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EX-32.2 - EXHIBIT 32.2 - GREENE COUNTY BANCORP INCex32_2.htm
EX-32.1 - EXHIBIT 32.1 - GREENE COUNTY BANCORP INCex32_1.htm
EX-31.2 - EXHIBIT 31.2 - GREENE COUNTY BANCORP INCex31_2.htm
EX-31.1 - EXHIBIT 31.1 - GREENE COUNTY BANCORP INCex31_1.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2018

OR

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


GREENE COUNTY BANCORP, INC.
(Exact name of registrant as specified in its charter)

Commission file number  0-25165

United States
 
14-1809721
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer  Identification Number)

302 Main Street, Catskill, New York
 
12414
(Address of principal executive office)
 
(Zip code)

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

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

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

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

Large accelerated filer   ☐
Accelerated filer ☐
Non-accelerated filer     ☐
Smaller reporting company ☒
Emerging Growth Company ☐
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES ☐   NO ☒

As of May 14, 2018, the registrant had 8,526,614 shares of common stock outstanding at $ 0.10 par value per share.
 


 
GREENE COUNTY BANCORP, INC.
 
     
 
INDEX
 
     
PART I.
FINANCIAL INFORMATION
 
   
Page
Item 1.
Financial Statements (unaudited)
 
 
3
 
4
 
5
 
6
 
7
 
8-29
   
Item 2.
30-44
   
Item 3.
44
   
Item 4.
44
   
PART II.
OTHER INFORMATION
   
Item 1.
45
   
Item 1A.
45
   
Item 2.
45
   
Item 3.
45
   
Item 4.
45
   
Item 5.
45
   
Item 6.
45
   
 
46
 
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
At March 31, 2018 and June 30, 2017
(Unaudited)
(In thousands, except share and per share amounts)

ASSETS
 
March 31, 2018
   
June 30, 2017
 
Total cash and cash equivalents
 
$
74,604
   
$
16,277
 
                 
Long term certificate of deposit
   
2,385
     
2,145
 
Securities available-for-sale, at fair value
   
117,627
     
91,483
 
Securities held-to-maturity, at amortized cost (fair value $277,799 at March 31, 2018; $228,452 at June 30, 2017)
   
277,432
     
223,830
 
Federal Home Loan Bank stock, at cost
   
1,485
     
2,131
 
                 
Loans
   
689,370
     
634,331
 
Allowance for loan losses
   
(11,622
)
   
(11,022
)
Unearned origination fees and costs, net
   
747
     
878
 
Net loans receivable
   
678,495
     
624,187
 
                 
Premises and equipment
   
13,361
     
13,615
 
Accrued interest receivable
   
5,079
     
4,033
 
Foreclosed real estate
   
208
     
799
 
Prepaid expenses and other assets
   
3,112
     
3,791
 
Total assets
 
$
1,173,788
   
$
982,291
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Noninterest-bearing deposits
 
$
100,729
   
$
95,929
 
Interest-bearing deposits
   
951,518
     
763,606
 
Total deposits
   
1,052,247
     
859,535
 
                 
Borrowings from Federal Home Loan Bank, short-term
   
-
     
6,900
 
Borrowings from Federal Home Loan Bank, long-term
   
18,150
     
22,650
 
Accrued expenses and other liabilities
   
10,724
     
9,685
 
Total liabilities
   
1,081,121
     
898,770
 
                 
SHAREHOLDERS' EQUITY
               
Preferred stock, Authorized - 1,000,000 shares; Issued - None
   
-
     
-
 
Common stock, par value $.10 per share; Authorized - 12,000,000 shares; Issued – 8,611,340 shares; Outstanding - 8,526,614 shares at March 31, 2018, and 8,502,614 shares at June 30, 2017
   
861
     
861
 
Additional paid-in capital
   
11,050
     
10,990
 
Retained earnings
   
82,975
     
73,072
 
Accumulated other comprehensive loss
   
(1,899
)
   
(992
)
Treasury stock, at cost 84,726 shares at March 31, 2018, and 108,726 shares at June 30, 2017
   
(320
)
   
(410
)
Total shareholders’ equity
   
92,667
     
83,521
 
Total liabilities and shareholders’ equity
 
$
1,173,788
   
$
982,291
 
 
See notes to consolidated financial statements
 
3

Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three and Nine Months Ended March 31, 2018 and 2017
(Unaudited)
(In thousands, except share and per share amounts)

   
For the three months ended
March 31,
   
For the nine months ended
March 31,
 
   
2018
   
2017
   
2018
   
2017
 
Interest income:
                       
Loans
 
$
7,454
   
$
6,598
   
$
21,800
   
$
19,033
 
Investment securities - taxable
   
185
     
156
     
513
     
452
 
Mortgage-backed securities
   
929
     
751
     
2,537
     
2,634
 
Investment securities - tax exempt
   
1,147
     
898
     
3,275
     
2,574
 
Interest-bearing deposits and federal funds sold
   
161
     
8
     
260
     
16
 
Total interest income
   
9,876
     
8,411
     
28,385
     
24,709
 
                                 
Interest expense:
                               
Interest on deposits
   
939
     
657
     
2,615
     
1,911
 
Interest on borrowings
   
77
     
127
     
280
     
353
 
Total interest expense
   
1,016
     
784
     
2,895
     
2,264
 
                                 
Net interest income
   
8,860
     
7,627
     
25,490
     
22,445
 
Provision for loan losses
   
345
     
343
     
1,044
     
1,472
 
Net interest income after provision for loan losses
   
8,515
     
7,284
     
24,446
     
20,973
 
                                 
Noninterest income:
                               
Service charges on deposit accounts
   
932
     
746
     
2,717
     
2,339
 
Debit card fees
   
566
     
490
     
1,723
     
1,491
 
Investment services
   
138
     
100
     
332
     
237
 
E-commerce fees
   
31
     
31
     
104
     
94
 
Other operating income
   
192
     
215
     
610
     
582
 
Total noninterest income
   
1,859
     
1,582
     
5,486
     
4,743
 
                                 
Noninterest expense:
                               
Salaries and employee benefits
   
3,485
     
2,992
     
9,522
     
8,447
 
Occupancy expense
   
448
     
442
     
1,159
     
1,161
 
Equipment and furniture expense
   
159
     
104
     
430
     
356
 
Service and data processing fees
   
539
     
508
     
1,566
     
1,455
 
Computer software, supplies and support
   
175
     
162
     
480
     
456
 
Advertising and promotion
   
74
     
79
     
241
     
287
 
FDIC insurance premiums
   
115
     
86
     
301
     
293
 
Legal and professional fees
   
223
     
207
     
683
     
625
 
Other
   
564
     
443
     
1,605
     
1,485
 
Total noninterest expense
   
5,782
     
5,023
     
15,987
     
14,565
 
                                 
Income before provision for income taxes
   
4,592
     
3,843
     
13,945
     
11,151
 
Provision for income taxes
   
915
     
946
     
3,156
     
2,821
 
Net income
 
$
3,677
   
$
2,897
   
$
10,789
   
$
8,330
 
                                 
Basic earnings per share
 
$
0.43
   
$
0.34
   
$
1.27
   
$
0.98
 
Basic average shares outstanding
   
8,517,614
     
8,502,614
     
8,508,103
     
8,492,501
 
Diluted earnings per share
 
$
0.43
   
$
0.34
   
$
1.26
   
$
0.98
 
Diluted average shares outstanding
   
8,536,407
     
8,519,376
     
8,533,850
     
8,509,752
 
Dividends per share
 
$
0.0975
   
$
0.0950
   
$
0.2925
   
$
0.2850
 
 
See notes to consolidated financial statements
 
4

Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended March 31, 2018 and 2017
(Unaudited)
(In thousands)

   
For the three months ended
March 31,
   
For the nine months ended
March 31,
 
   
2018
   
2017
   
2018
   
2017
 
Net Income
 
$
3,677
   
$
2,897
   
$
10,789
   
$
8,330
 
Other comprehensive (loss) income:
                               
Unrealized holding (losses) gains on available-for-sale securities, net of income tax (benefit) expense of ($58) and $27, for the three months, and  ($316) and ($503), for the nine months ended March 31, 2018 and 2017 respectively
   
(384
)
   
41
     
(648
)
   
(793
)
                                 
Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $- and $- for the three months, and $- and $1 for the nine months ended March 31, 2018 and 2017, respectively
   
-
     
1
     
-
     
2
 
                                 
Total other comprehensive (loss) income, net of taxes
   
(384
)
   
42
     
(648
)
   
(791
)
                                 
Comprehensive income
 
$
3,293
   
$
2,939
   
$
10,141
   
$
7,539
 

See notes to consolidated financial statements.
 
5

Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Nine Months Ended March 31, 2018 and 2017
(Unaudited)
(In thousands)

   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at June 30, 2016
 
$
861
   
$
10,872
   
$
63,805
   
$
(725
)
 
$
(512
)
 
$
74,301
 
Options exercised
           
67
                     
102
     
169
 
Tax benefit of stock based compensation
           
51
                             
51
 
Dividends declared
                   
(1,112
)
                   
(1,112
)
Net income
                   
8,330
                     
8,330
 
Other comprehensive loss, net of taxes
                           
(791
)
           
(791
)
Balance at March 31, 2017
 
$
861
   
$
10,990
   
$
71,023
   
$
(1,516
)
 
$
(410
)
 
$
80,948
 
 
   
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at June 30, 2017
 
$
861
   
$
10,990
   
$
73,072
   
$
(992
)
 
$
(410
)
 
$
83,521
 
Options exercised
           
60
                     
90
     
150
 
Dividends declared
                   
(1,145
)
                   
(1,145
)
Net income
                   
10,789
                     
10,789
 
Reclassification adjustment1
                   
259
     
(259
)
           
-
 
Other comprehensive loss, net of taxes
                           
(648
)
           
(648
)
Balance at March 31, 2018
 
$
861
   
$
11,050
   
$
82,975
   
$
(1,899
)
 
$
(320
)
 
$
92,667
 
 
(1)
Adoption of Accounting Standard Update 2018-02, reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects resulting from the newly enacted Federal corporate income tax rate from 34% to 21%.

See notes to consolidated financial statements.
 
6

Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2018 and 2017
(Unaudited)
(In thousands)
   
2018
   
2017
 
Cash flows from operating activities:
           
Net Income
 
$
10,789
   
$
8,330
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation
   
478
     
479
 
Deferred income tax benefit
   
(1,349
)
   
(962
)
Net amortization of premiums and discounts
   
519
     
614
 
Net amortization of deferred loan costs and fees
   
380
     
358
 
Provision for loan losses
   
1,044
     
1,472
 
(Gains) losses on sale of foreclosed real estate
   
(33
)
   
73
 
Excess tax benefit from share based compensation
   
-
     
(51
)
Net increase in accrued income taxes
   
3,125
     
753
 
Net increase in accrued interest receivable
   
(1,046
)
   
(433
)
Net increase in prepaid and other assets
   
(782
)
   
(156
)
Net increase (decrease) in other liabilities
   
1,039
     
(185
)
Net cash provided by operating activities
   
14,164
     
10,292
 
                 
Cash flows from investing activities:
               
Securities available-for-sale:
               
Proceeds from maturities
   
42,817
     
55,945
 
Purchases of securities
   
(72,299
)
   
(40,243
)
Principal payments on securities
   
2,335
     
6,034
 
Securities held-to-maturity:
               
Proceeds from maturities
   
10,021
     
7,358
 
Purchases of securities
   
(73,951
)
   
(24,835
)
Principal payments on securities
   
9,849
     
7,551
 
Net redemption of Federal Home Loan Bank Stock
   
646
     
1,069
 
Purchases of long term certificates of deposit
   
(240
)
   
-
 
Maturity of long term certificate of deposit
   
-
     
65
 
Net increase in loans receivable
   
(55,980
)
   
(85,840
)
Proceeds from sale of foreclosed real estate
   
872
     
212
 
Purchases of premises and equipment
   
(224
)
   
(76
)
Net cash used by investing activities
   
(136,154
)
   
(72,760
)
                 
Cash flows from financing activities
               
Net decrease in short-term advances
   
(6,900
)
   
(25,600
)
Proceeds from long-term FHLB advances
   
-
     
4,850
 
Repayment of long-term FHLB advances
   
(4,500
)
   
(2,500
)
Payment of cash dividends
   
(1,145
)
   
(1,112
)
Proceeds from issuance of stock options
   
150
     
169
 
Excess tax benefit from share based compensation
   
-
     
51
 
Net increase in deposits
   
192,712
     
106,302
 
Net cash provided by financing activities
   
180,317
     
82,160
 
                 
Net increase  in cash and cash equivalents
   
58,327
     
19,692
 
Cash and cash equivalents at beginning of period
   
16,277
     
15,895
 
Cash and cash equivalents at end of period
 
$
74,604
   
$
35,587
 
                 
Non-cash investing activities:
               
Foreclosed loans transferred to foreclosed real estate
 
$
240
   
$
123
 
Cash paid during period for:
               
Interest
 
$
2,902
   
$
2,253
 
Income taxes
 
$
1,500
   
$
3,030
 
 
See notes to consolidated financial statements
 
7

Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
At and for the Three and Nine Months Ended March 31, 2018 and 2017

(1)
Basis of Presentation

Within the accompanying unaudited consolidated statement of financial condition, and related notes to the consolidated financial statements, June 30, 2017 data was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, The Bank of Greene County (the “Bank”) and Greene Risk Management, Inc., and the Bank’s wholly owned subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd.  The consolidated financial statements at and for the three and nine months ended March 31, 2018 and 2017 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 fiscal year ended June 30, 2017, 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, 2018 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2018.   These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.

CRITICAL ACCOUNTING POLICIES

Greene County Bancorp, Inc.’s critical accounting policies relate to the allowance for loan losses and the evaluation of securities for other-than-temporary impairment.  The allowance for loan losses is based on management’s estimation of an amount that is intended to absorb losses in the existing portfolio.  The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, specific impaired loans and current economic conditions.  Such evaluation, which includes a review of all loans for which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for the allowance of loan losses.  However, this evaluation involves a high degree of complexity and requires management to make subjective judgments that often require assumptions or estimates about highly uncertain matters.  This critical accounting policy and its application are periodically reviewed with the Audit Committee and the Board of Directors. There have been no significant changes in the application of this critical accounting policy during the three and nine months ended March 31, 2018.

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

(2)
Nature of Operations

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its subsidiaries, The Bank of Greene County and Greene Risk Management, Inc.  The Bank of Greene County has 14 full-service offices, an operations center and lending 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 Risk Management, Inc. is a pooled captive insurance company, which provides additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.  The Bank of Greene County also owns and operates two subsidiaries, Greene County Commercial Bank and Greene Property Holdings, Ltd. Greene County Commercial Bank’s primary business is to attract deposits from and provide banking services to local municipalities. Greene Property Holdings, Ltd.is a real estate investment trust, which holds mortgages and notes which were originated through and serviced by The Bank of Greene County.
 
8

(3)
Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could materially differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the assessment of other-than-temporary security impairment.

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

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

(4)
Securities

Securities at March 31, 2018 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
 
$
5,548
   
$
42
   
$
20
   
$
5,570
 
State and political subdivisions
   
87,351
     
114
     
3
     
87,462
 
Mortgage-backed securities-residential
   
3,810
     
21
     
94
     
3,737
 
Mortgage-backed securities-multi-family
   
19,055
     
122
     
247
     
18,930
 
Corporate debt securities
   
1,773
     
-
     
51
     
1,722
 
Total debt securities
   
117,537
     
299
     
415
     
117,421
 
Equity securities
   
62
     
144
     
-
     
206
 
Total securities available-for-sale
   
117,599
     
443
     
415
     
117,627
 
Securities held-to-maturity:
                               
U.S. government sponsored enterprises
   
9,242
     
-
     
218
     
9,024
 
State and political subdivisions
   
134,697
     
2,807
     
576
     
136,928
 
Mortgage-backed securities-residential
   
6,938
     
92
     
4
     
7,026
 
Mortgage-backed securities-multi-family
   
123,204
     
228
     
1,977
     
121,455
 
Corporate debt securities
   
1,000
     
9
     
-
     
1,009
 
Other securities
   
2,351
     
17
     
11
     
2,357
 
Total securities held-to-maturity
   
277,432
     
3,153
     
2,786
     
277,799
 
Total securities
 
$
395,031
   
$
3,596
   
$
3,201
   
$
395,426
 
 
9

Securities at June 30, 2017 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
 
$
4,566
   
$
151
   
$
-
   
$
4,717
 
State and political subdivisions
   
57,885
     
227
     
-
     
58,112
 
Mortgage-backed securities-residential
   
4,868
     
72
     
27
     
4,913
 
Mortgage-backed securities-multi-family
   
20,344
     
483
     
62
     
20,765
 
Asset-backed securities
   
1
     
-
     
-
     
1
 
Corporate debt securities
   
2,765
     
29
     
3
     
2,791
 
Total debt securities
   
90,429
     
962
     
92
     
91,299
 
Equity securities
   
62
     
122
     
-
     
184
 
Total securities available-for-sale
   
90,491
     
1,084
     
92
     
91,483
 
Securities held-to-maturity:
                               
U.S. government sponsored enterprises
   
6,000
     
-
     
53
     
5,947
 
State and political subdivisions
   
115,805
     
3,434
     
95
     
119,144
 
Mortgage-backed securities-residential
   
10,798
     
274
     
2
     
11,070
 
Mortgage-backed securities-multi-family
   
88,702
     
1,259
     
199
     
89,762
 
Corporate debt securities
   
1,000
     
-
     
5
     
995
 
Other securities
   
1,525
     
21
     
12
     
1,534
 
Total securities held-to-maturity
   
223,830
     
4,988
     
366
     
228,452
 
Total securities
 
$
314,321
   
$
6,072
   
$
458
   
$
319,935
 

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 issued by these entities.  At March 31, 2018, all mortgage-backed securities including collateralized mortgage obligations were securities of government sponsored enterprises, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio.  The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured.  The obligations issued by school districts are supported by state aid.  Primarily, these investments are issued by municipalities within New York State.

The 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, 2018.
 
   
Less Than 12 Months
   
More Than 12 Months
   
Total
 
(In thousands, except number of securities)
 
Fair
Value
   
Unrealized
Losses
   
Number of
Securities
   
Fair
Value
   
Unrealized
Losses
   
Number of
Securities
   
Fair
Value
   
Unrealized
Losses
   
Number of
Securities
 
Securities available-for-sale:
                                                     
U.S. government sponsored enterprises
 
$
978
   
$
20
     
1
   
$
-
   
$
-
     
-
   
$
978
   
$
20
     
1
 
State and political subdivisions
   
5,656
     
3
     
10
     
-
     
-
     
-
     
5,656
     
3
     
10
 
Mortgage-backed securities-residential
   
2,636
     
94
     
4
     
-
     
-
     
-
     
2,636
     
94
     
4
 
Mortgage-backed securities-multi-family
   
9,790
     
247
     
6
     
-
     
-
     
-
     
9,790
     
247
     
6
 
Corporate debt securities
   
1,467
     
49
     
6
     
255
     
2
     
1
     
1,722
     
51
     
7
 
Total securities available-for-sale
   
20,527
     
413
     
27
     
255
     
2
     
1
     
20,782
     
415
     
28
 
Securities held-to-maturity:
                                                                       
U.S. government sponsored enterprises
   
7,071
     
171
     
1
     
1,953
     
47
     
1
     
9,024
     
218
     
2
 
State and political subdivisions
   
34,843
     
491
     
165
     
3,723
     
85
     
37
     
38,566
     
576
     
202
 
Mortgage-backed securities-residential
   
1,033
     
4
     
1
     
-
     
-
     
-
     
1,033
     
4
     
1
 
Mortgage-backed securities-multi-family
   
84,677
     
1,923
     
43
     
2,464
     
54
     
3
     
87,141
     
1,977
     
46
 
Other securities
   
914
     
11
     
4
     
-
     
-
     
-
     
914
     
11
     
4
 
Total securities held-to-maturity
   
128,538
     
2,600
     
214
     
8,140
     
186
     
41
     
136,678
     
2,786
     
255
 
Total securities
 
$
149,065
   
$
3,013
     
241
   
$
8,395
   
$
188
     
42
   
$
157,460
   
$
3,201
     
283
 
 
10

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2017.

   
Less Than 12 Months
   
More Than 12 Months
   
Total
 
(In thousands, except number of securities)
 
Fair
Value
   
Unrealized
Losses
   
Number of
Securities
   
Fair
Value
   
Unrealized
Losses
   
Number of
Securities
   
Fair
Value
   
Unrealized
Losses
   
Number of
Securities
 
Securities available-for-sale:
                                                     
Mortgage-backed securities-residential
 
$
1,164
   
$
27
     
1
   
$
-
   
$
-
     
-
   
$
1,164
   
$
27
     
1
 
Mortgage-backed securities-multi-family
   
6,488
     
62
     
4
     
-
     
-
     
-
     
6,488
     
62
     
4
 
Corporate debt securities
   
760
     
3
     
2
     
-
     
-
     
-
     
760
     
3
     
2
 
Total securities available for sale
   
8,412
     
92
     
7
     
-
     
-
     
-
     
8,412
     
92
     
7
 
Securities held to maturity:
                                                                       
U.S. government sponsored enterprises
   
5,947
     
53
     
2
     
-
     
-
     
-
     
5,947
     
53
     
2
 
State and political subdivisions
   
8,976
     
76
     
64
     
514
     
19
     
6
     
9,490
     
95
     
70
 
Mortgage-backed securities-residential
   
1,864
     
2
     
1
     
-
     
-
     
-
     
1,864
     
2
     
1
 
Mortgage-backed securities-multi-family
   
23,823
     
199
     
15
     
-
     
-
     
-
     
23,823
     
199
     
15
 
Corporate debt securities
   
995
     
5
     
1
     
-
     
-
     
-
     
995
     
5
     
1
 
Other securities
   
467
     
11
     
1
     
74
     
1
     
1
     
541
     
12
     
2
 
Total securities held to maturity
   
42,072
     
346
     
84
     
588
     
20
     
7
     
42,660
     
366
     
91
 
Total securities
 
$
50,484
   
$
438
     
91
   
$
588
   
$
20
     
7
   
$
51,072
   
$
458
     
98
 

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

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

For debt securities, credit-related OTTI is recognized in earnings while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“OCI”).  Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis.  Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized.  For securities classified as held-to-maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods.  For equity securities, the entire amount of OTTI is recognized in earnings.  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, 2018.  Management believes that the reasons for the decline in fair value are due to interest rates, widening credit spreads and market illiquidity at the reporting date.  Also, a decline in the fair value of tax-exempt securities is due to a decrease in the maximum Federal income tax rate from 35% to 21% effective January 1, 2018, resulting in a lower yield to be realized on these securities on a fully-taxable equivalent basis.

There were no transfers of securities available-for-sale to held-to-maturity during the three and nine months ended March 31, 2018 or 2017. During the three and nine months ended March 31, 2018 and 2017, there were no sales of securities and no gains or losses were recognized.  There was no other-than-temporary impairment loss recognized during the three and nine months ended March 31, 2018 and 2017.
 
11

The estimated fair values of debt securities at March 31, 2018, 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
 
$
87,351
   
$
87,462
 
After one year through five years
   
4,808
     
4,847
 
After five years through ten years
   
2,513
     
2,445
 
After ten years
   
-
     
-
 
Total available-for-sale debt securities
   
94,672
     
94,754
 
Mortgage-backed and asset-backed securities
   
22,865
     
22,667
 
Equity securities
   
62
     
206
 
Total available-for-sale securities
   
117,599
     
117,627
 
                 
Held-to-maturity debt securities
               
Within one year
   
22,243
     
22,383
 
After one year through five years
   
61,151
     
61,744
 
After five years through ten years
   
46,536
     
46,882
 
After ten years
   
17,360
     
18,309
 
Total held-to-maturity debt securities
   
147,290
     
149,318
 
Mortgage-backed
   
130,142
     
128,481
 
Total held-to-maturity securities
   
277,432
     
277,799
 
Total securities
 
$
395,031
   
$
395,426
 

At March 31, 2018 and June 30, 2017, respectively, securities with an aggregate fair value of $381.8 million and $305.7 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank.  At March 31, 2018 and June 30, 2017, securities with an aggregate fair value of $1.7 million and $2.8 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window.  Greene County Bancorp, Inc. did not participate in any securities lending programs during the three and nine months ended March 31, 2018 or 2017.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula.  This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par.  As a result of these restrictions, FHLB stock is carried at cost.  FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value.  Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position.  After evaluating these considerations, Greene County Bancorp, Inc. concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no other-than-temporary impairment charge was recorded during the three and nine months ended March 31, 2018 or 2017.
 
12

(5)
Loans and Allowance for Loan Losses

Loan segments and classes at March 31, 2018 and June 30, 2017 are summarized as follows:

(In thousands)
 
March 31, 2018
   
June 30, 2017
 
Residential real estate:
           
Residential real estate
 
$
253,345
   
$
245,331
 
Residential construction and land
   
8,153
     
7,160
 
Multi-family
   
14,201
     
9,199
 
Commercial real estate:
               
Commercial real estate
   
279,476
     
257,964
 
Commercial construction
   
30,495
     
28,430
 
Consumer loan:
               
Home equity
   
21,290
     
21,076
 
Consumer installment
   
4,863
     
4,790
 
Commercial loans
   
77,547
     
60,381
 
Total gross loans
   
689,370
     
634,331
 
Allowance for loan losses
   
(11,622
)
   
(11,022
)
Deferred fees and costs
   
747
     
878
 
Loans receivable, net
 
$
678,495
   
$
624,187
 

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

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

The Bank primarily has four segments within its loan portfolio that it considers when measuring credit quality: residential real estate loans, commercial real estate loans, consumer loans and commercial loans.  The residential real estate portfolio consists of residential, construction, and multi-family loan classes. Commercial real estate loans consist of commercial real estate and commercial construction loan classes. Consumer loans consist of home equity loan and consumer installment loan classes. The inherent risk within the loan portfolio varies depending upon each of these loan types.

The Bank of Greene County’s primary lending activity 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 89.9% 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 89.9% 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.
 
13

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

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

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

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

Loan balances by internal credit quality indicator at March 31, 2018 are shown below.
 
(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential real estate
 
$
250,543
   
$
538
   
$
89
   
$
2,175
   
$
253,345
 
Residential construction and land
   
8,153
     
-
     
-
     
-
     
8,153
 
Multi-family
   
11,908
     
-
     
2,205
     
88
     
14,201
 
Commercial real estate
   
269,164
     
173
     
8,468
     
1,671
     
279,476
 
Commercial construction
   
30,319
     
-
     
-
     
176
     
30,495
 
Home equity
   
20,635
     
-
     
-
     
655
     
21,290
 
Consumer installment
   
4,826
     
17
     
-
     
20
     
4,863
 
Commercial loans
   
76,440
     
18
     
240
     
849
     
77,547
 
Total gross loans
 
$
671,988
   
$
746
   
$
11,002
   
$
5,634
   
$
689,370
 
 
14

Loan balances by internal credit quality indicator at June 30, 2017 are shown below.

(In thousands)
 
Performing
   
Watch
   
Special Mention
   
Substandard
   
Total
 
Residential real estate
 
$
242,592
   
$
813
   
$
91
   
$
1,835
   
$
245,331
 
Residential construction and land
   
7,160
     
-
     
-
     
-
     
7,160
 
Multi-family
   
9,110
     
-
     
-
     
89
     
9,199
 
Commercial real estate
   
255,090
     
419
     
404
     
2,051
     
257,964
 
Commercial construction
   
28,254
     
-
     
-
     
176
     
28,430
 
Home equity
   
20,858
     
-
     
-
     
218
     
21,076
 
Consumer installment
   
4,770
     
10
     
-
     
10
     
4,790
 
Commercial loans
   
59,030
     
-
     
60
     
1,291
     
60,381
 
Total gross loans
 
$
626,864
   
$
1,242
   
$
555
   
$
5,670
   
$
634,331
 

The Company had no loans classified doubtful or loss at March 31, 2018 or June 30, 2017.  The $10.4 million increase in loans designated as special mention at March 31, 2018 compared to June 30, 2017 represented loans which, based on updated annual review, indicated weaknesses in borrowers’ cash flow, warranting management’s closer monitoring.  At March 31, 2018, all of these loans were performing and management believes that the identified weaknesses do not expose the Company to sufficient risk to warrant a classification of substandard.

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, 2018 and June 30, 2017.  Loans on nonaccrual status totaled $3.5 million at March 31, 2018 of which $1.8 million were in the process of foreclosure. At March 31, 2018, there were twelve residential loans in the process of foreclosure totaling $1.2 million.  Included in nonaccrual loans were $1.6 million of loans which were less than 90 days past due at March 31, 2018, 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 $62,000 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 $3.6 million at June 30, 2017 of which $1.6 million were in the process of foreclosure. At June 30, 2017, there were twelve residential loans in the process of foreclosure totaling $967,000. Included in nonaccrual loans were $1.9 million of loans which were less than 90 days past due at June 30, 2017, but have a recent history of delinquency greater than 90 days past due.

The following table sets forth information regarding delinquent and/or nonaccrual loans at March 31, 2018:
 
(In thousands)
 
30-59
days
past due
   
60-89
days
past due
   
90 days
or more
past due
   
Total
past due
   
Current
   
Total
Loans
   
Loans on
Non-
accrual
 
Residential real estate
 
$
2,124
   
$
244
   
$
883
   
$
3,251
   
$
250,094
   
$
253,345
   
$
1,640
 
Residential construction and land
   
-
     
-
     
-
     
-
     
8,153
     
8,153
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
14,201
     
14,201
     
-
 
Commercial real estate
   
1,949
     
743
     
674
     
3,366
     
276,110
     
279,476
     
1,278
 
Commercial construction
   
-
     
-
     
-
     
-
     
30,495
     
30,495
     
-
 
Home equity
   
260
     
-
     
214
     
474
     
20,816
     
21,290
     
332
 
Consumer installment
   
34
     
17
     
9
     
60
     
4,803
     
4,863
     
9
 
Commercial loans
   
449
     
18
     
182
     
649
     
76,898
     
77,547
     
279
 
Total gross loans
 
$
4,816
   
$
1,022
   
$
1,962
   
$
7,800
   
$
681,570
   
$
689,370
   
$
3,538
 
 
15

The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2017:

(In thousands)
 
30-59
days
past due
   
60-89
days
past due
   
90 days
or more
past due
   
Total
past due
   
Current
   
Total Loans
   
Loans on
Non-
accrual
 
Residential real estate
 
$
2,088
   
$
515
   
$
935
   
$
3,538
   
$
241,793
   
$
245,331
   
$
1,240
 
Residential construction and land
   
-
     
-
     
-
     
-
     
7,160
     
7,160
     
-
 
Multi-family
   
-
     
-
     
-
     
-
     
9,199
     
9,199
     
-
 
Commercial real estate
   
74
     
1,070
     
540
     
1,684
     
256,280
     
257,964
     
1,452
 
Commercial construction
   
-
     
176
     
-
     
176
     
28,254
     
28,430
     
176
 
Home equity
   
220
     
186
     
33
     
439
     
20,637
     
21,076
     
218
 
Consumer installment
   
22
     
10
     
10
     
42
     
4,748
     
4,790
     
10
 
Commercial loans
   
18
     
186
     
202
     
406
     
59,975
     
60,381
     
476
 
Total gross loans
 
$
2,422
   
$
2,143
   
$
1,720
   
$
6,285
   
$
628,046
   
$
634,331
   
$
3,572
 

The Bank of Greene County had accruing loans delinquent more than 90 days totaling $0 and $69,000 at March 31, 2018 and June 30, 2017, respectively.  The loans delinquent more than 90 days and accruing consist of loans that are well collateralized and the borrowers have demonstrated the ability and willingness to pay.  The borrower has made arrangements with the Bank to bring the loan current within a specified time period and has made a series of payments as agreed.

The table below details additional information related to nonaccrual loans for the three and nine months ended March 31:

   
For the three months
ended March 31,
   
For the nine months
ended March 31,
 
(In thousands)
 
2018
   
2017
   
2018
   
2017
 
Interest income that would have been recorded if loans had been performing in accordance with original terms
 
$
45
   
$
50
   
$
182
   
$
186
 
Interest income that was recorded on nonaccrual loans
   
30
     
34
     
95
     
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.  Based on this evaluation, a delinquent loan’s risk rating may be downgraded to either pass-watch, special mention, or substandard, and the allocation of the allowance for loan loss is based upon the risk associated with such designation.  Loans that have been modified as a troubled debt restructuring are included in impaired loans.  The measurement of impairment is generally based on the discounted cash flows based on the original rate of the loan before the restructuring, unless it is determined that the restructured loan is collateral dependent.  If the restructured loan is deemed to be collateral dependent, impairment is based on the fair value of the underlying collateral.
 
16

The tables below detail additional information on impaired loans at the date or periods indicated:
 
   
As of March 31, 2018
   
For the three months ended
March 31, 2018
   
For the nine months ended
March 31, 2018
 
(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:
                                             
Commercial real estate
 
$
803
   
$
803
   
$
-
   
$
800
   
$
7
   
$
803
   
$
22
 
Home equity
   
181
     
181
     
-
     
181
     
-
     
182
     
-
 
Commercial loans
   
353
     
353
     
-
     
355
     
-
     
320
     
-
 
Impaired loans with no allowance
   
1,337
     
1,337
     
-
     
1,336
     
7
     
1,305
     
22
 
                                                         
With an allowance recorded:
                                                       
Residential real estate
   
1,930
     
1,930
     
359
     
1,797
     
14
     
1,667
     
40
 
Commercial real estate
   
397
     
397
     
80
     
401
     
-
     
416
     
-
 
Commercial construction
   
176
     
176
     
27
     
176
     
-
     
176
     
-
 
Home equity
   
323
     
323
     
61
     
323
     
3
     
324
     
11
 
Impaired loans with allowance
   
2,826
     
2,826
     
527
     
2,697
     
17
     
2,583
     
51
 
                                                         
Total impaired:
                                                       
Residential real estate
   
1,930
     
1,930
     
359
     
1,797
     
14
     
1,667
     
40
 
Commercial real estate
   
1,200
     
1,200
     
80
     
1,201
     
7
     
1,219
     
22
 
Commercial construction
   
176
     
176
     
27
     
176
     
-
     
176
     
-
 
Home equity
   
504
     
504
     
61
     
504
     
3
     
506
     
11
 
Commercial loans
   
353
     
353
     
-
     
355
     
-
     
320
     
-
 
Total impaired loans
 
$
4,163
   
$
4,163
   
$
527
   
$
4,033
   
$
24
   
$
3,888
   
$
73
 

   
As of June 30, 2017
   
For the three months ended
March 31, 2017
   
For the nine months ended
March 31, 2017
 
(In thousands)
 
Recorded
Investment
   
Unpaid
Principal
   
Related
Allowance
   
Average
Recorded
Investment
   
Interest
Income
Recognized
   
Average
Recorded
Investment
   
Interest
Income
Recognized
 
With no related allowance recorded:
                                             
Residential real estate
 
$
-
   
$
-
   
$
-
   
$
171
   
$
-
   
$
235
   
$
-
 
Commercial real estate
   
809
     
809
     
-
     
423
     
11
     
755
     
25
 
Home equity
   
186
     
186
     
-
     
64
     
7
     
24
     
7
 
Commercial loans
   
186
     
186
     
-
     
192
     
3
     
86
     
4
 
Impaired loans with no allowance
   
1,181
     
1,181
     
-
     
850