
(853
)
Total shareholders’ equity
   
58,408
     
56,108
 
Total liabilities and shareholders’ equity
 
$
652,694
   
$
633,605
 
 
See notes to consolidated financial statements

3

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Six Months Ended December 31, 2013 and 2012
(Unaudited)
(In thousands, except share and per share amounts)

 
 
2013
   
2012
 
Interest income:
 
   
 
Loans
 
$
9,124
   
$
9,168
 
Investment securities - taxable
   
333
     
371
 
Mortgage-backed securities
   
1,294
     
1,841
 
Investment securities - tax exempt
   
1,018
     
836
 
Interest bearing deposits and federal funds sold
   
8
     
22
 
Total interest income
   
11,777
     
12,238
 
 
               
Interest expense:
               
Interest on deposits
   
1,099
     
1,337
 
Interest on borrowings
   
61
     
139
 
Total interest expense
   
1,160
     
1,476
 
 
               
Net interest income
   
10,617
     
10,762
 
Provision for loan losses
   
821
     
985
 
Net interest income after provision for loan losses
   
9,796
     
9,777
 
 
               
Noninterest income:
               
Service charges on deposit accounts
   
1,331
     
1,385
 
Debit card fees
   
775
     
671
 
Investment services
   
192
     
169
 
E-commerce fees
   
51
     
50
 
Net gain on sale of available-for-sale securities
   
-
     
10
 
Other operating income
   
317
     
290
 
Total noninterest income
   
2,666
     
2,575
 
 
               
Noninterest expense:
               
Salaries and employee benefits
   
4,257
     
4,073
 
Occupancy expense
   
619
     
593
 
Equipment and furniture expense
   
262
     
283
 
Service and data processing fees
   
654
     
809
 
Computer software, supplies and support
   
207
     
183
 
Advertising and promotion
   
136
     
173
 
FDIC insurance premiums
   
192
     
158
 
Legal and professional fees
   
455
     
341
 
Other
   
781
     
806
 
Total noninterest expense
   
7,563
     
7,419
 
 
               
Income before provision for income taxes
   
4,899
     
4,933
 
Provision for income taxes
   
1,420
     
1,500
 
Net income
 
$
3,479
   
$
3,433
 
 
               
Basic earnings per share
 
$
0.83
   
$
0.82
 
Basic average shares outstanding
   
4,199,349
     
4,184,747
 
Diluted earnings per share
 
$
0.82
   
$
0.81
 
Diluted average shares outstanding
   
4,237,766
     
4,223,329
 
Dividends per share
 
$
0.35
   
$
0.35
 
 
See notes to consolidated financial statements
4

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended December 31, 2013 and 2012
(Unaudited)
(In thousands, except share and per share amounts)

 
 
2013
   
2012
 
Interest income:
 
   
 
Loans
 
$
4,626
   
$
4,590
 
Investment securities - taxable
   
167
     
185
 
Mortgage-backed securities
   
644
     
894
 
Investment securities - tax exempt
   
508
     
420
 
Interest bearing deposits and federal funds sold
   
6
     
18
 
Total interest income
   
5,951
     
6,107
 
 
               
Interest expense:
               
Interest on deposits
   
549
     
673
 
Interest on borrowings
   
33
     
64
 
Total interest expense
   
582
     
737
 
 
               
Net interest income
   
5,369
     
5,370
 
Provision for loan losses
   
508
     
541
 
Net interest income after provision for loan losses
   
4,861
     
4,829
 
 
               
Noninterest income:
               
Service charges on deposit accounts
   
655
     
693
 
Debit card fees
   
386
     
344
 
Investment services
   
87
     
79
 
E-commerce fees
   
25
     
22
 
Net gain on sale of available-for-sale securities
   
-
     
10
 
Other operating income
   
163
     
148
 
Total noninterest income
   
1,316
     
1,296
 
 
               
Noninterest expense:
               
Salaries and employee benefits
   
2,063
     
2,000
 
Occupancy expense
   
296
     
291
 
Equipment and furniture expense
   
149
     
132
 
Service and data processing fees
   
318
     
412
 
Computer software, supplies and support
   
93
     
90
 
Advertising and promotion
   
69
     
84
 
FDIC insurance premiums
   
103
     
83
 
Legal and professional fees
   
250
     
184
 
Other
   
410
     
470
 
Total noninterest expense
   
3,751
     
3,746
 
 
               
Income before provision for income taxes
   
2,426
     
2,379
 
Provision for income taxes
   
701
     
710
 
Net income
 
$
1,725
   
$
1,669
 
 
               
Basic earnings per share
 
$
0.41
   
$
0.40
 
Basic average shares outstanding
   
4,203,985
     
4,185,562
 
Diluted earnings per share
 
$
0.41
   
$
0.39
 
Diluted average shares outstanding
   
4,240,216
     
4,225,746
 
Dividends per share
 
$
0.175
   
$
0.175
 
 
See notes to consolidated financial statements
5

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Six Months Ended December 31, 2013 and 2012
(Unaudited)
(In thousands)
 
 
 
2013
   
2012
 
Net income
 
$
3,479
   
$
3,433
 
Other comprehensive loss:
               
Unrealized holding losses on available for sale securities, net of income taxes of ($434) and ($37), respectively
   
(688
)
   
(60
)
 
               
Reclassification adjustment for gain on sale of available-for-sale securities realized in net income, net of income taxes of $-- and ($4), respectively
   
-
     
(6
)
 
               
Accretion of unrealized loss on securities transferred to held to maturity, net of income taxes of $27 and $8, respectively(1)
   
43
     
12
 
 
               
Pension actuarial gain, net of income taxes of $-- and $9(2)
   
-
     
15
 
 
               
Total other comprehensive loss, net of taxes
   
(645
)
   
(39
)
 
               
Comprehensive income
 
$
2,834
   
$
3,394
 

(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 interest income.
(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost and are included in salaries and employee benefit expense within noninterest expense.

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended December 31, 2013 and 2012
(Unaudited)
(In thousands)
 
 
 
2013
   
2012
 
Net income
 
$
1,725
   
$
1,669
 
Other comprehensive loss:
               
Unrealized holding losses on available for sale securities, net of income taxes of ($77) and ($122), respectively
   
(123
)
   
(194
)
 
               
Reclassification adjustment for gain on sale of available-for-sale securities realized in net income, net of income taxes of $-- and ($4), respectively
           
(6
)
 
               
Accretion of unrealized loss on securities transferred to held to maturity, net of income taxes of $26 and $4, respectively(1)
   
41
     
6
 
 
               
Pension actuarial gain, net of income taxes of $-- and $5(2)
   
-
     
7
 
 
               
Total other comprehensive loss, net of taxes
   
(82
)
   
(187
)
 
               
Comprehensive income
 
$
1,643
   
$
1,482
 

(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 interest income.
(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost and are included in salaries and employee benefit expense within noninterest expense..
 
See notes to consolidated financial statements.
6

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Six Months Ended December 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, 2012
 
$
431
   
$
11,119
   
$
41,869
   
$
173
   
$
(928
)
 
$
52,664
 
Options exercised
           
15
                     
23
     
38
 
Dividends declared
                   
(1,469
)
                   
(1,469
)
Net income
                   
3,433
                     
3,433
 
Other comprehensive loss, net of taxes
                           
(39
)
           
(39
)
Balance at December 31, 2012
 
$
431
   
$
11,134
   
$
43,833
   
$
134
   
$
(905
)
 
$
54,627
 
 
 
Common
 Stock
 
Additional
Paid-In
Capital
 
Retained
 Earnings
 
Accumulated
 Other
Comprehensive
Loss
 
Treasury
Stock
 
Total
Shareholders'
 Equity
 
Balance at June 30, 2013
 
$
431
   
$
11,168
   
$
46,112
   
$
(750
)
 
$
(853
)
 
$
56,108
 
Options exercised
           
(13
)
                   
120
     
107
 
Tax benefit of stock based compensation
           
27
                             
27
 
Dividends declared
                   
(668
)
                   
(668
)
Net income
                   
3,479
                     
3,479
 
Other comprehensive loss, net of taxes
                           
(645
)
           
(645
)
Balance at December 31, 2013
 
$
431
   
$
11,182
   
$
48,923
   
$
(1,395
)
 
$
(733
)
 
$
58,408
 
 
See notes to consolidated financial statements.
7

Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2013 and 2012
(Unaudited)
(In thousands)
 
 
 
2013
   
2012
 
Cash flows from operating activities:
 
   
 
Net income
 
$
3,479
   
$
3,433
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
341
     
381
 
Deferred income tax benefit
   
(1,567
)
   
(879
)
Net amortization of premiums and discounts
   
969
     
668
 
Net amortization of deferred loan costs and fees
   
179
     
131
 
Provision for loan losses
   
821
     
985
 
Net gain on sale of available-for-sale securities
   
-
     
(10
)
(Gain) loss on sale of foreclosed real estate
   
(5
)
   
27
 
Excess tax benefit from share-based payment arrangements
   
(27
)
   
-
 
Net increase in accrued income taxes
   
2,909
     
1,985
 
Net increase in accrued interest receivable
   
(91
)
   
(59
)
Net (increase) decrease in prepaid and other assets
   
(309
)
   
256
 
Net decrease in other liabilities
   
(36
)
   
(1,462
)
Net cash provided by operating activities
   
6,663
     
5,456
 
 
               
Cash flows from investing activities:
               
Securities available for sale:
               
Proceeds from maturities
   
515
     
4,010
 
Proceeds from sale of securities
   
-
     
10
 
Purchases of securities
   
-
     
(6,208
)
Principal payments on securities
   
4,383
     
11,273
 
Securities held to maturity:
               
Proceeds from maturities
   
14,864
     
13,552
 
Purchases of securities
   
(11,107
)
   
(46,736
)
Principal payments on securities
   
4,528
     
11,834
 
Net (purchase) redemption of Federal Home Loan Bank Stock
   
(1,152
)
   
31
 
Purchase of long term certificate of deposit
   
-
     
(250
)
Net increase in loans receivable
   
(29,061
)
   
(22,052
)
Proceeds from sale of foreclosed real estate
   
105
     
233
 
Purchases of premises and equipment
   
(346
)
   
(87
)
Net cash used by investing activities
   
(17,271
)
   
(34,390
)
 
               
Cash flows from financing activities
               
Net decrease in short-term FHLB advances
   
21,100
     
300
 
Proceeds from long-term FHLB advances
   
4,500
     
-
 
Repayment of long-term FHLB advances
   
-
     
(1,000
)
Payment of cash dividends
   
(668
)
   
(1,469
)
Proceeds from issuance of stock options
   
107
     
38
 
Excess tax benefit from share-based payment arrangements
   
27
     
-
 
Net (decrease) increase in deposits
   
(9,004
)
   
33,753
 
Net cash provided by financing activities
   
16,062
     
31,622
 
 
               
Net increase in cash and cash equivalents
   
5,454
     
2,688
 
Cash and cash equivalents at beginning of period
   
6,222
     
7,742
 
Cash and cash equivalents at end of period
 
$
11,676
   
$
$10,430
 
 
               
Non-cash investing activities:
               
Foreclosed loans transferred to foreclosed real estate
 
$
404
   
$
140
 
Available for sale securities transferred at fair value to held to maturity
   
11,735
     
-
 
Cash paid during period for:
               
Interest
   
1,156
     
1,469
 
Income taxes
   
78
     
394
 
 
See notes to consolidated financial statements
8

Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
As of and for the Six and Three Months Ended December 31, 2013 and 2012

(1) Basis of Presentation

The accompanying consolidated statement of financial condition as of June 30, 2013 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 six and three months ended December 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, 2013, 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 six and three months ended December 31, 2013 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2014.   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 within the Hudson Valley Region of New York State.    The Bank of Greene County is primarily engaged in the business of attracting deposits from the general public in The Bank of Greene County’s market area, and investing such deposits, together with other sources of funds, in loans and investment securities.  Greene County Commercial Bank’s primary business is to attract deposits from and provide banking services to local municipalities.
9

(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 materially differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the assessment of other-than-temporary security impairment.

While management uses available information to recognize losses on loans, future additions to the allowance for loan losses (the “Allowance”) may be necessary, based on changes in economic conditions, asset quality or other factors.  In addition, various regulatory authorities, as an integral part of their examination process, periodically review the Allowance.  Such authorities may require the Company to recognize additions to the Allowance based on their judgments of information available to them at the time of their examination.

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

(4) Securities

Securities at December 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
 
$
12,687
   
$
185
   
$
-
   
$
12,872
 
State and political subdivisions
   
1,329
     
26
     
7
     
1,348
 
Mortgage-backed securities-residential
   
5,726
     
189
     
2
     
5,913
 
Mortgage-backed securities-multi-family
   
27,260
     
192
     
642
     
26,810
 
Asset-backed securities
   
16
     
-
     
1
     
15
 
Corporate debt securities
   
4,819
     
388
     
28
     
5,179
 
Total debt securities
   
51,837
     
980
     
680
     
52,137
 
Equity securities
   
62
     
102
     
-
     
164
 
Total securities available for sale
   
51,899
     
1,082
     
680
     
52,301
 
Securities held to maturity:
                               
U.S. government sponsored enterprises
   
3,000
     
8
     
152
     
2,856
 
State and political subdivisions
   
84,417
     
501
     
759
     
84,159
 
Mortgage-backed securities-residential
   
25,191
     
1,171
     
-
     
26,362
 
Mortgage-backed securities-multi-family
   
64,989
     
721
     
2,504
     
63,206
 
Other securities
   
1,061
     
-
     
48
     
1,013
 
Total securities held to maturity
   
178,658
     
2,401
     
3,463
     
177,596
 
Total securities
 
$
230,557
   
$
3,483
   
$
4,143
   
$
229,897
 

10

Securities at June 30, 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
 
$
12,729
   
$
260
   
$
-
   
$
12,989
 
State and political subdivisions
   
1,849
     
29
     
20
     
1,858
 
Mortgage-backed securities-residential
   
7,340
     
193
     
-
     
7,533
 
Mortgage-backed securities-multi-family
   
42,096
     
289
     
466
     
41,919
 
Asset-backed securities
   
17
     
-
     
1
     
16
 
Corporate debt securities
   
4,827
     
380
     
31
     
5,176
 
Total debt securities
   
68,858
     
1,151
     
518
     
69,491
 
Equity securities
   
68
     
85
     
-
     
153
 
Total securities available for sale
   
68,926
     
1,236
     
518
     
69,644
 
Securities held to maturity:
                               
U.S. treasury securities
   
5,500
     
17
     
-
     
5,517
 
U.S. government sponsored enterprises
   
2,999
     
16
     
113
     
2,902
 
State and political subdivisions
   
82,801
     
362
     
755
     
82,408
 
Mortgage-backed securities-residential
   
29,077
     
1,515
     
9
     
30,583
 
Mortgage-backed securities-multi-family
   
55,086
     
1,236
     
1,093
     
55,229
 
Other securities
   
1,056
     
-
     
35
     
1,021
 
Total securities held to maturity
   
176,519
     
3,146
     
2,005
     
177,660
 
Total securities
 
$
245,445
   
$
4,382
   
$
2,523
   
$
247,304
 

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.  The Company’s investments in mortgage-backed securities include pass-through securities and collateralized mortgage obligations issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA.  As of December 31, 2013 and June 30, 2013, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio.  The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured.  The obligations issued by school districts are supported by state aid.  Primarily, these investments are issued by municipalities within New York State.

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at December 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:
 
   
   
   
   
   
 
State and political subdivisions
 
$
801
   
$
7
   
$
-
   
$
-
   
$
801
   
$
7
 
Mortgage-backed securities-residential
   
568
     
2
     
-
     
-
     
568
     
2
 
Mortgage-backed securities-multi-family
   
21,475
     
577
     
971
     
65
     
22,446
     
642
 
Asset-backed securities
   
-
     
-
     
15
     
1
     
15
     
1
 
Corporate debt securities
   
758
     
28
     
-
     
-
     
758
     
28
 
Total securities available for sale
   
23,602
     
614
     
986
     
66
     
24,588
     
680
 
Securities held to maturity:
                                               
U.S. government sponsored enterprises
   
1,848
     
152
     
-
     
-
     
1,848
     
152
 
State and political subdivisions
   
17,278
     
661
     
1,943
     
98
     
19,221
     
759
 
Mortgage-backed securities-multi-family
   
25,799
     
1,439
     
16,827
     
1,065
     
42,626
     
2,504
 
Other securities
   
560
     
39
     
78
     
9
     
638
     
48
 
Total securities held to maturity
   
45,485
     
2,291
     
18,848
     
1,172
     
64,333
     
3,463
 
Total securities
 
$
69,087
   
$
2,905
   
$
19,834
   
$
1,238
   
$
88,921
   
$
4,143
 

11

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 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:
 
   
   
   
   
   
 
State and political subdivisions
 
$
791
   
$
20
   
$
-
   
$
-
   
$
791
   
$
20
 
Mortgage-backed securities-multi-family
   
33,298
     
466
     
-
     
-
     
33,298
     
466
 
Asset-backed securities
   
-
     
-
     
16
     
1
     
16
     
1
 
Corporate debt securities
   
758
     
31
     
-
     
-
     
758
     
31
 
Total securities available for sale
   
34,847
     
517
     
16
     
1
     
34,863
     
518
 
Securities held to maturity:
                                               
U.S. government sponsored enterprises
   
1,887
     
113
     
-
     
-
     
1,887
     
113
 
State and political subdivisions
   
28,597
     
745
     
1,597
     
10
     
30,194
     
755
 
Mortgage-backed securities-residential
   
1,228
     
9
     
-
     
-
     
1,228
     
9
 
Mortgage-backed securities-multi-family
   
33,044
     
1,093
     
-
     
-
     
33,044
     
1,093
 
Other securities
   
753
     
35
     
-
     
-
     
753
     
35
 
Total securities held to maturity
   
65,509
     
1,995
     
1,597
     
10
     
67,106
     
2,005
 
Total securities
 
$
100,356
   
$
2,512
   
$
1,613
   
$
11
   
$
101,969
   
$
2,523
 

At December 30, 2013, there were 97 securities which have been in a continuous unrealized loss position for less than 12 months and 22 securities with a continuous unrealized loss position of more than 12 months.  When the fair value of a held to maturity or available for sale security is less than its amortized cost basis, an assessment is made as to whether other-than-temporary impairment (“OTTI”) is present.  The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover.  The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issuer (and guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a rating agency, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

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

For debt securities, credit-related OTTI is recognized in income while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”).  Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis.  Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized.  For securities classified as held to maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods.  For equity securities, the entire amount of OTTI is recognized in income.  Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at December 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 six and three months ended December 31, 2013, $11.7 million of securities available-for-sale were transferred to held-to-maturity and included primarily mortgage-backed securities.  These securities were transferred at fair value which reflected a net unrealized loss of $805,000.  This unrealized loss is being accreted to other comprehensive income over the remaining average lives of these securities.

During the six and three months ended December 31, 2013, there were no sales of securities and no gains or losses were recognized.  During the six and three months ended December 31, 2012, a gain on sale of $10,000 was recognized on a security that was previously written off as other-than-temporarily impaired.  There was no other-than-temporary impairment loss recognized during the six and three months ended December 31, 2013 and 2012.
12

The estimated fair values of debt securities at December 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
 
$
4,272
   
$
4,317
 
After one year through five years
   
9,641
     
10,083
 
After five years through ten years
   
4,922
     
4,999
 
After ten years
   
-
     
-
 
Total available for sale debt securities
   
18,835
     
19,399
 
Mortgage-backed and asset-backed securities
   
33,002
     
32,738
 
Equity securities
   
62
     
164
 
Total available for sale securities
   
51,899
     
52,301
 
 
               
Held to maturity debt securities
               
Within one year
   
18,720
     
18,755
 
After one year through five years
   
28,948
     
29,257
 
After five years through ten years
   
27,896
     
27,493
 
After ten years
   
12,914
     
12,523
 
Total held to maturity debt securities
   
88,478
     
88,028
 
Mortgage-backed
   
90,180
     
89,568
 
Total held to maturity securities
   
178,658
     
177,596
 
Total securities
 
$
230,557
   
$
229,897
 

As of December 31, 2013 and June 30, 2013, respectively, securities with an aggregate fair value of $187.4 million and $200.9 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 December 31, 2013 and June 30, 2013, securities with an aggregate fair value of $5.2 million were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window.  Greene County Bancorp, Inc. did not participate in any securities lending programs during the three and six months ended December 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 six and three months ended December 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.
13

When The Bank of Greene County classifies problem assets as either Substandard or Doubtful, it generally establishes a specific valuation allowance or "loss reserve" in an amount deemed prudent by management.  General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular loans.  When The Bank of Greene County identifies problem loans as being impaired, it is required to evaluate whether the Bank will be able to collect all amounts due either through repayments or the liquidation of the underlying collateral.  If it is determined that impairment exists, the Bank is required either to establish a specific allowance for losses equal to the amount of impairment of the assets, or to charge-off such amount.  Regulatory agencies may require The Bank of Greene County to recognize additions to the allowance based on their judgment about information available to them at the time of their examination.  The Bank of Greene County 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 % 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%, 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.
14

Loan balances by internal credit quality indicator as of December 31, 2013 are shown below.
 
(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential mortgage
 
$
220,987
   
$
581
   
$
100
   
$
4,165
   
$
225,833
 
Nonresidential mortgage
   
97,656
     
132
     
3,257
     
1,782
     
102,827
 
Residential construction and land
   
3,406
     
-
     
-
     
-
     
3,406
 
Commercial construction
   
3,500
     
-
     
-
     
-
     
3,500
 
Multi-family
   
4,436
     
-
     
-
     
258
     
4,694
 
Home equity
   
20,288
     
56
     
-
     
270
     
20,614
 
Consumer installment
   
4,225
     
19
     
-
     
23
     
4,267
 
Commercial loans
   
26,984
     
-
     
605
     
708
     
28,297
 
Total gross loans
 
$
381,482
   
$
788
   
$
3,962
   
$
7,206
   
$
393,438
 

Loan balances by internal credit quality indicator as of June 30, 2013 are shown below.
 
(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential mortgage
 
$
207,606
   
$
294
   
$
302
   
$
4,324
   
$
212,526
 
Nonresidential mortgage
   
87,509
     
-
     
2,197
     
1,776
     
91,482
 
Residential construction and land
   
2,691
     
-
     
-
     
-
     
2,691
 
Commercial construction
   
2,466
     
-
     
-
     
1,057
     
3,523
 
Multi-family
   
4,785
     
-
     
-
     
726
     
5,511
 
Home equity
   
20,099
     
221
     
23
     
28
     
20,371
 
Consumer installment
   
4,073
     
5
     
-
     
-
     
4,078
 
Commercial loans
   
24,454
     
-
     
516
     
687
     
25,657
 
Total gross loans
 
$
353,683
   
$
520
   
$
3,038
   
$
8,598
   
$
365,839
 

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

Nonaccrual Loans

Management places loans on nonaccrual status once the loans have become 90 days or more delinquent or sooner if there is a significant reason for management to believe the collectability is questionable and, therefore, interest on the loan will no longer be recognized on an accrual basis.  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 December 31, 2013 and June 30, 2013.  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 $6.0 million at December 31, 2013 of which $3.8 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 December 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 $346,000 of loans which were making payments pursuant to forbearance agreements.  Under the forbearance agreements, the customers have made arrangements with the Bank to bring the loans current over a specified period of time (resulting in an insignificant delay in repayment).  During this term of the forbearance agreement, the Bank has agreed not to continue foreclosure proceedings.  Loans on nonaccrual status totaled $6.3 million at June 30, 2013 of which $4.9 million were in the process of foreclosure.  Included in nonaccrual loans, were $781,000 of loans which were less than 90 days past due at June 30, 2013, but have a recent history of delinquency greater than 90 days past due.
15

The following table sets forth information regarding delinquent and/or nonaccrual loans as of December 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
 
$
1,061
   
$
452
   
$
3,084
   
$
4,597
   
$
221,236
   
$
225,833
   
$
3,427
 
Nonresidential mortgage
   
1,017
     
570
     
1,065
     
2,652
     
100,175
     
102,827
     
1,945
 
Residential construction and land
   
-
     
-
     
-
     
-
     
3,406
     
3,406
     
-
 
Commercial construction
   
-
     
-
     
-
     
-
     
3,500
     
3,500
     
-
 
Multi-family
   
142
     
-
     
-
     
142
     
4,552
     
4,694
     
-
 
Home equity
   
144
     
80
     
221
     
445
     
20,169
     
20,614
     
270
 
Consumer installment
   
46
     
19
     
22
     
87
     
4,180
     
4,267
     
23
 
Commercial loans
   
500
     
-
     
206
     
706
     
27,591
     
28,297
     
314
 
Total gross loans
 
$
2,910
   
$
1,121
   
$
4,598
   
$
8,629
   
$
384,809
   
$
393,438
   
$
5,979
 

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 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
 
$
1,255
   
$
165
   
$
3,875
   
$
5,295
   
$
207,231
   
$
212,526
   
$
3,599
 
Nonresidential mortgage
   
215
     
978
     
1,655
     
2,848
     
88,634
     
91,482
     
2,018
 
Residential construction and land
   
38
     
-
     
-
     
38
     
2,653
     
2,691
     
-
 
Commercial construction
   
-
     
-
     
-
     
-
     
3,523
     
3,523
     
-
 
Multi-family
   
144
     
-
     
463
     
607
     
4,904
     
5,511
     
463
 
Home equity
   
269
     
221
     
28
     
518
     
19,853
     
20,371
     
51
 
Consumer installment
   
34
     
5
     
-
     
39
     
4,039
     
4,078
     
-
 
Commercial loans
   
530
     
78
     
82
     
690
     
24,967
     
25,657
     
195
 
Total gross loans
 
$
2,485
   
$
1,447
   
$
6,103
   
$
10,035
   
$
355,804
   
$
365,839
   
$
6,326
 

The Bank of Greene County had accruing loans delinquent more than 90 days as of December 31, 2013 totaling $273,000 and had accruing loans delinquent more than 90 days as of June 30, 2013 totaling $559,000.    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 loans 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 three and six months ended December 31:

 
 
For the six months
ended December 31,
   
For the three months
ended December 31
 
(In thousands)
 
2013
   
2012
   
2013
   
2012
 
Interest income that would have been recorded if loans had been performing in accordance with original terms
 
$
208
   
$
275
   
$
83
   
$
125
 
Interest income that was recorded on nonaccrual loans
   
64
     
126
     
35
     
72
 

16

Impaired Loan Analysis

The Company identifies impaired loans and measures the impairment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.  The Bank of Greene County considers residential mortgages, home equity loans, smaller commercial 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 and commercial loans are viewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan 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.  Loans that have been modified as a troubled debt restructuring are included in impaired loans.  The measurement of impairment is generally based on the discounted cash flows based on the original rate of the loan before the restructuring, unless it is determined that the restructured loan is collateral dependent.  If the restructured loan is deemed to be collateral dependent, impairment is based on the fair value of the underlying collateral.

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

 
 
As of December 31, 2013
   
For the six months ended
 December 31, 2013
   
For the three months ended December 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
 
$
259
   
$
259
   
$
-
   
$
399
   
$
1
   
$
207
   
$
1
 
Nonresidential mortgage
   
539
     
633
     
-
     
596
     
17
     
539
     
8
 
 
   
798
     
892
     
-
     
995
     
18
     
746
     
9
 
With an allowance recorded:
                                         
Residential mortgage
   
2,865
     
2,884
     
574
     
3,100
     
30
     
3,065
     
15
 
Nonresidential mortgage
   
2,755
     
2,842
     
403
     
1,992
     
20
     
2,423
     
12
 
Commercial construction
   
-
     
-
     
-
     
701
     
17
     
350
     
-
 
Multi-family
   
-
     
-
     
-
     
386
     
-
     
308
     
-
 
Home equity
   
200
     
200
     
86
     
100
     
-
     
200
     
-
 
Commercial loans
   
606
     
606
     
3
     
607
     
20
     
607
     
10
 
 
   
6,426
     
6,532
     
1,066
     
6,886
     
87
     
6,953
     
37
 
Total impaired:
                                                       
Residential mortgage
   
3,124
     
3,143
     
574
     
3,499
     
31
     
3,272
     
16
 
Nonresidential mortgage
   
3,294
     
3,475
     
403
     
2,588
     
37
     
2,962
     
20
 
Commercial construction
   
-
     
-
     
-
     
701
     
17
     
350
     
-
 
Multi-family
   
-
     
-
     
-
     
386
     
-
     
308
     
-
 
Home equity
   
200
     
200
     
86
     
100
     
-
     
200
     
-
 
Commercial loans
   
606
     
606
     
3
     
607
     
20
     
607
     
10
 
 
 
$
7,224
   
$
7,424
   
$
1,066
   
$
7,881
   
$
105
   
$
7,699
   
$
46
 

17

 
 
As of June 30, 2013
   
For the six months ended
December 31, 2012
   
For the three months ended
December 31, 2012
 
(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
 
$
852
   
$
852
   
$
-
   
$
78
   
$
11
   
$
156
   
$
11
 
Nonresidential mortgage
   
783
     
783
     
-
     
1,267
     
47
     
1,264
     
26
 
Commercial loans
   
-
     
-
     
-
     
124
     
10
     
122
     
10
 
 
   
1,635
     
1,635
     
-
     
1,469
     
68
     
1,542
     
47
 
With an allowance recorded:
                                         
Residential mortgage
   
2,582
     
2,632
     
520
     
2,378
     
38
     
2,894
     
23
 
Nonresidential mortgage
   
1,339
     
1,339
     
305
     
1,027
     
8
     
1,088
     
2
 
Commercial construction
   
1,057
     
1,057
     
331
     
1,070
     
28
     
1,106
     
11
 
Multi-family
   
463
     
463
     
16
     
885
     
16
     
889
     
8
 
Home equity
   
-
     
-
     
-
     
386
     
4
     
386
     
4
 
Commercial loans
   
610
     
610
     
7
     
573
     
20
     
572
     
10
 
 
   
6,051
     
6,101
     
1,179
     
6,319
     
114
     
6,935
     
58
 
Total impaired:
                                                       
Residential mortgage
   
3,434
     
3,484
     
520
     
2,456
     
49
     
3,050
     
34
 
Nonresidential mortgage
   
2,122
     
2,122
     
305
     
2,294
     
55
     
2,352
     
28
 
Commercial construction
   
1,057
     
1,057
     
331
     
1,070
     
28
     
1,106
     
11
 
Multi-family
   
463
     
463
     
16
     
885
     
16
     
889
     
8
 
Home equity
   
-
     
-
     
-
     
386
     
4
     
386
     
4
 
Commercial loans
   
610
     
610
     
7
     
697
     
30
     
694
     
20
 
 
 
$
7,686
   
$
7,736
   
$
1,179
   
$
7,788
   
$
182
   
$
8,477
   
$
105
 

The table below details loans that have been modified as a troubled debt restructuring during the six and three month periods ended December 31, 2013 and 2012.

(Dollars in thousands)
 
Number of Contracts
   
Pre-Modification Outstanding Recorded Investment
   
Post-Modification Outstanding Recorded Investment
   
Current Outstanding Recorded Investment
 
Six months ended December 31, 2013
 
   
   
   
 
Residential mortgage
   
2
   
$
367