Notes to Consolidated Financial Statements
At and for the Three and Six Months Ended December 31, 2020 and 2019
(1) Basis of Presentation
Within the accompanying unaudited consolidated statement of financial condition, and related notes to the consolidated financial statements, June 30, 2020 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 six months ended December 31, 2020 and 2019 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, 2020, 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. The Company had no reclassifications from amounts in the prior year’s consolidated financial statements to conform to the current year’s presentation. All material inter-company accounts and transactions have been eliminated in the
consolidation. The results of operations and other data for the three and six months ended December 31, 2020 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2021. These consolidated
financial statements consider events that occurred through the date the consolidated financial statements were issued.
In December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) originated in Wuhan, China and has since spread to other countries, including the U.S. On March 11, 2020, the World Health Organization
characterized COVID-19 as a pandemic. In addition, multiple jurisdictions in the U.S. have declared states of emergency. It is anticipated that these impacts will continue for some time. Potential impacts to the Company include disruptions or
restrictions on our employees’ ability to work, lack of demand for new loans or the borrower’s ability to pay the required monthly payments. Changes to the operating environment may also be impacted. Operations include loan applications, processing
or other areas requiring contact with the borrower. These changes may increase operating costs. Further impacts may include increased repurchase risk or loan defaults. The future effects of these issues are unknown.
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 six months ended December
31, 2020.
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 17 full-service offices and
an operations center and lending center located in its market area within the Hudson Valley and Capital District Regions 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. was formed as a New York corporation that has
elected under the Internal Revenue Code to be a real estate investment trust, which holds mortgages and notes which were originated through and serviced by The Bank of Greene County.
(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 December 31, 2020 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
|
|
|
6,999
|
|
|
|
-
|
|
|
|
48
|
|
|
|
6,951
|
|
State and political subdivisions
|
|
$
|
195,832
|
|
|
$
|
572
|
|
|
$
|
-
|
|
|
$
|
196,404
|
|
Mortgage-backed securities-residential
|
|
|
46,858
|
|
|
|
575
|
|
|
|
1
|
|
|
|
47,432
|
|
Mortgage-backed securities-multi-family
|
|
|
76,305
|
|
|
|
1,166
|
|
|
|
324
|
|
|
|
77,147
|
|
Corporate debt securities
|
|
|
4,009
|
|
|
|
167
|
|
|
|
6
|
|
|
|
4,170
|
|
Total securities available-for-sale
|
|
|
330,003
|
|
|
|
2,480
|
|
|
|
379
|
|
|
|
332,104
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
262,005
|
|
|
|
17,245
|
|
|
|
5
|
|
|
|
279,245
|
|
Mortgage-backed securities-residential
|
|
|
25,484
|
|
|
|
829
|
|
|
|
3
|
|
|
|
26,310
|
|
Mortgage-backed securities-multi-family
|
|
|
108,697
|
|
|
|
7,011
|
|
|
|
-
|
|
|
|
115,708
|
|
Corporate debt securities
|
|
|
7,095
|
|
|
|
27
|
|
|
|
25
|
|
|
|
7,097
|
|
Other securities
|
|
|
5,488
|
|
|
|
81
|
|
|
|
-
|
|
|
|
5,569
|
|
Total securities held-to-maturity
|
|
|
408,769
|
|
|
|
25,193
|
|
|
|
33
|
|
|
|
433,929
|
|
Total securities
|
|
$
|
738,772
|
|
|
$
|
27,673
|
|
|
$
|
412
|
|
|
$
|
766,033
|
|
Securities at June 30, 2020 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
|
|
$
|
502
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
504
|
|
State and political subdivisions
|
|
|
176,064
|
|
|
|
1,043
|
|
|
|
-
|
|
|
|
177,107
|
|
Mortgage-backed securities-residential
|
|
|
15,148
|
|
|
|
380
|
|
|
|
-
|
|
|
|
15,528
|
|
Mortgage-backed securities-multi-family
|
|
|
28,116
|
|
|
|
798
|
|
|
|
4
|
|
|
|
28,910
|
|
Corporate debt securities
|
|
|
4,510
|
|
|
|
163
|
|
|
|
13
|
|
|
|
4,660
|
|
Total securities available-for-sale
|
|
|
224,340
|
|
|
|
2,386
|
|
|
|
17
|
|
|
|
226,709
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government sponsored enterprises
|
|
|
2,000
|
|
|
|
11
|
|
|
|
-
|
|
|
|
2,011
|
|
State and political subdivisions
|
|
|
210,535
|
|
|
|
14,286
|
|
|
|
3
|
|
|
|
224,818
|
|
Mortgage-backed securities-residential
|
|
|
38,884
|
|
|
|
1,002
|
|
|
|
15
|
|
|
|
39,871
|
|
Mortgage-backed securities-multi-family
|
|
|
127,582
|
|
|
|
6,680
|
|
|
|
21
|
|
|
|
134,241
|
|
Corporate debt securities
|
|
|
2,593
|
|
|
|
7
|
|
|
|
130
|
|
|
|
2,470
|
|
Other securities
|
|
|
2,063
|
|
|
|
38
|
|
|
|
-
|
|
|
|
2,101
|
|
Total securities held-to-maturity
|
|
|
383,657
|
|
|
|
22,024
|
|
|
|
169
|
|
|
|
405,512
|
|
Total securities
|
|
$
|
607,997
|
|
|
$
|
24,410
|
|
|
$
|
186
|
|
|
$
|
632,221
|
|
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 including subordinated debt of banks 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 December 31, 2020, 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 Company’s current securities investment strategy utilizes a risk management approach of diversified investing among three categories: short-, intermediate- and long-term. The emphasis of this approach is to
increase overall investment securities yields while managing interest rate risk. The Company will only invest in high quality securities as determined by management’s analysis at the time of purchase. The Company generally does not engage in any
derivative or hedging transactions, such as interest rate swaps or caps.
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,
2020.
|
|
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
|
|
$
|
6,951
|
|
|
$
|
48
|
|
|
|
2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
6,951
|
|
|
$
|
48
|
|
|
|
2
|
|
Mortgage-backed securities-residential
|
|
|
1,925
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,925
|
|
|
|
1
|
|
|
|
1
|
|
Mortgage-backed securities-multi-family
|
|
|
32,916
|
|
|
|
324
|
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,916
|
|
|
|
324
|
|
|
|
10
|
|
Corporate debt securities
|
|
|
994
|
|
|
|
6
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
994
|
|
|
|
6
|
|
|
|
1
|
|
Total securities available-for-sale
|
|
|
42,786
|
|
|
|
379
|
|
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,786
|
|
|
|
379
|
|
|
|
14
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
1,204
|
|
|
|
5
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,204
|
|
|
|
5
|
|
|
|
6
|
|
Mortgage-backed securities-residential
|
|
|
1,640
|
|
|
|
3
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,640
|
|
|
|
3
|
|
|
|
1
|
|
Corporate debt securities
|
|
|
1,497
|
|
|
|
3
|
|
|
|
1
|
|
|
|
473
|
|
|
|
22
|
|
|
|
1
|
|
|
|
1,970
|
|
|
|
25
|
|
|
|
2
|
|
Total securities held-to-maturity
|
|
|
4,341
|
|
|
|
11
|
|
|
|
8
|
|
|
|
473
|
|
|
|
22
|
|
|
|
1
|
|
|
|
4,814
|
|
|
|
33
|
|
|
|
9
|
|
Total securities
|
|
$
|
47,127
|
|
|
$
|
390
|
|
|
|
22
|
|
|
$
|
473
|
|
|
$
|
22
|
|
|
|
1
|
|
|
$
|
47,600
|
|
|
$
|
412
|
|
|
|
23
|
|
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, 2020.
|
|
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-multi-family
|
|
$
|
1,051
|
|
|
$
|
4
|
|
|
|
1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
1,051
|
|
|
$
|
4
|
|
|
|
1
|
|
Corporate debt securities
|
|
|
2,487
|
|
|
|
13
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,487
|
|
|
|
13
|
|
|
|
3
|
|
Total securities available-for-sale
|
|
|
3,538
|
|
|
|
17
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,538
|
|
|
|
17
|
|
|
|
4
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
3,336
|
|
|
|
3
|
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,336
|
|
|
|
3
|
|
|
|
12
|
|
Mortgage-backed securities-residential
|
|
|
3,604
|
|
|
|
15
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,604
|
|
|
|
15
|
|
|
|
2
|
|
Mortgage-backed securities-multi-family
|
|
|
3,562
|
|
|
|
21
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,562
|
|
|
|
21
|
|
|
|
3
|
|
Corporate debt securities
|
|
|
1,103
|
|
|
|
2
|
|
|
|
2
|
|
|
|
361
|
|
|
|
128
|
|
|
|
1
|
|
|
|
1,464
|
|
|
|
130
|
|
|
|
3
|
|
Total securities held-to-maturity
|
|
|
11,605
|
|
|
|
41
|
|
|
|
19
|
|
|
|
361
|
|
|
|
128
|
|
|
|
1
|
|
|
|
11,966
|
|
|
|
169
|
|
|
|
20
|
|
Total securities
|
|
$
|
15,143
|
|
|
$
|
58
|
|
|
|
23
|
|
|
$
|
361
|
|
|
$
|
128
|
|
|
|
1
|
|
|
$
|
15,504
|
|
|
$
|
186
|
|
|
|
24
|
|
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. 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, 2020. Management believes that the reasons for the decline in
fair value are due to interest rates, widening credit spreads partially due to COVID-19 concerns and market illiquidity at the reporting date.
There were no transfers of securities available-for-sale to held-to-maturity during the three and six months ended December 31, 2020 or 2019. During the three and six months ended December 31, 2020 and 2019, 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 six months ended December 31, 2020 and 2019.
The estimated fair values of debt securities at December 31, 2020, 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
|
|
$
|
193,109
|
|
|
$
|
193,670
|
|
After one year through five years
|
|
|
3,689
|
|
|
|
3,786
|
|
After five years through ten years
|
|
|
8,542
|
|
|
|
8,558
|
|
After ten years
|
|
|
1,500
|
|
|
|
1,511
|
|
Total available-for-sale debt securities
|
|
|
206,840
|
|
|
|
207,525
|
|
Mortgage-backed securities
|
|
|
123,163
|
|
|
|
124,579
|
|
Total available-for-sale securities
|
|
|
330,003
|
|
|
|
332,104
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity debt securities
|
|
|
|
|
|
|
|
|
Within one year
|
|
|
41,684
|
|
|
|
42,395
|
|
After one year through five years
|
|
|
102,444
|
|
|
|
107,389
|
|
After five years through ten years
|
|
|
69,549
|
|
|
|
75,648
|
|
After ten years
|
|
|
60,911
|
|
|
|
66,479
|
|
Total held-to-maturity debt securities
|
|
|
274,588
|
|
|
|
291,911
|
|
Mortgage-backed securities
|
|
|
134,181
|
|
|
|
142,018
|
|
Total held-to-maturity securities
|
|
|
408,769
|
|
|
|
433,929
|
|
Total debt securities
|
|
$
|
738,772
|
|
|
$
|
766,033
|
|
At December 31, 2020 and June 30, 2020, respectively, securities with an aggregate fair value of $719.8 million and $619.3 million were pledged as collateral for deposits in
excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. At December 31, 2020 and June 30, 2020, securities with an aggregate fair value of $4.2 million and $4.7 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 quarters ended December 31, 2020 or 2019.
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 six months ended December 31, 2020 or 2019.
(5) Loans and Allowance for Loan Losses
Loan segments and classes at December 31, 2020 and June 30, 2020 are summarized as follows:
(In thousands)
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Residential real estate:
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
299,479
|
|
|
$
|
279,332
|
|
Residential construction and land
|
|
|
7,494
|
|
|
|
11,847
|
|
Multi-family
|
|
|
28,000
|
|
|
|
25,104
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
448,122
|
|
|
|
381,415
|
|
Commercial construction
|
|
|
72,200
|
|
|
|
74,920
|
|
Consumer loan:
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
19,922
|
|
|
|
22,106
|
|
Consumer installment
|
|
|
4,851
|
|
|
|
4,817
|
|
Commercial loans
|
|
|
171,099
|
|
|
|
213,119
|
|
Total gross loans
|
|
|
1,051,167
|
|
|
|
1,012,660
|
|
Allowance for loan losses
|
|
|
(18,270
|
)
|
|
|
(16,391
|
)
|
Unearned origination fees and costs, net
|
|
|
(1,378
|
)
|
|
|
(2,747
|
)
|
Loans receivable, net
|
|
$
|
1,031,519
|
|
|
$
|
993,522
|
|
In early 2020, COVID-19 had spread world-wide and the Federal and state governments have been diligently working to contain the spread. The containment strategies implemented by local governments has had an enormous
impact on the economy and may continue to have a negative impact on borrowers’ ability to make timely loan payments as many businesses are forced to temporarily shut down or operate with limited capacity. Management is monitoring and addressing the
impact on the loan portfolio and working with borrowers.
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 historically has been 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 85.0% of the appraised value of the property. 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 85.0% or less, 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 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. Over the past few years, The Bank of Greene County has shifted more focus on the origination of commercial loans including commercial real estate. The Bank of Greene County has also formed relationships
with other community banks within our region to participate in larger commercial loan relationships. These types of loans are generally considered to be riskier due to the size and complexity of the loan relationship. By entering into a
participation agreement with the other bank, The Bank of Greene County can obtain the loan relationship while limiting its exposure to credit loss. Management completes its due diligence in underwriting these loans and monitors the servicing of
these loans. During the quarter ended December 31, 2020, the Company had on average outstanding $82.2 million in PPP loans which are unsecured commercial loans and are 100% guaranteed by the Small Business Administration.
Loan balances by internal credit quality indicator at December 31, 2020 are shown below.
(In thousands)
|
|
Performing
|
|
|
Watch
|
|
|
Special Mention
|
|
|
Substandard
|
|
|
Total
|
|
Residential real estate
|
|
$
|
295,850
|
|
|
$
|
840
|
|
|
$
|
81
|
|
|
$
|
2,708
|
|
|
$
|
299,479
|
|
Residential construction and land
|
|
|
7,494
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,494
|
|
Multi-family
|
|
|
26,009
|
|
|
|
-
|
|
|
|
1,627
|
|
|
|
364
|
|
|
|
28,000
|
|
Commercial real estate
|
|
|
423,153
|
|
|
|
316
|
|
|
|
21,020
|
|
|
|
3,633
|
|
|
|
448,122
|
|
Commercial construction
|
|
|
70,253
|
|
|
|
-
|
|
|
|
1,947
|
|
|
|
-
|
|
|
|
72,200
|
|
Home equity
|
|
|
19,355
|
|
|
|
-
|
|
|
|
-
|
|
|
|
567
|
|
|
|
19,922
|
|
Consumer installment
|
|
|
4,804
|
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,851
|
|
Commercial loans
|
|
|
164,829
|
|
|
|
-
|
|
|
|
3,488
|
|
|
|
2,782
|
|
|
|
171,099
|
|
Total gross loans
|
|
$
|
1,011,747
|
|
|
$
|
1,203
|
|
|
$
|
28,163
|
|
|
$
|
10,054
|
|
|
$
|
1,051,167
|
|
Loan balances by internal credit quality indicator at June 30, 2020 are shown below.
(In thousands)
|
|
Performing
|
|
|
Watch
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Total
|
|
Residential real estate
|
|
$
|
274,973
|
|
|
$
|
626
|
|
|
$
|
996
|
|
|
$
|
2,737
|
|
|
$
|
279,332
|
|
Residential construction and land
|
|
|
11,847
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,847
|
|
Multi-family
|
|
|
23,336
|
|
|
|
-
|
|
|
|
1,645
|
|
|
|
123
|
|
|
|
25,104
|
|
Commercial real estate
|
|
|
364,884
|
|
|
|
-
|
|
|
|
13,189
|
|
|
|
3,342
|
|
|
|
381,415
|
|
Commercial construction
|
|
|
67,844
|
|
|
|
-
|
|
|
|
6,974
|
|
|
|
102
|
|
|
|
74,920
|
|
Home equity
|
|
|
21,466
|
|
|
|
-
|
|
|
|
-
|
|
|
|
640
|
|
|
|
22,106
|
|
Consumer installment
|
|
|
4,792
|
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,817
|
|
Commercial loans
|
|
|
210,031
|
|
|
|
50
|
|
|
|
2,675
|
|
|
|
363
|
|
|
|
213,119
|
|
Total gross loans
|
|
$
|
979,173
|
|
|
$
|
701
|
|
|
$
|
25,479
|
|
|
$
|
7,307
|
|
|
$
|
1,012,660
|
|
The Company had no loans classified doubtful or loss at December 31, 2020 and June 30, 2020. Loans classified as substandard or special mention totaled $38.2 million at December 31, 2020 and $32.8 million at June 30,
2020, an increase of $5.4 million. Loans classified as substandard or special mention increased due to insufficient cash flows and revenues related to the COVID-19 pandemic. These newly classified loans were all performing as of December 31, 2020.
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 December 31, 2020 and June 30, 2020. Loans on nonaccrual status totaled $2.8 million at December 31, 2020 of which $433,000 were in the
process of foreclosure. At December 31, 2020, there were four residential loans in the process of foreclosure totaling $204,000. Included in nonaccrual loans were $1.5 million of loans which were less than 90
days past due at December 31, 2020, 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. Loans on nonaccrual status totaled
$4.1 million at June 30, 2020 of which $1.3 million were in the process of foreclosure. At June 30, 2020, there were eight residential loans in the process of foreclosure totaling $1.0 million. Included in nonaccrual loans were $1.4 million of
loans which were less than 90 days past due at June 30, 2020, but have a recent history of delinquency greater than 90 days past due. The decrease in nonaccrual loans during the six months ended December 31, 2020, was primarily due to $1.3 million
in loan repayments, $588,000 in charge-offs, $293,000 in loans returned to performing status, offset by $861,000 of loans placed into nonperforming status.
The following table sets forth information regarding delinquent and/or nonaccrual loans at December 31, 2020:
(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
|
|
$
|
1,819
|
|
|
$
|
341
|
|
|
$
|
609
|
|
|
$
|
2,769
|
|
|
$
|
296,710
|
|
|
$
|
299,479
|
|
|
$
|
1,670
|
|
Residential construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,494
|
|
|
|
7,494
|
|
|
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,000
|
|
|
|
28,000
|
|
|
|
-
|
|
Commercial real estate
|
|
|
803
|
|
|
|
316
|
|
|
|
404
|
|
|
|
1,523
|
|
|
|
446,599
|
|
|
|
448,122
|
|
|
|
560
|
|
Commercial construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,200
|
|
|
|
72,200
|
|
|
|
-
|
|
Home equity
|
|
|
193
|
|
|
|
15
|
|
|
|
128
|
|
|
|
336
|
|
|
|
19,586
|
|
|
|
19,922
|
|
|
|
247
|
|
Consumer installment
|
|
|
77
|
|
|
|
47
|
|
|
|
-
|
|
|
|
124
|
|
|
|
4,727
|
|
|
|
4,851
|
|
|
|
-
|
|
Commercial loans
|
|
|
261
|
|
|
|
-
|
|
|
|
77
|
|
|
|
338
|
|
|
|
170,761
|
|
|
|
171,099
|
|
|
|
278
|
|
Total gross loans
|
|
$
|
3,153
|
|
|
$
|
719
|
|
|
$
|
1,218
|
|
|
$
|
5,090
|
|
|
$
|
1,046,077
|
|
|
$
|
1,051,167
|
|
|
$
|
2,755
|
|
The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2020:
(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
|
|
$
|
871
|
|
|
$
|
345
|
|
|
$
|
1,691
|
|
|
$
|
2,907
|
|
|
$
|
276,425
|
|
|
$
|
279,332
|
|
|
$
|
2,513
|
|
Residential construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,847
|
|
|
|
11,847
|
|
|
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
151
|
|
|
|
151
|
|
|
|
24,953
|
|
|
|
25,104
|
|
|
|
151
|
|
Commercial real estate
|
|
|
393
|
|
|
|
189
|
|
|
|
374
|
|
|
|
956
|
|
|
|
380,459
|
|
|
|
381,415
|
|
|
|
781
|
|
Commercial construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
74,920
|
|
|
|
74,920
|
|
|
|
-
|
|
Home equity
|
|
|
29
|
|
|
|
-
|
|
|
|
238
|
|
|
|
267
|
|
|
|
21,839
|
|
|
|
22,106
|
|
|
|
319
|
|
Consumer installment
|
|
|
36
|
|
|
|
25
|
|
|
|
-
|
|
|
|
61
|
|
|
|
4,756
|
|
|
|
4,817
|
|
|
|
-
|
|
Commercial loans
|
|
|
48
|
|
|
|
72
|
|
|
|
245
|
|
|
|
365
|
|
|
|
212,754
|
|
|
|
213,119
|
|
|
|
313
|
|
Total gross loans
|
|
$
|
1,377
|
|
|
$
|
631
|
|
|
$
|
2,699
|
|
|
$
|
4,707
|
|
|
$
|
1,007,953
|
|
|
$
|
1,012,660
|
|
|
$
|
4,077
|
|
The Bank of Greene County had no accruing loans delinquent more than 90 days at December 31, 2020 or June 30, 2020, 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 six months ended December 31:
|
|
For the three months ended
December 31,
|
|
|
For the six months
ended December 31
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Interest income that would have been recorded if loans had been performing in accordance with original terms
|
|
$
|
92
|
|
|
$
|
53
|
|
|
$
|
198
|
|
|
$
|
154
|
|
Interest income that was recorded on nonaccrual loans
|
|
|
88
|
|
|
|
42
|
|
|
|
126
|
|
|
|
92
|
|
In order to assist borrowers through the COVID-19 pandemic, The Company instituted a loan deferment program in response to the COVID-19 pandemic whereby deferral of principal and/or interest payments have been
provided and correspond to the length of the National Emergency as defined under the CARES Act and extended under the Consolidated Appropriations Act which was signed into law on December 27, 2020. Payment deferrals consisted of either principal
deferrals or full payment deferrals. Based on guidance provided by bank regulators on March 22, 2020 regarding deferrals granted due to COVID-19, these have not been reported as delinquent and we will continue to recognize interest income during
the deferral period. At December 31, 2020, there were four loans totaling $204,000 in nonaccrual that previously participated in this loan deferment program due to COVID-19.
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.
The tables below detail additional information on impaired loans at the date or periods indicated:
|
|
At December 31, 2020
|
|
|
For the three months ended
December 31, 2020
|
|
|
For the six months ended
December 31, 2020
|
|
(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
|
|
$
|
386
|
|
|
$
|
386
|
|
|
$
|
-
|
|
|
$
|
392
|
|
|
$
|
3
|
|
|
$
|
397
|
|
|
$
|
8
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61
|
|
|
|
-
|
|
Commercial real estate
|
|
|
316
|
|
|
|
316
|
|
|
|
-
|
|
|
|
321
|
|
|
|
1
|
|
|
|
328
|
|
|
|
2
|
|
Home equity
|
|
|
231
|
|
|
|
231
|
|
|
|
-
|
|
|
|
162
|
|
|
|
-
|
|
|
|
145
|
|
|
|
-
|
|
Commercial loans
|
|
|
109
|
|
|
|
109
|
|
|
|
-
|
|
|
|
111
|
|
|
|
8
|
|
|
|
194
|
|
|
|
8
|
|
Impaired loans with no allowance
|
|
|
1,042
|
|
|
|
1,042
|
|
|
|
-
|
|
|
|
986
|
|
|
|
12
|
|
|
|
1,125
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
668
|
|
|
|
668
|
|
|
|
82
|
|
|
|
1,064
|
|
|
|
12
|
|
|
|
1,225
|
|
|
|
17
|
|
Commercial construction
|
|
|
102
|
|
|
|
102
|
|
|
|
20
|
|
|
|
102
|
|
|
|
-
|
|
|
|
102
|
|
|
|
-
|
|
Home equity
|
|
|
321
|
|
|
|
321
|
|
|
|
73
|
|
|
|
391
|
|
|
|
4
|
|
|
|
410
|
|
|
|
8
|
|
Commercial loans
|
|
|
24
|
|
|
|
24
|
|
|
|
2
|
|
|
|
16
|
|
|
|
1
|
|
|
|
8
|
|
|
|
1
|
|
Impaired loans with allowance
|
|
|
1,115
|
|
|
|
1,115
|
|
|
|
177
|
|
|
|
1,573
|
|
|
|
17
|
|
|
|
1,745
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
1,054
|
|
|
|
1,054
|
|
|
|
82
|
|
|
|
1,456
|
|
|
|
15
|
|
|
|
1,622
|
|
|
|
25
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61
|
|
|
|
-
|
|
Commercial real estate
|
|
|
316
|
|
|
|
316
|
|
|
|
-
|
|
|
|
321
|
|
|
|
1
|
|
|
|
328
|
|
|
|
2
|
|
Commercial construction
|
|
|
102
|
|
|
|
102
|
|
|
|
20
|
|
|
|
102
|
|
|
|
-
|
|
|
|
102
|
|
|
|
-
|
|
Home equity
|
|
|
552
|
|
|
|
552
|
|
|
|
73
|
|
|
|
553
|
|
|
|
4
|
|
|
|
555
|
|
|
|
8
|
|
Commercial loans
|
|
|
133
|
|
|
|
133
|
|
|
|
2
|
|
|
|
127
|
|
|
|
9
|
|
|
|
202
|
|
|
|
9
|
|
Total impaired loans
|
|
$
|
2,157
|
|
|
$
|
2,157
|
|
|
$
|
177
|
|
|
$
|
2,559
|
|
|
$
|
29
|
|
|
$
|
2,870
|
|
|
$
|
44
|
|
|
|
At June 30, 2020
|
|
|
For the three months ended
December 31, 2019
|
|
|
For the six months ended
December 31, 2019
|
|
(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
|
|
$
|
868
|
|
|
$
|
868
|
|
|
$
|
-
|
|
|
$
|
542
|
|
|
|
11
|
|
|
|
617
|
|
|
|
41
|
|
Multi-family
|
|
|
123
|
|
|
|
123
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
344
|
|
|
|
344
|
|
|
|
-
|
|
|
|
375
|
|
|
|
5
|
|
|
|
383
|
|
|
|
12
|
|
Home equity
|
|
|
128
|
|
|
|
128
|
|
|
|
-
|
|
|
|
128
|
|
|
|
-
|
|
|
|
197
|
|
|
|
-
|
|
Commercial loans
|
|
|
145
|
|
|
|
145
|
|
|
|
-
|
|
|
|
146
|
|
|
|
1
|
|
|
|
141
|
|
|
|
1
|
|
Impaired loans with no allowance
|
|
|
1,608
|
|
|
|
1,608
|
|
|
|
-
|
|
|
|
1,191
|
|
|
|
17
|
|
|
|
1,338
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
995
|
|
|
|
995
|
|
|
|
127
|
|
|
|
1,124
|
|
|
|
8
|
|
|
|
1,051
|
|
|
|
32
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
131
|
|
|
|
1
|
|
|
|
66
|
|
|
|
1
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
|
|
3
|
|
|
|
53
|
|
|
|
3
|
|
Commercial construction
|
|
|
102
|
|
|
|
102
|
|
|
|
15
|
|
|
|
102
|
|
|
|
-
|
|
|
|
102
|
|
|
|
-
|
|
Home equity
|
|
|
431
|
|
|
|
431
|
|
|
|
73
|
|
|
|
460
|
|
|
|
9
|
|
|
|
395
|
|
|
|
14
|
|
Commercial loans
|
|
|
134
|
|
|
|
134
|
|
|
|
13
|
|
|
|
159
|
|
|
|
3
|
|
|
|
145
|
|
|
|
4
|
|
Impaired loans with allowance
|
|
|
1,662
|
|
|
|
1,662
|
|
|
|
228
|
|
|
|
2,081
|
|
|
|
24
|
|
|
|
1,812
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
1,863
|
|
|
|
1,863
|
|
|
|
127
|
|
|
|
1,666
|
|
|
|
19
|
|
|
|
1,668
|
|
|
|
73
|
|
Multi-family
|
|
|
123
|
|
|
|
123
|
|
|
|
-
|
|
|
|
131
|
|
|
|
1
|
|
|
|
66
|
|
|
|
1
|
|
Commercial real estate
|
|
|
344
|
|
|
|
344
|
|
|
|
-
|
|
|
|
480
|
|
|
|
8
|
|
|
|
436
|
|
|
|
15
|
|
Commercial construction
|
|
|
102
|
|
|
|
102
|
|
|
|
15
|
|
|
|
102
|
|
|
|
-
|
|
|
|
102
|
|
|
|
-
|
|
Home equity
|
|
|
559
|
|
|
|
559
|
|
|
|
73
|
|
|
|
588
|
|
|
|
9
|
|
|
|
592
|
|
|
|
14
|
|
Commercial loans
|
|
|
279
|
|
|
|
279
|
|
|
|
13
|
|
|
|
305
|
|
|
|
4
|
|
|
|
286
|
|
|
|
5
|
|
Total impaired loans
|
|
$
|
3,270
|
|
|
$
|
3,270
|
|
|
$
|
228
|
|
|
$
|
3,272
|
|
|
|
41
|
|
|
|
3,150
|
|
|
|
108
|
|
The table below details loans that have been modified as a troubled debt restructuring during the six months ended December 31, 2020.
(Dollars in thousands)
|
|
Number of Contracts
|
|
|
Pre-Modification Outstanding Recorded Investment
|
|
|
Post-Modification Outstanding Recorded Investment
|
|
|
Current Outstanding Recorded Investment
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
1
|
|
|
$
|
24
|
|
|
$
|
24
|
|
|
$
|
24
|
|
The decrease in total impaired loans within the residential real estate portfolio for the six months ended December 31, 2020, is primarily due to the combination of loans returned to accrual status and payoffs.
During the six months ended December 31, 2020, one commercial loan was modified by reducing the rate and extending the term on this loan. There were no loans that were modified as a trouble debt restricting during the three and six months ended
December 31, 2019. There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to June 30, 2020 or 2019 which have subsequently defaulted during the three and six months ended December 31, 2020 or
2019, respectively.
The Bank of Greene County continues working with borrowers through the current pandemic. During fiscal 2020, the Company instituted a loan deferment program in response to the COVID-19 pandemic whereby deferral of
principal and/or interest payments have been provided and correspond to the length of the National Emergency as defined under the CARES Act and extended under the Consolidated Appropriations Act which was signed into law on December 27, 2020. At
December 31, 2020, the Company still had $14.5 million consisting of 66 loans on payment deferral as a result of the pandemic, which is down from $193.5 million consisting of 706 loans at June 30, 2020. Based on guidance provided by bank regulators
on March 22, 2020 regarding deferrals granted due to COVID-19, we have not reported these loans as delinquent and will continue to recognize interest income during the deferral period. These loans will be closely monitored to determine
collectability and accrual and delinquency status will be updated as deemed appropriate.
Under Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), loans less than 30 days past due as of December 31, 2020 will be considered current for COVID-19 modifications.
Provisions under Section 4013 of the CARES Act were extended as part of the Consolidated Appropriations Act signed into law on December 27, 2020. A financial institution can then suspend the requirements under GAAP for loan modifications related to
COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting
purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or
the 60th day after the end of the COVID-19 national emergency. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current
prior to any relief are not TDRs. Lastly, prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such
guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act. Based on this guidance, the Company does not believe that TDRs will significantly change as a result of the
modifications granted.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired
loans and current economic conditions. Such evaluation, which includes a review of certain identified loans on 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, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for the loan loss allowance. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review The Bank of Greene County’s allowance for loan losses. Such agencies may require The Bank of Greene County to recognize additions to the allowance based on their judgment about
information available to them at the time of their examination. The Bank of Greene County considers smaller balance residential mortgages, home equity loans, commercial loans and installment loans to customers as small, homogeneous loans, which are
evaluated for impairment collectively based on historical loss experience. Larger balance residential, commercial mortgage and business loans are viewed individually and considered impaired if it is probable that The Bank of Greene County will not
be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements. The measurement of impaired loans is generally based on the fair value of the underlying collateral. The Bank of
Greene County charges loans off against the allowance for credit losses when it becomes evident that a loan cannot be collected within a reasonable amount of time or that it will cost the Bank more than it will receive, and all possible avenues of
repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers. Generally, consumer loans and smaller commercial loans (not secured by real estate)
in excess of 90 days are charged-off against the allowance for loan losses, unless equitable arrangements are made. Included within consumer installment loan charge-offs and recoveries are deposit accounts that have been overdrawn in excess of 60
days. With continued growth in the number of deposit accounts, charge-off activity within this category has also grown, as can be seen from the tables below. For loans secured by real estate, a charge-off is recorded when it is determined that the
collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries
of loans previously charged off and is reduced by charge-offs.
The Bank of Greene County recognizes that strategies put in place to assist borrowers through the COVID-19 pandemic may not be sufficient to fully mitigate the impact to borrowers and that it is likely that a portion
of the loan portfolio will default and result in losses to The Bank of Greene County. As a result, The Bank of Greene County has increased its provision for loan losses for the three and six months ended December 31, 2020 to $1.3 million and $2.5
million, respectively, from $690,000 and $1.2 million for the three and six months ended December 31, 2019, respectively. Much uncertainty remains regarding the duration of the containment strategies and the overall impact to the economy and to
local businesses. Management is closely monitoring the changes within its economic environment, stress testing the loan portfolio under various scenarios, and adjusting the allowance for loan loss as necessary to remain adequately reserved.
The following tables set forth the activity and allocation of the allowance for loan losses by loan category during and at the periods indicated. The allowance is allocated to each loan category based on historical
loss experience and economic conditions.
|
|
Activity for the three months ended December 31, 2020
|
|
(In thousands)
|
|
Balance at
September 30, 2020
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance at
December 31, 2020
|
|
Residential real estate
|
|
$
|
1,463
|
|
|
$
|
26
|
|
|
$
|
4
|
|
|
$
|
557
|
|
|
$
|
1,998
|
|
Residential construction and land
|
|
|
118
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
90
|
|
Multi-family
|
|
|
180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
96
|
|
|
|
276
|
|
Commercial real estate
|
|
|
9,384
|
|
|
|
-
|
|
|
|
-
|
|
|
|
823
|
|
|
|
10,207
|
|
Commercial construction
|
|
|
1,961
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(114
|
)
|
|
|
1,847
|
|
Home equity
|
|
|
272
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
265
|
|
Consumer installment
|
|
|
350
|
|
|
|
85
|
|
|
|
19
|
|
|
|
(28
|
)
|
|
|
256
|
|
Commercial loans
|
|
|
3,868
|
|
|
|
500
|
|
|
|
-
|
|
|
|
(37
|
)
|
|
|
3,331
|
|
Total
|
|
$
|
17,596
|
|
|
$
|
611
|
|
|
$
|
23
|
|
|
$
|
1,262
|
|
|
$
|
18,270
|
|
|
|
Activity for the six months ended December 31, 2020
|
|
(In thousands)
|
|
Balance at
June 30, 2020
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance at
December 31, 2020
|
|
Residential real estate
|
|
$
|
2,091
|
|
|
$
|
26
|
|
|
$
|
7
|
|
|
$
|
(74
|
)
|
|
$
|
1,998
|
|
Residential construction and land
|
|
|
141
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(51
|
)
|
|
|
90
|
|
Multi-family
|
|
|
176
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
|
|
276
|
|
Commercial real estate
|
|
|
8,634
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,573
|
|
|
|
10,207
|
|
Commercial construction
|
|
|
2,053
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(206
|
)
|
|
|
1,847
|
|
Home equity
|
|
|
295
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
265
|
|
Consumer installment
|
|
|
197
|
|
|
|
146
|
|
|
|
39
|
|
|
|
166
|
|
|
|
256
|
|
Commercial loans
|
|
|
2,804
|
|
|
|
500
|
|
|
|
-
|
|
|
|
1,027
|
|
|
|
3,331
|
|
Total
|
|
$
|
16,391
|
|
|
$
|
672
|
|
|
$
|
46
|
|
|
$
|
2,505
|
|
|
$
|
18,270
|
|
|
|
Allowance for Loan Losses
|
|
|
Loans Receivable
|
|
|
|
Ending Balance At December 31, 2020
Impairment Analysis
|
|
|
Ending Balance At December 31, 2020
Impairment Analysis
|
|
(In thousands)
|
|
Individually
Evaluated
|
|
|
Collectively
Evaluated
|
|
|
Individually
Evaluated
|
|
|
Collectively
Evaluated
|
|
Residential real estate
|
|
$
|
82
|
|
|
$
|
1,916
|
|
|
$
|
1,054
|
|
|
$
|
298,425
|
|
Residential construction and land
|
|
|
-
|
|
|
|
90
|
|
|
|
-
|
|
|
|
7,494
|
|
Multi-family
|
|
|
-
|
|
|
|
276
|
|
|
|
-
|
|
|
|
28,000
|
|
Commercial real estate
|
|
|
-
|
|
|
|
10,207
|
|
|
|
316
|
|
|
|
447,806
|
|
Commercial construction
|
|
|
20
|
|
|
|
1,827
|
|
|
|
102
|
|
|
|
72,098
|
|
Home equity
|
|
|
73
|
|
|
|
192
|
|
|
|
552
|
|
|
|
19,370
|
|
Consumer installment
|
|
|
-
|
|
|
|
256
|
|
|
|
-
|
|
|
|
4,851
|
|
Commercial loans
|
|
|
2
|
|
|
|
3,329
|
|
|
|
133
|
|
|
|
170,966
|
|
Total
|
|
$
|
177
|
|
|
$
|
18,093
|
|
|
$
|
2,157
|
|
|
$
|
1,049,010
|
|
|
|
Activity for the three months ended December 31, 2019
|
|
(In thousands)
|
|
Balance at
September 30, 2019
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance at
December 31, 2019
|
|
Residential real estate
|
|
$
|
1,512
|
|
|
$
|
48
|
|
|
$
|
10
|
|
|
$
|
(4
|
)
|
|
$
|
1,470
|
|
Residential construction and land
|
|
|
99
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
93
|
|
Multi-family
|
|
|
205
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(58
|
)
|
|
|
147
|
|
Commercial real estate
|
|
|
7,159
|
|
|
|
-
|
|
|
|
-
|
|
|
|
351
|
|
|
|
7,510
|
|
Commercial construction
|
|
|
1,291
|
|
|
|
-
|
|
|
|
-
|
|
|
|
176
|
|
|
|
1,467
|
|
Home equity
|
|
|
307
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(37
|
)
|
|
|
270
|
|
Consumer installment
|
|
|
319
|
|
|
|
139
|
|
|
|
26
|
|
|
|
160
|
|
|
|
366
|
|
Commercial loans
|
|
|
2,552
|
|
|
|
5
|
|
|
|
6
|
|
|
|
108
|
|
|
|
2,661
|
|
Total
|
|
$
|
13,444
|
|
|
$
|
192
|
|
|
$
|
42
|
|
|
$
|
690
|
|
|
$
|
13,984
|
|
|
|
Activity for the six months ended December 31, 2019
|
|
(In thousands)
|
|
Balance at
June 30, 2019
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance at
December 30, 2019
|
|
Residential real estate
|
|
$
|
2,026
|
|
|
$
|
101
|
|
|
$
|
10
|
|
|
$
|
(465
|
)
|
|
$
|
1,470
|
|
Residential construction and land
|
|
|
87
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
93
|
|
Multi-family
|
|
|
180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(33
|
)
|
|
|
147
|
|
Commercial real estate
|
|
|
7,110
|
|
|
|
-
|
|
|
|
-
|
|
|
|
400
|
|
|
|
7,510
|
|
Commercial construction
|
|
|
872
|
|
|
|
-
|
|
|
|
-
|
|
|
|
595
|
|
|
|
1,467
|
|
Home equity
|
|
|
314
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(44
|
)
|
|
|
270
|
|
Consumer installment
|
|
|
250
|
|
|
|
248
|
|
|
|
50
|
|
|
|
314
|
|
|
|
366
|
|
Commercial loans
|
|
|
2,361
|
|
|
|
204
|
|
|
|
36
|
|
|
|
468
|
|
|
|
2,661
|
|
Total
|
|
$
|
13,200
|
|
|
$
|
553
|
|
|
$
|
96
|
|
|
$
|
1,241
|
|
|
$
|
13,984
|
|
|
|
Allowance for Loan Losses
|
|
|
Loans Receivable
|
|
|
|
Ending Balance June 30, 2020
Impairment Analysis
|
|
|
Ending Balance June 30, 2020
Impairment Analysis
|
|
(In thousands)
|
|
Individually
Evaluated
|
|
|
Collectively
Evaluated
|
|
|
Individually
Evaluated
|
|
|
Collectively
Evaluated
|
|
Residential real estate
|
|
$
|
127
|
|
|
$
|
1,964
|
|
|
$
|
1,863
|
|
|
$
|
277,469
|
|
Residential construction and land
|
|
|
-
|
|
|
|
141
|
|
|
|
-
|
|
|
|
11,847
|
|
Multi-family
|
|
|
-
|
|
|
|
176
|
|
|
|
123
|
|
|
|
24,981
|
|
Commercial real estate
|
|
|
-
|
|
|
|
8,634
|
|
|
|
344
|
|
|
|
381,071
|
|
Commercial construction
|
|
|
15
|
|
|
|
2,038
|
|
|
|
102
|
|
|
|
74,818
|
|
Home equity
|
|
|
73
|
|
|
|
222
|
|
|
|
559
|
|
|
|
21,547
|
|
Consumer installment
|
|
|
-
|
|
|
|
197
|
|
|
|
-
|
|
|
|
4,817
|
|
Commercial loans
|
|
|
13
|
|
|
|
2,791
|
|
|
|
279
|
|
|
|
212,840
|
|
Total
|
|
$
|
228
|
|
|
$
|
16,163
|
|
|
$
|
3,270
|
|
|
$
|
1,009,390
|
|
Foreclosed real estate (FRE)
FRE consists of properties acquired through mortgage loan foreclosure proceedings or in full or partial satisfaction of loans. The following table sets forth information regarding FRE at December 31, 2020 and June
30, 2020:
(in thousands)
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Residential real estate
|
|
$
|
385
|
|
|
$
|
-
|
|
Total foreclosed real estate
|
|
$
|
385
|
|
|
$
|
-
|
|
(6) Fair Value Measurements and Fair Value of Financial Instruments
Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial
instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured at December 31, 2020 and
June 30, 2020 and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective
reporting dates may be different than the amounts reported at each period-end.
The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and
liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
The FASB ASC Topic on “Fair Value Measurement” established a fair value hierarchy that prioritized the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
are as follows:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used are as follows:
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices
In Active
Markets For
Identical Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
(In thousands)
|
|
December 31, 2020
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises
|
|
$
|
6,951
|
|
|
$
|
-
|
|
|
$
|
6,951
|
|
|
$
|
-
|
|
State and political subdivisions
|
|
|
196,404
|
|
|
|
-
|
|
|
|
196,404
|
|
|
|
-
|
|
Mortgage-backed securities-residential
|
|
|
47,432
|
|
|
|
-
|
|
|
|
47,432
|
|
|
|
-
|
|
Mortgage-backed securities-multi-family
|
|
|
77,147
|
|
|
|
-
|
|
|
|
77,147
|
|
|
|
-
|
|
Corporate debt securities
|
|
|
4,170
|
|
|
|
4,170
|
|
|
|
-
|
|
|
|
-
|
|
Securities available-for-sale
|
|
$
|
332,104
|
|
|
$
|
4,170
|
|
|
$
|
327,934
|
|
|
$
|
-
|
|
Equity securities
|
|
|
292
|
|
|
|
292
|
|
|
|
-
|
|
|
|
-
|
|
Total securities measured at fair value
|
|
$
|
332,396
|
|
|
$
|
4,462
|
|
|
$
|
327,934
|
|
|
$
|
-
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices
In Active
Markets For
Identical Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable Inputs
|
|
(In thousands)
|
|
June 30, 2020
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises
|
|
$
|
504
|
|
|
$
|
-
|
|
|
$
|
504
|
|
|
$
|
-
|
|
State and political subdivisions
|
|
|
177,107
|
|
|
|
-
|
|
|
|
177,107
|
|
|
|
-
|
|
Mortgage-backed securities-residential
|
|
|
15,528
|
|
|
|
-
|
|
|
|
15,528
|
|
|
|
-
|
|
Mortgage-backed securities-multi-family
|
|
|
28,910
|
|
|
|
-
|
|
|
|
28,910
|
|
|
|
-
|
|
Corporate debt securities
|
|
|
4,660
|
|
|
|
4,660
|
|
|
|
-
|
|
|
|
-
|
|
Securities available-for-sale
|
|
$
|
226,709
|
|
|
$
|
4,660
|
|
|
$
|
222,049
|
|
|
$
|
-
|
|
Equity securities
|
|
|
267
|
|
|
|
267
|
|
|
|
-
|
|
|
|
-
|
|
Total securities measured at fair value
|
|
$
|
226,976
|
|
|
$
|
4,927
|
|
|
$
|
222,049
|
|
|
$
|
-
|
|
Certain investments that are actively traded and have quoted market prices have been classified as Level 1 valuations. Other available-for-sale investment securities have been valued by reference to prices for
similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.
In addition to disclosures of the fair value of assets on a recurring basis, FASB ASC Topic on “Fair Value Measurement” requires disclosures for assets and liabilities
measured at fair value on a nonrecurring basis, such as impaired assets, in the period in which a re-measurement at fair value is performed. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records
nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent
loans calculated as required by the “Receivables –Loan Impairment” subtopic of the FASB ASC when establishing the allowance for credit losses. Impaired loans are those loans in which the Company has measured
impairment based on the fair value of the loan’s collateral or the discounted value of expected future cash flows. Fair value is generally determined based upon market value evaluations by third parties of the properties and/or estimates by
management of working capital collateral or discounted cash flows based upon expected proceeds. These appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property), and
the cost approach. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as, changes in absorption rates or market conditions from the time of valuation and anticipated
sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets.
These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance for loan losses is allocated
to impaired loans if the value of such loans is deemed to be less than the unpaid balance.
Fair values for foreclosed real estate are initially recorded based on market value evaluations by third parties, less costs to sell (“initial cost basis”). Any write-downs required when the related loan receivable
is exchanged for the underlying real estate collateral at the time of transfer to foreclosed real estate are charged to the allowance for loan losses. Values are derived from appraisals, similar to impaired loans, of underlying collateral or
discounted cash flow analysis. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis. In the determination of fair value subsequent to foreclosure,
management also considers other factors or recent developments, such as, changes in absorption rates and market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition. Either change could
result in adjustment to lower the property value estimates indicated in the appraisals. These measurements are classified as Level 3 within the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
(In thousands)
|
|
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
1,250
|
|
|
$
|
177
|
|
|
$
|
1,073
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,073
|
|
Foreclosed real estate
|
|
|
385
|
|
|
|
-
|
|
|
|
385
|
|
|
|
-
|
|
|
|
-
|
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
1,809
|
|
|
$
|
228
|
|
|
$
|
1,581
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,581
|
|
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were utilized to determine fair value:
(Dollars in thousands)
|
|
Fair Value
|
|
Valuation Technique
|
Unobservable Input
|
|
Range
|
|
|
Weighted
Average
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
465
|
|
Appraisal of collateral(1)
|
Appraisal adjustments(2)
|
|
|
8.57%-33.73
|
%
|
|
|
25.90
|
%
|
|
|
|
|
|
|
Liquidation expenses(3)
|
|
|
3.98%-5.49
|
%
|
|
|
4.45
|
%
|
|
|
|
608
|
|
Discounted cash flow
|
Discount rate
|
|
|
4.19%-7.49
|
%
|
|
|
5.43
|
%
|
Foreclosed real estate
|
|
|
385
|
|
Appraisal of collateral(1)
|
Appraisal adjustments(2)
|
|
|
0.00%-0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
Liquidation expenses(3)
|
|
|
7.39%-8.89
|
%
|
|
|
7.82
|
%
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
1,143
|
|
Appraisal of collateral(1)
|
Appraisal adjustments(2)
|
|
|
8.57%-33.73
|
%
|
|
|
27.55
|
%
|
|
|
|
|
|
|
Liquidation expenses(3)
|
|
3.98%-6.88
|
%
|
|
4.64
|
%
|
|
|
|
438
|
|
Discounted cash flow
|
Discount rate
|
|
4.19%-6.63
|
%
|
|
|
5.64
|
%
|
|
(1)
|
Fair value is generally determined through independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.
|
|
(2)
|
Appraisals may be adjusted downwards by management for qualitative factors such as economic conditions. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real
estate market, actual offers or sales contracts received or age of the appraisal.
|
|
(3)
|
Appraisals are adjusted downwards by management for qualitative factors such as the estimated costs to liquidate the collateral.
|
The carrying amounts reported in the statements of financial condition for cash and cash equivalents, accrued interest receivable and accrued interest payable approximate their fair values. Fair values of securities
are based on quoted market prices (Level 1), where available, or matrix pricing (Level 2), which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific
securities but rather by relying on the securities’ relationship to other benchmark quoted prices. The carrying amount of Federal Home Loan Bank stock approximates fair value due to its restricted nature. The fair values for loans are measured
using the "exit price" notion which is a reasonable estimate of what another party might pay in an orderly transaction. Fair values for variable rate loans that reprice frequently, with no significant credit risk, are based on carrying value. Fair
value for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values disclosed for demand and savings deposits are equal to
carrying amounts at the reporting date. The carrying amounts for variable rate money market deposits approximate fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using discounted cash flows and
interest rates currently being offered in the market on similar certificates. Fair value for Federal Home Loan Bank long term borrowings and borrowings from other banks are estimated using discounted cash flows and interest rates currently being
offered on similar borrowings. Fair value for subordinated notes payable is estimated based upon quotes from its pricing service based on a discounted cash flow methodology or utilizes observations of recent highly-similar transactions. The
carrying value of short-term Federal Home Loan Bank borrowings approximates its fair value.
The fair value of commitments to extend credit is estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments
and the credit-worthiness of the potential borrowers. At December 31, 2020 and June 30, 2020, the estimated fair values of these off-balance sheet financial instruments were immaterial, and are therefore excluded from the table below.
The carrying amounts and estimated fair value of financial instruments are as follows:
(In thousands)
|
|
December 31, 2020
|
|
|
Fair Value Measurements Using
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Cash and cash equivalents
|
|
$
|
57,024
|
|
|
$
|
57,024
|
|
|
$
|
57,024
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Long term certificate of deposit
|
|
|
4,093
|
|
|
|
4,093
|
|
|
|
4,093
|
|
|
|
-
|
|
|
|
-
|
|
Securities available-for-sale
|
|
|
332,104
|
|
|
|
332,104
|
|
|
|
4,170
|
|
|
|
327,934
|
|
|
|
-
|
|
Securities held-to-maturity
|
|
|
408,769
|
|
|
|
433,929
|
|
|
|
-
|
|
|
|
433,929
|
|
|
|
-
|
|
Equity securities
|
|
|
292
|
|
|
|
292
|
|
|
|
292
|
|
|
|
-
|
|
|
|
-
|
|
Federal Home Loan Bank stock
|
|
|
1,158
|
|
|
|
1,158
|
|
|
|
-
|
|
|
|
1,158
|
|
|
|
-
|
|
Net loans receivable
|
|
|
1,031,519
|
|
|
|
1,034,737
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,034,737
|
|
Accrued interest receivable
|
|
|
8,475
|
|
|
|
8,475
|
|
|
|
-
|
|
|
|
8,475
|
|
|
|
-
|
|
Deposits
|
|
|
1,679,718
|
|
|
|
1,680,205
|
|
|
|
-
|
|
|
|
1,680,205
|
|
|
|
-
|
|
Borrowings
|
|
|
6,100
|
|
|
|
6,193
|
|
|
|
-
|
|
|
|
6,193
|
|
|
|
-
|
|
Subordinated notes payable, net
|
|
|
19,601
|
|
|
|
19,099
|
|
|
|
-
|
|
|
|
19,099
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
367
|
|
|
|
367
|
|
|
|
-
|
|
|
|
367
|
|
|
|
-
|
|
(In thousands)
|
|
June 30, 2020
|
|
|
Fair Value Measurements Using
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Cash and cash equivalents
|
|
$
|
40,463
|
|
|
$
|
40,463
|
|
|
$
|
40,463
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Long term certificate of deposit
|
|
|
4,070
|
|
|
|
4,070
|
|
|
|
4,070
|
|
|
|
-
|
|
|
|
-
|
|
Securities available-for-sale
|
|
|
226,709
|
|
|
|
226,709
|
|
|
|
4,660
|
|
|
|
222,049
|
|
|
|
-
|
|
Securities held-to-maturity
|
|
|
383,657
|
|
|
|
405,512
|
|
|
|
-
|
|
|
|
405,512
|
|
|
|
-
|
|
Equity Securities
|
|
|
267
|
|
|
|
267
|
|
|
|
267
|
|
|
|
-
|
|
|
|
-
|
|
Federal Home Loan Bank stock
|
|
|
1,226
|
|
|
|
1,226
|
|
|
|
-
|
|
|
|
1,226
|
|
|
|
-
|
|
Net loans receivable
|
|
|
993,522
|
|
|
|
1,004,031
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,004,031
|
|
Accrued interest receivable
|
|
|
8,207
|
|
|
|
8,027
|
|
|
|
-
|
|
|
|
8,027
|
|
|
|
-
|
|
Deposits
|
|
|
1,501,075
|
|
|
|
1,051,628
|
|
|
|
-
|
|
|
|
1,501,628
|
|
|
|
-
|
|
Borrowings
|
|
|
25,484
|
|
|
|
25,602
|
|
|
|
-
|
|
|
|
25,602
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
119
|
|
|
|
119
|
|
|
|
-
|
|
|
|
119
|
|
|
|
-
|
|
(7) Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic
earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding under the treasury stock method if all potentially dilutive
common shares (such as stock options) issued became vested during the period. There were no dilutive or anti-dilutive securities or contracts outstanding during the three and six months ended December 31, 2020 and 2019.
|
|
For the three months
ended December 31,
|
|
|
For the six months
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
6,195,000
|
|
|
$
|
5,113,000
|
|
|
$
|
11,070,000
|
|
|
$
|
9,976,000
|
|
Weighted Average Shares – Basic
|
|
|
8,513,414
|
|
|
|
8,537,010
|
|
|
|
8,513,414
|
|
|
|
8,537,412
|
|
Weighted Average Shares - Dilute
|
|
|
8,513,414
|
|
|
|
8,537,010
|
|
|
|
8,513,414
|
|
|
|
8,537,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic
|
|
$
|
0.73
|
|
|
$
|
0.60
|
|
|
$
|
1.30
|
|
|
$
|
1.17
|
|
Earnings per share - Diluted
|
|
$
|
0.73
|
|
|
$
|
0.60
|
|
|
$
|
1.30
|
|
|
$
|
1.17
|
|
(8) Dividends
On October 21, 2020, Greene County Bancorp, Inc. (NASDAQ-GCBC) announced that its Board of Directors has approved a quarterly cash dividend of $0.12 per share on the Company’s common stock. The dividend reflects an
annual cash dividend rate of $0.48 per share, which is the same rate as the dividend declared during the previous quarter. The dividend was payable to stockholders of record as of November 13, 2020, and was paid on November 30, 2020. Greene County
Bancorp, MHC waived its right to receive this dividend.
(9) Impact of Recent Accounting Pronouncements
The following accounting standards were adopted in the first quarter ended September 30, 2020:
In August 2018, the FASB issued an Update (ASU 2018-13) to its guidance on “Fair Value Measurement (Topic 820).” This update modifies the disclosure requirements on fair value measurements. The following disclosure
requirements were removed from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; (3) the valuation processes for Level 3 fair value
measurements; and (4) for nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period. The following disclosure
requirements were modified in Topic 820: (1) in lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3
assets and liabilities; (2) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if
the investee has communicated the timing to the entity or announced the timing publicly; and (3) the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the
reporting date. The following disclosure requirements were added to Topic 820; however, the disclosures are not required for non-public entities: (1) the changes in unrealized gains and losses for the period included in other comprehensive income
for recurring Level 3 fair value measurements held at the end of the reporting period; and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an
entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the
distribution of unobservable inputs used to develop Level 3 fair value measurements. In addition, the amendments eliminate at a minimum from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by
entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The amendments in ASU No. 2018-13 are effective for
all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to
develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other
amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay
adoption of the additional disclosures until their effective date. The adoption of this guidance did not have a material impact on our consolidated results of operations or financial position.
In April 2019, the FASB issued an Update (ASU 2019-04), Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The
amendments to Topic 326 and other topics in this Update include items related to the amendments in Update 2016-13 discussed at the June 2018 and November 2018 Credit Losses TRG meetings. The amendments related to Update 2016-13 have the same
effective dates as Update 2016-13 and are described in the next paragraph below. The ASU also covered a number of issues that related to hedge accounting including: Partial-Term Fair Value Hedges of Interest Rate Risk, Amortization of Fair Value
Hedge Basis Adjustments, Disclosure of Fair Value Hedge Basis Adjustments, Consideration of the Hedged Contractually Specified Interest Rate under the Hypothetical Derivative Method, Scoping for Not-for-Profit Entities, Hedge Accounting Provisions
Applicable to Certain Private Companies and Not-for-Profit Entities, and Application of a First-Payments-Received Cash Flow Hedging Technique to Overall Cash Flows on a Group of Variable Interest Payments. The amendments related to Topic 815 are
effective with the adoption of the amendments in Update 2017-12. The Company does not have any transactions that are applicable to Update 2017-12, and therefore the adoption of Update 2017-12 and related provisions of Update 2019-04, did not have
any impact on our consolidated results of operations or financial position. The ASU also covers Transition Guidance For Codification Improvements specific to ASU 2016-01. The following topics were covered within ASU 2019-04: Scope Clarifications,
Held-to-Maturity Debt Securities Fair Value Disclosures, Applicability of Topic 820 to the Measurement Alternative, and Remeasurement of Equity Securities at Historical Exchange Rates. The amendments related to ASU 2016-01 are effective for fiscal
years beginning after December 15, 2019. The adoption of this guidance did not have a material impact on our consolidated results of operations or financial position.
Accounting Pronouncements to be adopted in future periods
In June 2016, the FASB issued an Update (ASU 2016-13) to its guidance on “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 requires credit losses
on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit
losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition
of that instrument. The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit
deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase
price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above. Further, the ASU made certain targeted amendments to the existing
impairment model for available-for-sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a
write-down of the amortized cost basis. An entity will apply the amendments in this Update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a
modified-retrospective approach). In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which aligns the implementation date for nonpublic entities’ annual financial statements
with the implementation date for their interim financial statements and clarifies the scope of the guidance in the amendments in ASU 2016-13. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial
Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments to Topic 326 and other topics in ASU 2019-04 include items related to the amendments in Update 2016-13 discussed at the June 2018
and November 2018 Credit Losses TRG meetings. The amendments clarify or address stakeholders’ specific issues about certain aspects of the amendments in Update 2016-13 on a number of different topics, including the following: Accrued Interest,
Transfers between Classifications or Categories for Loans and Debt Securities, Recoveries, Consideration of Prepayments in Determining the Effective Interest Rate, Consideration of Estimated Costs to Sell When Foreclosure Is Probable, Vintage
Disclosures— Line-of-Credit Arrangements Converted to Term Loans, and Contractual Extensions and Renewals. The effective dates and transition requirements for the amendments related to this Update are the same as the effective dates and transition
requirements in Update 2016-13. In November 2019, the FASB issued ASU 2019-11 Codification Improvements to Topic 326 Financial Instruments Credit Losses provides additional clarification to specific issues about certain aspects of the amendments
in Update 2016-13 related to measuring the allowance for loan losses under the new guidance. The Company is currently evaluating the potential impact on our consolidated results of operations or financial position. The initial adjustment will not
be reported in earnings and therefore will not have any material impact on our consolidated results of operations, but it is expected that it will have an impact on our consolidated financial position at the date of adoption of this Update. At
this time, we have not calculated the estimated impact that this Update will have on our Allowance for Loan Losses, however, we anticipate it will have a significant impact on the methodology process we utilize to calculate the allowance. A vendor
has been selected and alternative methodologies are currently being considered. Data requirements and integrity are being reviewed and enhancements incorporated into standard processes. For public business entities that are U.S. Securities and
Exchange Commission (SEC) filers, excluding small reporting companies such as the Company, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In
November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses which amends the implementation effective date for small reporting companies, such as the Company, and non-public business entities, for fiscal years beginning after
December 15, 2022. All entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
In August 2018, the FASB has issued an Update (ASU No. 2018-14), “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for
Defined Benefit Plans”, that applies to all employers that sponsor defined benefit pension or other postretirement plans. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement
plans. The following disclosure requirements were removed from Subtopic 715-20: (1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year; (2) the amount
and timing of plan assets expected to be returned to the employer; (3) the disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law; related party disclosures about the amount of future annual benefits covered
by insurance and annuity contracts and significant transactions between the employer or related parties and the plan; (4) for nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a
recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets; and (5)
for public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement
health care benefits. The following disclosure requirements were added to Subtopic 715-20: (1) the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates; and (2) an explanation of
the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined
benefit pension plans should be disclosed: (1) the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets; and (2) the accumulated benefit obligation (ABO) and fair value of plan assets for
plans with ABOs in excess of plan assets. ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is
permitted for all entities. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.
In March 2020, the FASB issued an Update (ASU 2020-04), Reference Rate Reform (Topic 848). The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting
principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or
evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The following
optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance: (1) Modifications of
contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate. (2) Modifications of contracts within the scope of Topics 840, Leases, and 842, Leases, should be
accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate (for example, the incremental borrowing rate) or remeasurements of lease payments that otherwise would be required
under those Topics for modifications not accounted for as separate contracts. (3) Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly
and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives. The amendments in this Update are effective for all entities as of March 12, 2020 through
December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a
date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied
prospectively for all eligible contract modifications for that Topic or Industry Subtopic. An entity may elect to apply the amendments in this Update to eligible hedging relationships existing as of the beginning of the interim period that includes
March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company’s initial evaluation of LIBOR exposure appears to be minimal and limited to a couple of
participation loans or risk participation agreements. The Company is working with the other lead lenders to determine if any potential contract modifications are needed.
In October 2020, the FASB issued an Update (ASU 2020-08), Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. The amendments affect the guidance in ASU 2017-08, Receivables
– Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in that Update shortened the amortization period for certain purchased callable debt securities held at a premium by
requiring that entities amortize the premium associated with those callable debt securities within the scope of paragraph 310-20-25-33 to the earliest call date. The Board noted in paragraph BC21 of Update 2017-08 that if the security contained
additional future call dates, an entity should consider whether the amortized cost basis exceeded the amount repayable by the issuer at the next call date. If so, the excess should be amortized to the next call date. The amendments in ASU 2020-08
clarify the Board’s intent that an entity should reevaluate whether a callable debt security that has multiple call dates is within the scope of paragraph 310-20-35-33 for each reporting period. For public business entities, the amendments in this
Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is not permitted. All entities should apply the amendments in this Update on a prospective basis as of the
beginning of the period of adoption for existing or newly purchased callable debt securities. The Company is in the early stages of evaluation of the guidance.
(10) Employee Benefit Plans
Defined Benefit Plan
The components of net periodic pension cost related to the defined benefit pension plan for the three and six months ended December 31, 2020 and 2019 were as follows:
|
|
Three months ended
December 31,
|
|
|
Six months ended
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Interest cost
|
|
$
|
41
|
|
|
$
|
49
|
|
|
$
|
82
|
|
|
$
|
98
|
|
Expected return on plan assets
|
|
|
(64
|
)
|
|
|
(63
|
)
|
|
|
(127
|
)
|
|
|
(126
|
)
|
Amortization of net loss
|
|
|
52
|
|
|
|
40
|
|
|
|
104
|
|
|
|
80
|
|
Net periodic pension cost
|
|
$
|
29
|
|
|
$
|
26
|
|
|
$
|
59
|
|
|
$
|
52
|
|
The Company does not anticipate that it will make any additional contributions to the defined benefit pension plan during fiscal 2021.
SERP
The Board of Directors of The Bank of Greene County adopted The Bank of Greene County Supplemental Executive Retirement Plan (the “SERP Plan”), effective as of July 1, 2010. The SERP Plan benefits certain key senior
executives of the Bank who have been selected by the Board to participate. The SERP Plan is intended to provide a benefit from the Bank upon retirement, death or disability or voluntary or involuntary termination of service (other than “for
cause”). The SERP Plan is more fully described in Note 10 of the consolidated financial statements and notes thereto for the year ended June 30, 2020.
The net periodic pension costs related to the SERP Plan for the three and six months ended December 31, 2020 were $270,000 and $526,000. The net periodic pension costs related to the SERP Plan for the three and six
months ended December 31, 2019 were $214,000 and $419,000. The total liability for the SERP Plan was $7.3 million at December 31, 2020 and $6.4 million at June 30, 2020, respectively, and is included in accrued
expenses and other liabilities. The total liability for the SERP Plan includes both accumulated net periodic pension costs and participant contributions.
(11) Stock-Based Compensation
Phantom Stock Option Plan and Long-term Incentive Plan
The Greene County Bancorp, Inc. 2011 Phantom Stock Option and Long-term Incentive Plan (the “Plan”) was adopted effective July 1, 2011, to promote the long-term financial success of the Company and its subsidiaries
by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s shareholders. The Plan is intended to provide benefits to employees and directors of the
Company or any subsidiary as designated by the Compensation Committee of the Board of Directors of the Company (“Committee”). A phantom stock option represents the right to receive a cash payment on the date the award vests. The Plan is more fully
described in Note 11 of the consolidated financial statements and notes thereto for the year ended June 30, 2020.
A summary of the Company’s phantom stock option activity and related information for the Plan for the three and six months ended December 31, 2020 and 2019 were as follows:
|
|
Three months ended December 31,
|
|
|
Six months ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Number of options outstanding, beginning of period
|
|
|
2,288,800
|
|
|
|
2,319,300
|
|
|
|
1,765,100
|
|
|
|
1,711,600
|
|
Options Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
523,700
|
|
|
|
614,700
|
|
Options Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,000
|
)
|
Options Paid in Cash
|
|
|
(583,200
|
)
|
|
|
(554,200
|
)
|
|
|
(583,200
|
)
|
|
|
(554,200
|
)
|
Number of options outstanding, end of period
|
|
|
1,705,600
|
|
|
|
1,765,100
|
|
|
|
1,705,600
|
|
|
|
1,765,100
|
|
|
|
Three months ended December 31,
|
|
|
Six months ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Cash paid out on options vested
|
|
$
|
3,107
|
|
|
$
|
2,516
|
|
|
$
|
3,107
|
|
|
$
|
2,516
|
|
Compensation costs recognized
|
|
|
972
|
|
|
|
1,697
|
|
|
|
1,607
|
|
|
|
1,395
|
|
The total liability for the Plan was $3.4 million and $4.9 million at December 31, 2020 and June 30, 2020, respectively, and is included in accrued expenses and other liabilities.
(12) Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss at December 31, 2020 and 2019 are presented as follows:
Activity for the three months ended December 31, 2020 and 2019
(In thousands)
|
|
Unrealized
gain (losses)
on securities
available-for-
sale
|
|
|
Pension
benefits
|
|
|
Total
|
|
Balance - September 30, 2019
|
|
$
|
561
|
|
|
$
|
(1,838
|
)
|
|
$
|
(1,277
|
)
|
Other comprehensive loss before reclassification
|
|
|
(114
|
)
|
|
|
-
|
|
|
|
(114
|
)
|
Other comprehensive loss for the three months ended September 30, 2019
|
|
|
(114
|
)
|
|
|
-
|
|
|
|
(114
|
)
|
Balance - December 31, 2019
|
|
$
|
447
|
|
|
$
|
(1,838
|
)
|
|
$
|
(1,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - September 30, 2020
|
|
$
|
1,560
|
|
|
$
|
(2,178
|
)
|
|
$
|
(618
|
)
|
Other comprehensive loss before reclassification
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
Other comprehensive loss for the three months ended September 30, 2020
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
Balance - December 31, 2020
|
|
$
|
1,552
|
|
|
$
|
(2,178
|
)
|
|
$
|
(626
|
)
|
Activity for the six months ended December 31, 2020 and 2019
(In thousands)
|
|
Unrealized
gain (losses)
on securities
available-for-
sale
|
|
|
Pension
benefits
|
|
|
Total
|
|
Balance at June 30, 2019
|
|
$
|
832
|
|
|
$
|
(1,838
|
)
|
|
$
|
(1,006
|
)
|
Other comprehensive loss before reclassification
|
|
|
(385
|
)
|
|
|
-
|
|
|
|
(385
|
)
|
Other comprehensive income for the six months ended December 31, 2019
|
|
|
(385
|
)
|
|
|
-
|
|
|
|
(385
|
)
|
Balance at December 31, 2019
|
|
$
|
447
|
|
|
$
|
(1,838
|
)
|
|
$
|
(1,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
$
|
1,750
|
|
|
$
|
(2,178
|
)
|
|
$
|
(428
|
)
|
Other comprehensive loss before reclassification
|
|
|
(198
|
)
|
|
|
-
|
|
|
|
(198
|
)
|
Other comprehensive loss for the six months ended December 31, 2020
|
|
|
(198
|
)
|
|
|
-
|
|
|
|
(198
|
)
|
Balance at December 31, 2020
|
|
$
|
1,552
|
|
|
$
|
(2,178
|
)
|
|
$
|
(626
|
)
|
(13) Revenue from Contracts with Customers
The majority of the Company's revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans and investment securities which are presented in
our consolidated income statements as components of net interest income. All of the Company's revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income, with the exception of net gains and losses from
sales of foreclosed real estate, which is recognized within non-interest expense. The following table presents revenues subject to ASC 606 for the three and six months ended December 31, 2020 and 2019, respectively.
|
|
For the three months ended
December 31,
|
|
|
For the six months ended
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Service charges on deposit accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Insufficient funds fees
|
|
$
|
826
|
|
|
$
|
1,003
|
|
|
$
|
1,526
|
|
|
$
|
2,021
|
|
Deposit related fees
|
|
|
38
|
|
|
|
41
|
|
|
|
74
|
|
|
|
80
|
|
ATM/point of sale fees
|
|
|
70
|
|
|
|
67
|
|
|
|
140
|
|
|
|
135
|
|
Total service charges
|
|
|
934
|
|
|
|
1,111
|
|
|
|
1,740
|
|
|
|
2,136
|
|
Interchange fee income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debit card interchange fees
|
|
|
917
|
|
|
|
755
|
|
|
|
1,810
|
|
|
|
1,498
|
|
E-commerce fee income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E-commerce fees
|
|
|
28
|
|
|
|
31
|
|
|
|
57
|
|
|
|
66
|
|
Investment services income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment services
|
|
|
216
|
|
|
|
168
|
|
|
|
377
|
|
|
|
313
|
|
Sales of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on foreclosed real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76
|
|
Service Charges on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which included services such
as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate
primarily to monthly maintenance, are recognized at the time the maintenance occurs. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.
Debit Card Interchange Fee Income: The Company earns interchange fees from debit cardholder transactions conducted through the Visa DPS payment network. Interchange fees from cardholder transactions represent
a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to cardholder.
E-commerce income: The Company earns fees for merchant transaction processing services provided to its business customers by a third party service provider. The fees represent a percentage of the monthly
transaction activity net of related costs, and are received from the service provider on a monthly basis.
Investment Services Income: The Company earns fees from investment brokerage services provided to its customers by a third-party service provider. The Company receives commissions from the third-party service
provider on a monthly basis based upon customer activity for the month. The Company (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the
customers. Investment brokerage fees are presented net of related costs.
Net Gains/Losses on Sales of Foreclosed Real Estate: The Company records a gain or loss from the sale of foreclosed real estate when control of the property transfers to the buyer, which generally occurs at
the time of an executed deed. When the Company finances the sale of foreclosed real estate to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the
transaction price is probable. Once these criteria are met, the foreclosed real estate asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the
sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.
(14) Operating leases
The Company leases certain branch properties under long-term, operating lease agreements. The Company’s operating lease agreements contain lease components, which are generally accounted for separately. The Company’s
lease agreements do not contain any residual value guarantee. The following includes quantitative data related to the Company’s operating leases as of December 31, and June 30, 2020, and for the three and six months ended December 31, 2020 and
2019:
(In thousands, except weighted-average information).
|
|
|
|
|
|
|
Operating lease amounts:
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Right-of-use assets
|
|
$
|
2,043
|
|
|
$
|
1,575
|
|
Lease liabilities
|
|
$
|
2,063
|
|
|
$
|
1,587
|
|
|
|
Three months ended
December 31,
|
|
|
Three months ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
(In thousands)
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
Operating outgoing cash flows from operating leases
|
|
$
|
86
|
|
|
$
|
78
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
$
|
625
|
|
|
$
|
1,840
|
|
|
|
|
|
|
|
|
|
|
Lease costs:
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
81
|
|
|
$
|
70
|
|
Variable lease cost
|
|
$
|
10
|
|
|
$
|
10
|
|
|
|
Six months ended
December 31,
|
|
|
Six months ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
(In thousands)
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
Operating outgoing cash flows from operating leases
|
|
$
|
173
|
|
|
$
|
155
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
$
|
625
|
|
|
$
|
1,840
|
|
|
|
|
|
|
|
|
|
|
Lease costs:
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
161
|
|
|
$
|
142
|
|
Variable lease cost
|
|
$
|
20
|
|
|
$
|
20
|
|
The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding common area maintenance charges and real estate taxes, as of December 31, 2020:
(in thousands)
|
|
|
|
Within the twelve months ended December 31,
|
|
|
|
2021
|
|
$
|
338
|
|
2022
|
|
|
291
|
|
2023
|
|
|
273
|
|
2024
|
|
|
283
|
|
2025
|
|
|
274
|
|
Thereafter
|
|
|
783
|
|
Total undiscounted cash flow
|
|
|
2,242
|
|
Less net present value adjustment
|
|
|
(179
|
)
|
Lease Liability
|
|
$
|
2,063
|
|
|
|
|
|
|
Weighted-average remaining lease term (Years)
|
|
|
6.18
|
|
Weighted-average discount rate
|
|
|
2.22
|
%
|
Right-of-use assets are included in prepaid expenses and other assets, and lease liabilities are included in accrued expenses and other liabilities within the Company’s statement of condition. The Company entered
into a new lease commitment for a new branch location on Wolf Road, in Colonie, NY during the year ended June 30, 2020. This lease commenced on July 1, 2020.
(15) Subsequent events
On January 19, 2021, the Board of Directors declared a cash dividend for the quarter ended December 31, 2020 of $0.12 per share on Greene County Bancorp, Inc.’s common stock. The dividend reflects an annual cash
dividend rate of $0.48 per share, which was the same rate as the dividend declared during the previous quarter. The dividend will be payable to stockholders of record as of February 15, 2021, and will be paid on February 26, 2021. The MHC does
not intend to waive its receipt of this dividend.
During January 2021, the Company entered into a Bank Owned Life Insurance (“BOLI”) program, and established a wholly-owned trust under the Company’s subsidiary, The Bank of Greene County (“Bank”). The Bank
purchased $40.0 million of institutional life insurance on a select group of eligible senior and management employees to partially defray the costs of employee benefit programs. All employees participating in the program are aware of and have
consented to the coverage.