All FDIC-insured institutions are required to pay a pro rata portion of the interest due on obligations issued by the Financing Corporation (“FICO”) for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended June 30, ~~2015,~~2016, the annualized Financing Corporation assessment was equal to ~~0.63~~0.58 basis points of total assets less tangible capital. For the fiscal year June 30, ~~2015,~~2016, The Bank of Greene County, and its subsidiary Greene County Commercial Bank, jointly paid ~~$39,000~~$41,000 related to the FICO bonds.

Prohibitions Against Tying Arrangements. Federal savings associations are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Federal Home Loan Bank System. The Bank of Greene County is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a member of the Federal Home Loan Bank of New York, The Bank of Greene County is required to acquire and hold shares of capital stock in the Federal Home Loan Bank in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20 of its borrowings from the Federal Home Loan Bank, whichever is greater. As of June 30, ~~2015,~~2016, The Bank of Greene County was in compliance with this requirement.

Federal Reserve System. The Federal Reserve Board regulations require savings associations to maintain noninterest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At June 30, ~~2015,~~2016, The Bank of Greene County was in compliance with these reserve requirements.

Other Regulations

Interest and other charges collected or contracted for by The Bank of Greene County are subject to state usury laws and federal laws concerning interest rates. The Bank of Greene County’s operations are also subject to federal laws applicable to credit transactions, such as the:

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

~~Index~~

Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

Truth in Savings Act; and

rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of The Bank of Greene County also are subject to the:

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

Check Clearing for the 21^st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

The USA PATRIOT Act, which requires financial institutions to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Index

Holding Company Regulation

General. Greene County Bancorp, MHC and Greene County Bancorp, Inc. are nondiversified savings and loan holding companies within the meaning of the Home Owners’ Loan Act. As such, Greene County Bancorp, MHC and Greene County Bancorp, Inc. are registered with the FRB and are subject to FRB regulations, supervision and reporting requirements. In addition, the FRB has enforcement authority over Greene County Bancorp, Inc. and Greene County Bancorp, MHC, and their non-bank subsidiaries. Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. As federal corporations, Greene County Bancorp, Inc. and Greene County Bancorp, MHC are generally not subject to state business organization laws.

Permitted Activities. Pursuant to Section 10(o) of the Home Owners’ Loan Act and federal regulations and policy, a mutual holding company and a federally chartered mid-tier holding company such as Greene County Bancorp, Inc. may engage in the following activities: (i) investing in the stock of a savings association; (ii) acquiring a mutual association through the merger of such association into a savings association subsidiary of such holding company or an interim savings association subsidiary of such holding company; (iii) merging with or acquiring another holding company, one of whose subsidiaries is a savings association; (iv) investing in a corporation, the capital stock of which is available for purchase by a savings association under federal law or under the law of any state where the subsidiary savings association or associations share their home offices; (v) furnishing or performing management services for a savings association subsidiary of such company; (vi) holding, managing or liquidating assets owned or acquired from a savings subsidiary of such company; (vii) holding or managing properties used or occupied by a savings association subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix) any other activity (A) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the Director of the Federal Reserve Board, by regulation, prohibits or limits any such activity for savings and loan holding companies; or (B) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987; (x) any activity permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act, including securities and insurance underwriting; and (xi) purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such savings and loan holding company is approved by the Director. If a mutual holding company acquires or merges with another holding company, the holding company acquired or the holding company resulting from such merger or acquisition may only invest in assets and engage in activities listed in (i) through (xi) above, and has a period of two years to cease any nonconforming activities and divest any nonconforming investments.

~~Index~~

The Home Owners’ Loan Act prohibits a savings and loan holding company, including Greene County Bancorp, Inc. and Greene County Bancorp, MHC, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior written approval of the FRB. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a nonsubsidiary company engaged in activities other than those permitted by the Home Owners’ Loan Act, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the FRB must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

The FRB is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Capital. Historically, savings and loan holding companies have not been subject to specific regulatory capital requirements. The Dodd-Frank Act, however, requires the FRB to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. On January 29, 2015, the Federal Reserve Bank Board revised the Small Bank Holding Company Policy Statement (“Policy Statement”) to raise the total consolidated asset limit from $500 million to $1 billion, and expand the scope of the Policy Statement to include savings and loan holding companies (SLHCs). In conjunction with these revisions, the Board proposed changes to regulatory reports effective in 2015 to lessen the reporting burden on smaller institutions. Prior to these revisions, beginning on January 1, 2015, the top-tier savings and loan holding company, Greene County Bancorp, MHC would have been subject to the new regulatory capital reporting requirements. However, as a result of these revisions, the MHC has been exempted from the new regulatory capital reporting requirements.

Dividends. The FRB has issued a policy statement regarding the payment of dividends by bank holding companies that applies to savings and loan holding companies as well. In general, the FRB’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. FRB guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of Greene County Bancorp, Inc. to pay dividends or otherwise engage in capital distributions.

Index

Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must issue regulations requiring that all bank and savings and loan holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Waivers of Dividends by Greene County Bancorp, MHC. Federal regulations require Greene County Bancorp, MHC to notify the FRB of any proposed waiver of its receipt of dividends from Greene County Bancorp, Inc. The Office of Thrift Supervision, the previous regulator for Greene County Bancorp, MHC, allowed dividend waivers where the mutual holding company’s board of directors determined that the waiver was consistent with its fiduciary duties and the waiver would not be detrimental to the safety and soundness of the institution. The FRB has issued an interim final rule providing that, pursuant to a Dodd-Frank Act grandfathering provision, it may not object to dividend waivers under similar circumstances, but adding the requirement that a majority of the mutual holding company’s members eligible to vote have approved a waiver of dividends by the company within 12 months prior to the declaration of the dividend being waived. The MHC received the approval of its members (depositors of The Bank of Greene County) and the non-objection of the Federal Reserve Bank of Philadelphia, to waive the MHC’s receipt of quarterly cash dividends aggregating up to ~~$0.80~~$0.40 per share to be declared by the Company for the four quarters ending December 31, ~~2015.~~2016. The waiver of dividends beyond this period are subject to the MHC obtaining approval of its members at a special meeting of members and receive the non-objection of the Federal Reserve Bank of Philadelphia for such dividend waivers for the four quarters subsequent to the approval. Therefore, its ability to waive its right to receive dividends beyond this date cannot be reasonably determined at this time.

Conversion of Greene County Bancorp, MHC to Stock Form. Federal regulations permit Greene County Bancorp, MHC to convert from the mutual form of organization to the capital stock form of organization (a “Conversion Transaction”). There can be no assurance when, if ever, a Conversion Transaction will occur, and the Board of Directors has no current intention or plan to undertake a Conversion Transaction. In a Conversion Transaction a new stock holding company would be formed as the successor to Greene County Bancorp, Inc. (the “New Holding Company”), Greene County Bancorp, MHC’s corporate existence would end, and certain depositors of The Bank of Greene County would receive the right to subscribe for additional shares of the New Holding Company. In a Conversion Transaction, each share of common stock held by stockholders other than Greene County Bancorp, MHC (“Minority Stockholders”) would be automatically converted into a number of shares of common stock of the New Holding Company determined pursuant to an exchange ratio that ensures that Minority Stockholders own the same percentage of common stock in the New Holding Company as they owned in Greene County Bancorp, Inc. immediately prior to the Conversion Transaction. Under a provision of the Dodd-Frank Act applicable to Greene County Bancorp, MHC, Minority Stockholders would not be diluted because of any dividends waived by Greene County Bancorp, MHC (and waived dividends would not be considered in determining an appropriate exchange ratio), in the event Greene County Bancorp, MHC converts to stock form.

~~Index~~

Commercial Bank Regulation

Our commercial bank, Greene County Commercial Bank, derives its authority primarily from the applicable provisions of the New York Banking Law and the regulations adopted under that law. Our commercial bank is limited in its investments and the activities that it may engage in to those permissible under applicable state law and those permissible for national banks and their subsidiaries, unless those investments and activities are specifically permitted by the Federal Deposit Insurance Act or the FDIC determines that the activity or investment would pose no significant risk to the deposit insurance fund. We limit our commercial bank activities to accepting municipal deposits and acquiring municipal and other securities.

Under New York Banking Law, our commercial bank is not permitted to declare, credit or pay any dividends if its capital stock is impaired or would be impaired as a result of the dividend. In addition, the New York Banking Law provides that our commercial bank cannot declare or pay dividends in any calendar year in excess of “net profits” for such year combined with “retained net profits” of the two preceding years, less any required transfer to surplus or a fund for the retirement of preferred stock, without prior regulatory approval.

Our commercial bank is subject to minimum capital requirements imposed by the FDIC that are substantially similar to the capital requirements imposed on The Bank of Greene County, discussed above. Capital requirements higher than the generally applicable minimum requirements may be established for a particular bank if the FDIC determines that a bank’s capital is, or may become, inadequate in view of the bank’s particular circumstances. Failure to meet capital guidelines could subject a bank to a variety of enforcement actions, including actions under the FDIC’s prompt corrective action regulations.

At June 30, ~~2015,~~2016, our commercial bank met the criteria for being considered “well-capitalized.”

Index

Federal Securities Laws

Greene County Bancorp, Inc. common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Greene County Bancorp, Inc. is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

Greene County Bancorp, Inc. common stock held by persons who are affiliates (generally officers, directors and principal shareholders) of Greene County Bancorp, Inc. may not be resold without registration or unless sold in accordance with certain resale restrictions. If Greene County Bancorp, Inc. meets specified current public information requirements, each affiliate of Greene County Bancorp, Inc. is able to sell in the public market, without registration, a limited number of shares in any three-month period.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 was enacted to address, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. Under Section 302(a) of the Sarbanes-Oxley Act, the Chief Executive Officer and Chief Financial Officer of Greene County Bancorp, Inc. are required to certify that its quarterly and annual reports filed with the Securities and Exchange Commission do not contain any untrue statement of a material fact. Rules promulgated under the Sarbanes-Oxley Act require that these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal controls; and they have included information in our quarterly and annual reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls. Greene County Bancorp, Inc. has existing policies, procedures and systems designed to comply with these regulations, and is further enhancing and documenting such policies, procedures and systems to ensure continued compliance with these regulations.

~~Index~~

Reports to Security Holders

Greene County Bancorp, Inc. files annual and current reports with the SEC on Forms 10-K, 10-Q and 8-K, respectively. Greene County Bancorp, Inc. also files proxy materials with the SEC.

The public may read and copy any materials filed by Greene County Bancorp, Inc. with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Greene County Bancorp, Inc. is an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the site is http://www.sec.gov.

ITEM 1A.

Risk Factors

Not applicable to smaller reporting companies.

ITEM 1B.

Unresolved Staff Comments

None.

Index

ITEM 2.

Properties

The Bank of Greene County currently conducts its business through 13 full-service banking offices, ~~and~~an administration center, operations center and lending center. Both Greene County Bancorp, Inc. and The Bank of Greene County maintain their executive offices at the Administration Center, 302 Main Street, Catskill, New York. The following table sets forth The Bank of Greene County's offices as of June 30, ~~2015.~~2016.

Location	Leased or Owned	Original Year Leased or Acquired	Date of Lease Expiration	Net Book Value		Leased or Owned	Original Year Leased or Acquired	Date of Lease Expiration	Net Book Value
				(Dollars in thousands)					(Dollars in thousands)
Administration Office⁽¹⁾
302 Main Street, Catskill, NY 12414	Owned	1999	---	$	646	Owned	1999	---	$	631

Operations Center
288 Main Street, Catskill, NY 12414	Owned	2006	---	$	1,333	Owned	2006	---	$	1,294

Lending Center
341 Main Street, Catskill, NY 12414	Owned	2013	---	$	721	Owned	2013	---	$	727

Main Branch ⁽¹⁾
Main & Church Streets, Catskill, NY 12414	Owned	1963	---	$	390	Owned	1963	---	$	369

Coxsackie Branch
2 Technology Drive, W. Coxsackie, NY 12192	Owned	2005	---	$	1,652	Owned	2005	---	$	1,604

Cairo Branch
230 Matthew Simons Road, Cairo, NY 12413	Owned	2005	---	$	1,721	Owned	2005	---	$	1,672

Chatham Branch
Route 66, Chatham, NY 12037	Owned	2006	---	$	1,622	Owned	2006	---	$	1,583

Germantown Branch
4266 State Route 9G, Germantown, NY 12526	Owned	2010	---	$	554	Owned	2010	---	$	536

Greenville Branch
Route 32, Greeneville, NY 12083	Owned	1997	---	$	721	Owned	1997	---	$	719

Greenport Branch
160 Fairview Avenue, Hudson, NY 12534	Leased	2006	31-Dec-16	$	272	Leased	2006	31-Dec-21	$	231

Hudson Branch
21 North 7^th Street, Hudson, NY 12534	Leased	2004	31-Oct-16	$	-	Leased	2004	31-Oct-21	$	-

Ravena Branch
2494 U.S., Route 9W, Ravena, NY 12143	Owned	2009	---	$	1,451	Owned	2009	---	$	1,423

Tannersville Branch
Main Street, Tannersville, NY 12485	Owned	2000	---	$	938	Owned	2000	---	$	935

Westerlo Branch
Routes 141 & 143, Westerlo, NY 12193	Leased	2001	30-Nov-20	$	4	Leased	2001	30-Nov-20	$	-

Catskill Commons Branch
100 Catskill Commons, Catskill, NY 12414	Owned	2006	---	$	1,807	Owned	2006	---	$	1,773

Kingston Branch
2 Miron Lane, Kingston, NY 12401	Leased	2014	14-Sep-18	$	60	Leased	2014	14-Sep-18	$	58

⁽¹⁾	Includes adjacent parking lot and long term storage building.

Index

ITEM 3.

Legal Proceedings

Greene County Bancorp, Inc. and its subsidiaries are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business that, in the aggregate, involve amounts that are believed by management to be immaterial to the consolidated financial condition and consolidated results of operations of Greene County Bancorp, Inc.

ITEM 4.

Mine Safety Disclosures

Not applicable.

PART II

ITEM 5.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Greene County Bancorp, Inc.’s common stock is listed on the NASDAQ Capital Market under the symbol “GCBC”. As of September ~~8, 2015~~9, 2016 Greene County Bancorp, Inc. had 1419 registered market makers, ~~493~~487 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms) and ~~4,224,457~~8,487,614 shares outstanding. As of such date, Greene County Bancorp, MHC (the “MHC”), Greene County Bancorp, Inc.’s mutual holding company, held ~~2,304,632~~4,609,264 shares of common stock or ~~54.6%~~54.4% of total shares outstanding. Consequently, shareholders other than the MHC held ~~1,919,825~~3,878,350 shares.

Payment of dividends on Greene County Bancorp, Inc.’s common stock is subject to determination and declaration by the Board of Directors and depends upon a number of factors, including capital requirements, regulatory limitations on the payment of dividends, Greene County Bancorp, Inc.’s results of operations, financial condition, tax considerations and general economic conditions. No assurance can be given that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends, once declared, will continue. The Federal Reserve Board has adopted interim final regulations that impose significant conditions and restrictions on the ability of mutual holding companies to waive the receipt of dividends from their subsidiaries. The MHC received the approval of its members (depositors of The Bank of Greene County) and the non-objection of the Federal Reserve Bank of Philadelphia, to waive the MHC’s receipt of quarterly cash dividends aggregating up to ~~$0.80~~$0.40 per share to be declared by the Company for the four quarters ending December 31, ~~2015.~~2016. The waiver of dividends beyond this period are subject to the MHC obtaining approval of its members at a special meeting of members and receive the non-objection of the Federal Reserve Bank of Philadelphia for such dividend waivers for the four quarters subsequent to the approval. Therefore, its ability to waive its right to receive dividends beyond this date cannot be reasonably determined at this time.

The following table sets forth a summary of selected financial data at and for the fiscal quarter ends for the years ended June 30, ~~2015~~2016 and ~~2014.~~2015. Closing market price information is stated at the quarter end dates ~~indicated.~~indicated, and for periods prior to March 15, 2016 all information has been adjusted for a 2-for-1 stock split.

Fiscal 2016									First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Market price (NASDAQ:GCBC)
High									$	14.80	$	16.50	$	21.25	$	21.30
Low										13.50		13.75		15.24		15.84
Close										13.75		15.98		17.57		16.27
Cash Dividends										0.0925		0.0925		0.0925		0.0925

Fiscal 2015	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Market price (NASDAQ:GCBC)
High	$	27.00	$	30.87	$	30.10	$	31.00	$	13.50	$	15.44	$	15.05	$	15.50
Low		25.25		25.32		27.50		25.20		12.63		12.66		13.75		12.60
Close		26.98		30.10		28.50		28.49		13.49		15.05		14.25		14.25
Cash Dividends		0.18		0.18		0.18		0.18		0.09		0.09		0.09		0.09

Fiscal 2014
Market price (NASDAQ:GCBC)
High	$	32.54	$	28.00	$	28.00	$	26.99
Low		21.00		24.30		24.97		25.50
Close		28.26		26.00		25.70		26.55
Cash Dividends		0.175		0.175		0.175		0.175

There were no sales of unregistered securities during fiscal ~~2015~~2016 or ~~2014.~~2015. On August 22, 2007, the Board of Directors authorized a stock repurchase program pursuant of up to 5% of its outstanding shares (excluding shares held by Greene County Bancorp, MHC, the Company’s mutual holding company), or up to ~~92,346 shares.~~184,692 shares, adjusted for a 2-for-1 stock split. As of June 30, ~~2015,~~2016, the Company had repurchased ~~62,478~~124,956 shares in accordance with the stock repurchase program. There were no shares repurchased during fiscal ~~2015,~~2016, or ~~2014.~~2015. The Company currently does not intend to repurchase any additional shares under this stock repurchase program.

Index

As of June 30, ~~2015,~~2016, the Company has adopted two equity-based compensation plans: the 2008 Stock Option Plan and the ESOP. The 2008 Stock Option Plan has been approved by stockholders of the Company and, except for the ESOP, the Company has not implemented any equity-based compensation program that has not been approved by Company stockholders.

Set forth below is certain information as of June 30, ~~2015~~2016 regarding equity-based compensation plans for directors and executive officers of the Company that have been approved by stockholders.

Plan		Number of securities to be issued upon exercise of outstanding options and rights			Weighted average exercise price			Number of securities remaining available for issuance under plan			Number of securities to be issued upon exercise of outstanding options and rights			Weighted average exercise price				Number of securities remaining available for issuance under plan
2008 Stock Option Plan		47,835			$12.50			15,500			64,770			$	6.25			31,000

Index

ITEM 6.

Selected Financial Data

The selected financial and operational data presented below at and for the years shown was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. and should be read in conjunction with the consolidated financial statements presented elsewhere in this Report.

	At or for the Years Ended June 30,									At or for the Years Ended June 30,
(Dollars in thousands, except per share amounts)	2015			2014			2013			2016			2015			2014
SELECTED FINANCIAL CONDITION DATA:
Total assets	$	738,647		$	674,161		$	633,605		$	868,781		$	738,647		$	674,161
Loans receivable, net		443,496			399,309			359,426			522,764			443,496			399,309
Securities available-for-sale		86,034			56,151			69,644			100,123			86,034			56,151
Securities held-to-maturity		169,000			181,946			176,519			204,935			169,000			181,946
Deposits		622,717			589,574			558,439			738,887			622,717			589,574
Shareholders' equity		66,920			61,200			56,108			74,301			66,920			61,200
AVERAGE BALANCES:
Total assets		703,515			658,796			618,829			795,819			703,515			658,796
Interest-earning assets		685,172			641,033			599,910			777,539			685,172			641,033
Loans receivable, net		419,793			382,759			343,620			476,356			419,793			382,759
Securities		250,247			236,220			235,554			281,308			250,247			236,220
Deposits		610,170			582,185			551,285			690,995			610,170			582,185
Borrowings		24,760			15,243			9,612			27,835			24,760			15,243
Shareholders' equity		64,222			58,394			54,656			70,669			64,222			58,394
SELECTED OPERATIONS DATA:
Total interest income		25,700			23,788			24,060			28,802			25,700			23,788
Total interest expense		2,302			2,387			2,817			2,581			2,302			2,387
Net interest income		23,398			21,401			21,243			26,221			23,398			21,401
Provision for loan losses		1,556			1,500			1,746			1,673			1,556			1,500
Net interest income after provision for loan losses		21,842			19,901			19,497			24,548			21,842			19,901
Total noninterest income		5,608			5,280			4,995			5,965			5,697			5,280
Total noninterest expense		17,943			16,116			15,449			18,871			18,032			16,116
Income before provision for income taxes		9,507			9,065			9,043			11,642			9,507			9,065
Provision for income taxes		2,318			2,537			2,672			2,679			2,318			2,537
Net income		7,189			6,528			6,371			8,963			7,189			6,528
FINANCIAL RATIOS:
Return on average assets¹		1.02	%		0.99	%		1.03	%		1.13	%		1.02	%		0.99	%
Return on average shareholders’ equity²		11.19			11.18			11.66			12.68			11.19			11.18
Noninterest expenses to average total assets		2.55			2.45			2.50			2.37			2.56			2.45
Average interest-earning assets to average interest-bearing liabilities		120.78			119.25			117.80			121.70			120.78			119.25
Net interest rate spread³		3.34			3.27			3.46			3.30			3.34			3.27
Net interest margin⁴		3.41			3.34			3.54			3.37			3.41			3.34
Efficiency ratio⁵		61.86			60.40			58.88			58.63			61.98			60.40
Shareholders’ equity to total assets, at end of period		9.06			9.08			8.86			8.55			9.06			9.08
Average shareholders’ equity to average assets		9.13			8.86			8.83			8.88			9.13			8.86
Dividend payout ratio⁶		42.35			45.16			46.05			34.91			42.35			45.16
Actual dividends declared to net income⁷		25.01			20.45			33.40			20.69			25.01			20.45
Nonperforming assets to total assets, at end of period		0.75			0.98			1.13			0.43			0.75			0.98
Nonperforming loans to net loans, at end of period		1.06			1.54			1.92			0.65			1.06			1.54
Allowance for loan losses to nonperforming loans		173.53			120.34			102.25			278.72			173.53			120.34
Allowance for loan losses to total loans receivable		1.81			1.83			1.92			1.79			1.81			1.83
Book value per share⁸	$	15.85		$	14.52		$	13.38
Basic earnings per share		1.70			1.55			1.52
Diluted earnings per share		1.69			1.54			1.51
Book value per share⁸⁹										$	8.77		$	7.92		$	7.26
Basic earnings per share⁹											1.06			0.85			0.78
Diluted earnings per share⁹											1.06			0.85			0.77
OTHER DATA:
Closing market price of common stock	$	28.49		$	26.55		$	21.50
Closing market price of common stock⁹										$	16.27		$	14.25		$	13.28
Number of full-service offices		13			12			12			13			13			12
Number of full-time equivalent employees		136			124			124			137			133			124

¹	Ratio of net income to average total assets.

²	Ratio of net income to average shareholders’ equity.

³	The difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

⁴	Net interest income as a percentage of average interest-earning assets.

⁵	Noninterest expense divided by the sum of net interest income and noninterest income.

⁶	Dividends per share divided by basic earnings per share. This calculation does not take into account the waiver of dividends by Greene County Bancorp, MHC.

⁷	Dividends declared divided by net income.

⁸	Shareholders’ equity divided by outstanding shares.

⁹	Prior periods restated for comparability to reflect the 2-for-1 stock split effective March 15, 2016

Index

ITEM 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Greene County Bancorp, Inc. (the “Company”) is the holding company for The Bank of Greene County (the “Bank”), a community-based bank offering a variety of financial services to meet the needs of the communities it serves. The Bank of Greene County is a federally chartered savings bank. The Bank of Greene County’s principal business is attracting deposits from customers within its market area and investing those funds primarily in loans, with excess funds used to invest in securities. The Bank of Greene County currently operates 13 full-service branches, an administration office, a lending center, and an operations center in New York’s Hudson Valley Region. In June 2004, Greene County Commercial Bank (“GCCB”) was opened for the limited purpose of servicing local municipalities. GCCB is a subsidiary of The Bank of Greene County, and is a New York State-chartered commercial bank. Greene County Bancorp, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol “GCBC.” Greene County Bancorp, MHC is a mutual holding company that owns ~~54.6%~~54.4% of the Company’s outstanding common stock. In June 2011, Greene Property Holdings, Ltd. was formed as a New York corporation that has elected under the Internal Revenue Code to be a real estate investment trust. Greene Properties Holding, Ltd. is a subsidiary of The Bank of Greene County. Certain mortgages and notes held by The Bank of Greene County were transferred to and are beneficially owned by Greene Property Holdings, Ltd. The Bank of Greene County continues to service these loans. In December 2014, Greene Risk Management, Inc. was formed as a Nevada corporation that is operating as a pooled captive insurance company. The purpose of this company is to provide additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.

Overview of the Company’s Activities and Risks

Greene County Bancorp, Inc.’s results of operations depend primarily on its net interest income, which is the difference between the income earned on Greene County Bancorp, Inc.’s loan and securities portfolios and its cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by Greene County Bancorp, Inc.’s provision for loan losses, gains and losses from sales of securities, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges. Greene County Bancorp, Inc.’s noninterest expense consists principally of compensation and employee benefits, occupancy, equipment and data processing, and other operating expenses. Results of operations are also significantly affected by general economic and competitive conditions, changes in interest rates, as well as government policies and actions of regulatory authorities. Additionally, future changes in applicable law, regulations or government policies may materially affect Greene County Bancorp, Inc.

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.

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.

Index

Management of Credit Risk

Management considers credit risk to be an important risk factor affecting the financial condition and operating results of Greene County Bancorp, Inc. The potential for loss associated with this risk factor is managed through a combination of policies approved by Greene County Bancorp, Inc.’s Board of Directors, the monitoring of compliance with these policies, and the periodic reporting and evaluation of loans with problem characteristics. Policies relate to the maximum amount that can be granted to a single borrower and such borrower’s related interests, the aggregate amount of loans outstanding by type in relation to total assets and capital, loan concentrations, loan-to-collateral value ratios, approval limits and other underwriting criteria. Policies also exist with respect to the rating of loans, determination of when loans should be placed on a nonperforming status and the factors to be considered in establishing Greene County Bancorp, Inc.’s allowance for loan losses. Management also considers credit risk when evaluating potential and current holdings of securities. Credit risk is a critical component in evaluating corporate debt securities. Greene County Bancorp, Inc. has purchased municipal securities as part of its strategy based on the fact that such securities can offer a higher tax-equivalent yield than other similar investments.

Management of Interest Rate Risk

While Greene County Bancorp, Inc.’s loan portfolio is subject to risks associated with the local economy, Greene County Bancorp, Inc.’s most significant form of market risk is interest rate risk because most of Greene County Bancorp, Inc.’s assets and liabilities are sensitive to changes in interest rates. Greene County Bancorp, Inc.’s assets consist primarily of mortgage loans, which have longer maturities than Greene County Bancorp, Inc.’s liabilities, which consist primarily of deposits. Greene County Bancorp, Inc. does not engage in any derivative-based hedging transactions, such as interest rate swaps and caps. Due to the complex nature and additional risk often associated with derivative hedging transactions, such as counterparty risk, it is Greene County Bancorp, Inc.’s policy to continue its strategy of mitigating interest rate risk through balance sheet composition. Greene County Bancorp, Inc.’s interest rate risk management program focuses primarily on evaluating and managing the composition of Greene County Bancorp, Inc.’s assets and liabilities in the context of various interest rate scenarios. Tools used to evaluate and manage interest rate risk include measuring net interest income sensitivity (“NII”), economic value of equity (“EVE”) sensitivity and GAP analysis. These standard interest rate risk measures are described more fully below. Factors beyond management’s control, such as market interest rates and competition, also have an impact on interest income and interest expense.

In recent years, Greene County Bancorp, Inc. has followed the following strategies to manage interest rate risk:

(i)

maintaining a high level of liquid interest-earning assets such as short-term interest-earning deposits and various investment securities;

(ii)

maintaining a high concentration of less interest-rate sensitive and lower-costing core deposits;

(iii)

originating consumer installment loans that have up to five-year terms but that have significantly shorter average lives due to early prepayments;

(iv)

originating adjustable-rate commercial real estate mortgage loans and commercial loans; and

(v)

where possible, matching the funding requirements for fixed-rate residential mortgages with lower-costing core deposits.

By investing in liquid securities, which can be sold to take advantage of interest rate shifts, and originating adjustable rate commercial real estate and commercial loans with shorter average durations, Greene County Bancorp, Inc. believes it is better positioned to react to changes in market interest rates. Investments in short-term securities, however, generally bear lower yields than longer-term investments. Thus, these strategies may result in lower levels of interest income than would be obtained by investing in longer-term fixed-rate investments.

Net Interest Income Analysis. One of the most significant measures of interest risk is net interest income sensitivity (“NII”). NII is the measurement of the sensitivity of Greene County Bancorp, Inc.’s net interest income to changes in interest rates and is computed for instantaneous rate shocks and a series of rate ramp assumptions. The net interest income sensitivity can be viewed as the exposure to changes in interest rates in the balance sheet as of the report date. The net interest income sensitivity measure does not take into account any future change to the balance sheet. Greene County Bancorp, Inc. has a relatively low level of NII sensitivity and is well within policy limits in all positive rate shock scenarios. This means that Greene County Bancorp, Inc.’s income exposure to rising rate is projected to be relatively low.

The analysis of NII sensitivity is limited by the fact that it does not take into account any future changes in the balance sheet. Therefore, Greene County Bancorp, Inc. also performs dynamic modeling which utilizes a projected balance sheet and income statement based on budget and planning assumptions and then stress tests those projections in various economic environments and interest rate scenarios. In each economic scenario that is modeled, assumptions pertaining to growth volumes, income, expenses and asset quality are adjusted based on what the likely impact of the economic scenario will be. By incorporating the Company’s financial projections into the analysis, Greene County Bancorp, Inc. can better understand the impact that the implementation of those plans would have on its overall interest rate risk, and thereby better manage its interest rate risk position.

Index

EVE Analysis. Economic value of equity (“EVE”) is defined as the present value of all future asset cash flows less the present value of all future liability cash flows, or an estimate of the value of the entire balance sheet. The EVE measure is limited in that it does not take into account any future change to the balance sheet. The following table presents Greene County Bancorp, Inc.’s EVE. The EVE table indicates the market value of assets less the market value of liabilities at each specific rate shock environment. These calculations were based upon assumptions believed to be fundamentally sound, although they may vary from assumptions utilized by other financial institutions. The information set forth below is based on data that included all financial instruments as of June 30, ~~2015.~~2016. Assumptions made by Greene County Bancorp, Inc. relate to interest rates, loan prepayment rates, core deposit duration, and the market values of certain assets and liabilities under the various interest rate scenarios. Actual maturity dates were used for fixed rate loans and certificate accounts. Securities were scheduled at either maturity date or next scheduled call date based upon judgment of whether the particular security would be called based upon the current interest rate environment, as it existed on June 30, ~~2015.~~2016. Variable rate loans were scheduled as of their next scheduled interest rate repricing date. Additional assumptions made in the preparation of the EVE table include prepayment rates on loans and mortgage-backed securities. For each interest-bearing core deposit category, a discounted cash flow based upon the decay of each category was calculated and a discount rate applied based on the FHLB fixed rate advance term nearest the average life of the category. The noninterest-bearing category does not use a decay assumption, and the 24 month FHLB advance rate was used as the discount rate. The EVE at “Par” represents the difference between Greene County Bancorp, Inc.’s estimated value of assets and value of liabilities assuming no change in interest rates. The EVE for a decrease of 100, 200 and 300 basis points have been excluded since they would not be meaningful in the interest rate environment as of June 30, ~~2015.~~2016.

The following sets forth Greene County Bancorp, Inc.’s EVE as of June 30, ~~2015.~~2016.

Changes in Market Interest Rates (Basis Points)	Changes in Market Interest Rates (Basis Points)															Changes in Market Interest Rates (Basis Points)
(Dollars in thousands)		Company EVE		$ Change From Par			% Change From Par			EVE Ratio¹			Change²				Company EVE		$ Change From Par			% Change From Par			EVE Ratio¹			Change²
+300 bp		$	90,931	$	(17,373	)		(16.04	)		13.06	%	(125		) bps
+200 bp			98,609		(9,695	)		(8.95	)		13.76			(55	)
+100 bp			105,047		(3,257	)		(3.01	)		14.25			(6	)
+300bp																	$	108,023	$	(18,357	)		(14.53	)%		13.05	%		(103	)	bps
+200bp																		116,748		(9,633	)		(7.62	)		13.71			(37	)
+100bp																		123,561		(2,819	)		(2.23	)		14.12			4
PAR			108,304		-			-			14.31			-				126,380		-			-			14.08			-

¹	Calculated as the estimated EVE divided by the present value of total assets.

²	Calculated as the excess (deficiency) of the EVE ratio assuming the indicated change in interest rates over the estimated EVE ratio assuming no change in interest rates.

The prolonged low rate environment continues to increase EVE sensitivity across the industry, as the decreasing yield on assets increases price sensitivity to large rate shocks. EVE sensitivity will increase further as rates rise and loans and investments lose value and move out the sensitivity curve. Greene County Bancorp, Inc.’s EVE modeling projects that the EVE will decrease in instantaneous rate shocks, however, the level of sensitivity resulting from these rate shocks is within the Company’s policy limits and regulatory guidance. In anticipation of rising interest rates from the current historical low rate environment, Greene County Bancorp, Inc. has implemented several strategies to help mitigate the negative impact on EVE that would result from rising interest rates. These strategies include shortening the average duration of assets and lengthening the average duration of its liabilities.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE require the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.

Gap Analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring a company’s interest rate sensitivity “gap.” An asset or liability is deemed to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. Accordingly, during a period of rising interest rates, an institution with a negative gap position generally would not be in as favorable a position, compared with an institution with a positive gap, to invest in higher yielding assets. The resulting yield on the institution’s assets generally would increase at a slower rate than the increase in its cost of interest-bearing liabilities. Conversely, during a period of falling interest rates, an institution with a negative gap would tend to experience a repricing of its assets at a slower rate than its interest-bearing liabilities which, consequently, would generally result in its net interest income growing at a faster rate than an institution with a positive gap position. At June 30, ~~2015,~~2016, Greene County Bancorp, Inc.’s cumulative one-year and three-year gap positions, the difference between the amount of interest-earning assets maturing or repricing within one year and three years and interest-bearing liabilities maturing or repricing within one year and three years, as a percentage of total interest-earning assets were positive ~~12.89%~~14.30% and ~~17.53%~~18.29% respectively.

Index

Certain shortcomings are inherent in this method of analysis. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. It should also be noted that interest-bearing core deposit categories, which have no stated maturity date, have an assumed decay rate applied to create a cash flow on those deposit categories for gap purposes. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets such as adjustable-rate loans have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their adjustable-rate loans may decrease in the event of an interest rate increase.

FINANCIAL OVERVIEW

Net income for the year ended June 30, ~~2015~~2016 amounted to ~~$7.2~~$9.0 million or ~~$1.70~~$1.06 per basic and ~~$1.69 per~~ diluted share as compared to ~~$6.5~~$7.2 million or ~~$1.55~~$0.85 per basic and ~~$1.54 per~~ diluted share for the year ended June 30, ~~2014,~~2015, an increase of ~~$661,000,~~$1.8 million, or ~~10.1%~~24.7%. The increase in net income was primarily the result of ~~an increase~~increases of ~~$2.0~~$2.8 million in net interest income ~~an increase of $328,000~~and $268,000 in noninterest income, ~~and a decrease~~which were partially offset by increases in provision for income taxes of ~~$219,000 which was partially offset by a $1.8 million increase~~$361,000 and $839,000 in noninterest expense. The change in net interest income resulted from growth in interest-earning assets when comparing the years ended June 30, ~~2015~~2016 and ~~2014.~~2015. Growth in interest-earning assets was ~~largely~~ within both investment securities and loans. Growth in loans was primarily in commercial real estate mortgages and commercial loans which are generally higher yielding assets. ~~As a result, net~~Net interest rate spread ~~increased 7~~decreased 4 basis points to ~~3.34%~~3.30% for the year ended June 30, ~~2015 as compared to 3.27% for the year ended June 30, 2014. Net interest margin also increased 7 basis points to 3.41% for the year ended June 30, 2015~~2016 as compared to 3.34% for the year ended June 30, ~~2014.~~2015. Net interest margin also decreased 4 basis points to 3.37% for the year ended June 30, 2016 as compared to 3.41% for the year ended June 30, 2015. Changes in noninterest income and noninterest expense are more fully explained within the Comparison of Operating Results for the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015 contained herein.

Total assets grew ~~$64.4~~$130.2 million, or ~~9.6%~~17.6%, to $868.8 million at June 30, 2016 as compared to $738.6 million at June 30, ~~2015 as compared~~2015. Net loans increased $79.3 million, or 17.9%, to ~~$674.2~~$522.8 million at June 30, ~~2014. Net loans increased $44.2 million, or 11.1%,~~2016 as compared to $443.5 million at June 30, ~~2015 as compared to $399.3 million at June 30, 2014.~~2015. Securities classified as available-for-sale and held-to-maturity increased ~~$16.9~~$50.1 million, or 19.6%, to $305.1 million at June 30, 2016 as compared to $255.0 million at June 30, ~~2015 as compared~~2015. Deposits grew $116.2 million, or 18.7%, to ~~$238.1~~$738.9 million at June 30, ~~2014. Deposits grew $33.1 million, or 5.6%,~~2016 as compared to $622.7 million at June 30, ~~2015 as compared to $589.6 million at June 30, 2014.~~2015. Total shareholders’ equity amounted to ~~$66.9~~$74.3 million and ~~$61.2~~$66.9 million at June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, or 8.6% and 9.1% of total ~~assets.~~assets, respectively.

Comparison of Financial Condition as of June 30, ~~2015~~2016 and ~~2014~~2015

SECURITIES

Securities available-for-sale and held-to-maturity increased ~~$16.9~~$50.1 million, or ~~7.1%~~19.6%, to $305.1 million at June 30, 2016 as compared to $255.0 million at June 30, ~~2015 as compared to $238.1 million at June 30, 2014.~~2015. Securities purchases totaled ~~$68.5~~$123.4 million during the year ended June 30, ~~2015~~2016 and consisted of ~~$62.7~~$96.4 million of state and political subdivision securities, ~~and $5.8~~$24.5 million of mortgage-backed securities, $1.0 million of corporate debt securities, and $1.5 million of other securities. Principal pay-downs and maturities amounted to ~~$51.3~~$73.5 million, of which ~~$13.6~~$12.2 million were mortgage-backed securities, ~~$34.4~~$57.8 million were state and political subdivision securities, $3.0 million were U.S. government agency securities, and ~~$250,000~~$500,000 were corporate debt securities. Greene County Bancorp, Inc. holds ~~47.4%~~52.3% of its securities portfolio at June 30, ~~2015~~2016 in state and political subdivision securities to take advantage of tax savings and to promote Greene County Bancorp, Inc.’s participation in the communities in which it operates. Mortgage-backed securities and asset-backed securities held within the portfolio do not contain sub-prime loans and are not exposed to the credit risk associated with such lending.

Index

	At June 30,															At June 30,
	2015					2014					2013					2016					2015					2014
(Dollars in thousands)	Carrying Amount		Percent of total			Carrying Amount		Percent of total			Carrying Amount		Percent of total			Carrying Amount		Percent of total			Carrying Amount		Percent of total			Carrying Amount		Percent of total
Securities available-for-sale:
U.S. government sponsored enterprises	$	7,855		3.1	%	$	10,898		4.5	%	$	12,989		5.3	%	$	4,891		1.6	%	$	7,855		3.1	%	$	10,898		4.5	%
State and political subdivisions		39,582		15.5			1,347		0.6			1,858		0.7			60,499		19.8			39,582		15.5			1,347		0.6
Mortgage-backed securities-residential		7,942		3.1			9,545		4.0			7,533		3.1			6,540		2.1			7,942		3.1			9,545		4.0
Mortgage-backed securities-multi-family		25,735		10.1			29,018		12.2			41,919		17.0			23,879		7.8			25,735		10.1			29,018		12.2
Asset-backed securities		9		0.0			13		0.0			16		0.0			5		0.0			9		0.0			13		0.0
Corporate debt securities		4,774		1.9			5,170		2.2			5,176		2.1			4,157		1.4			4,774		1.9			5,170		2.2
Total debt securities		85,897		33.7			55,991		23.5			69,491		28.2			99,971		32.7			85,897		33.7			55,991		23.5
Equity securities and other		137		0.1			160		0.1			153		0.1
Equity securities																	152		0.1			137		0.1			160		0.1
Total securities available-for-sale		86,034		33.8			56,151		23.6			69,644		28.3			100,123		32.8			86,034		33.8			56,151		23.6
Securities held-to-maturity:
U.S. treasury securities		-		-			-		-			5,500		2.2
U.S. government sponsored enterprises		2,000		0.8			2,000		0.8			2,999		1.2			2,000		0.7			2,000		0.8			2,000		0.8
State and political subdivisions		81,501		31.9			91,634		38.5			82,801		33.7			99,040		32.5			81,501		31.9			91,634		38.5
Mortgage-backed securities-residential		17,468		6.8			22,785		9.6			29,077		11.8			13,543		4.4			17,468		6.8			22,785		9.6
Mortgage-backed securities-multi-family		67,239		26.4			64,605		27.1			55,086		22.4			87,204		28.6			67,239		26.4			64,605		27.1
Corporate debt securities																	1,000		0.3			-		-			-		-
Other securities		792		0.3			922		0.4			1,056		0.4			2,148		0.7			792		0.3			922		0.4
Total securities held-to-maturity		169,000		66.2			181,946		76.4			176,519		71.7			204,935		67.2			169,000		66.2			181,946		76.4
Total securities	$	255,034		100.0	%	$	238,097		100.0	%	$	246,163		100.0	%	$	305,058		100.0	%	$	255,034		100.0	%	$	238,097		100.0	%

Investment Maturity Schedule

The estimated fair value of debt securities at June 30, ~~2015~~2016 by contractual maturity are shown below. Asset-backed and mortgage-backed securities balances are presented based on final maturity date and do not reflect the expected cash flows from monthly principal repayments. 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. No tax-equivalent adjustments were made in calculating the weighted average yield.

(Dollars in thousands)		In One Year or Less			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total			In One Year or Less		After One Year through Five Years		After Five Years through Ten Years		After Ten Years		Total
Securities available-for-sale:
U.S. government sponsored enterprises		$	3,008		$	4,277		$	570		$	-		$	7,855		$	-	$	4,891	$	-	$	-	$	4,891
State and political subdivisions	��		38,451			1,131			-			-			39,582			59,696		803		-		-		60,499
Mortgage-backed securities-residential			-			377			608			6,957			7,942			-		192		1,528		4,820		6,540
Mortgage-backed securities-multi-family			744			2,915			22,076			-			25,735			-		3,549		20,330		-		23,879
Asset-backed securities			-			-			9			-			9			-		-		5		-		5
Corporate debt securities			513			4,261			-			-			4,774			1,264		2,893		-		-		4,157
Total debt securities			42,716			12,961			23,263			6,957			85,897			60,960		12,328		21,863		4,820		99,971
Equity securities and other			-			-			-			137			137
Equity securities																		-		-		-		152		152
Total securities available-for-sale			42,716			12,961			23,263			7,094			86,034			60,960		12,328		21,863		4,972		100,123
Securities held-to-maturity:
U.S. government sponsored enterprises			-			-			1,951			-			1,951			-		2,032		-		-		2,032
State and political subdivisions			12,514			44,962			18,140			7,835			83,451			13,686		51,223		26,729		12,402		104,040
Mortgage-backed securities-residential			934			5,859			7,606			3,837			18,236			-		7,614		4,908		1,627		14,149
Mortgage-backed securities-multi-family			1,039			5,005			61,520			-			67,564			268		22,045		68,358		-		90,671
Corporate debt securities																		-		-		1,000		-		1,000
Other securities			40			210			406			118			774			650		821		595		100		2,166
Total securities held-to-maturity			14,527			56,036			89,623			11,790			171,976			14,604		83,735		101,590		14,129		214,058
Total securities		$	57,243		$	68,997		$	112,886		$	18,884		$	258,010		$	75,564	$	96,063	$	123,453	$	19,101	$	314,181
Weighted Average Yield			1.59	%		2.58	%		2.36	%		3.22	%		2.31	%		1.52	%	2.58	%	2.37	%	3.03	%	2.27	%

Index

LOANS

Net loans receivable increased to $522.8 million at June 30, 2016 from $443.5 million at June 30, 2015, ~~from $399.3 million at June 30, 2014,~~ an increase of ~~$44.2~~$79.3 million, or ~~11.1%~~17.9%. The loan growth experienced during the year consisted primarily of ~~$28.3~~$50.4 million in commercial real estate loans, ~~$8.0~~$8.3 million in residential real estate loans, $13.2 million in construction loans, ~~$441,000 in home equity loans, $228,000 in multi-family loans~~ and ~~$8.8~~$8.9 million in commercial ~~loans, and was partially offset by a $725,000 decrease in residential mortgage loans, and an increase of $723,000 in the allowance for loan losses.~~loans. The continued low interest rate environment and, we believe, strong customer satisfaction from personal service, continued to enhance loan growth. If long term rates begin to rise, the Company anticipates some reduced new loan demand as well as refinancing activities. The Bank of Greene County continues to use a conservative underwriting policy in regard to all loan originations, and does not engage in sub-prime lending or other exotic loan products. A significant decline in home values in the Company’s market areas, however, could have a negative effect on the consolidated results of operations, as any such decline in home values would likely lead to a decrease in residential real estate loans and new home equity loan originations and increased delinquencies and defaults in both the consumer home equity loan and the residential real estate loan portfolios and result in increased losses in these portfolios. Updated appraisals are obtained on loans when there is a reason to believe that there has been a change in the borrower’s ability to repay the loan principal and interest, generally, when a loan is in a delinquent status. Additionally, if an existing loan is to be modified or refinanced, generally, an appraisal is ordered to ensure continued collateral adequacy.

Loan Portfolio Composition

Set forth below is selected information concerning the composition of The Bank of Greene County’s loan portfolio in dollar amounts and in percentages (before deductions for deferred fees and costs, unearned discounts and allowances for losses) as of the dates indicated.

																															At June 30,
	2015						2014						At June 30, 2013						2012						2011						2016						2015						2014						2013						2012
(Dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
Real estate loans:
Residential real estate	$	226,648			50.28	%	$	227,373			56.02	%	$	212,526			58.09	%	$	193,378			58.17	%	$	181,612			59.42	%	$	234,992			44.23	%	$	226,648			50.28	%	$	227,373			56.02	%	$	212,526			58.09	%	$	193,378			58.17	%
Residential construction and land		3,621			0.81			3,005			0.74			2,691			0.74			2,156			0.65			3,731			1.22			5,575			1.05			3,621			0.81			3,005			0.74			2,691			0.74			2,156			0.65
Multi-family		4,287			0.95			4,059			1.00			5,511			1.51			5,522			1.66			6,048			1.98			3,918			0.74			4,287			0.95			4,059			1.00			5,511			1.51			5,522			1.66
Commercial real estate		142,323			31.57			114,066			28.11			91,482			25.00			80,794			24.30			63,860			20.90			192,678			36.27			142,323			31.57			114,066			28.11			91,482			25.00			80,794			24.30
Commercial construction		8,936			1.98			1,558			0.38			3,523			0.96			2,034			0.61			2,014			0.66			20,159			3.79			8,936			1.98			1,558			0.38			3,523			0.96			2,034			0.61
Total real estate loans		385,815			85.59			350,061			86.25			315,733			86.30			283,884			85.39			257,265			84.18			457,322			86.08			385,815			85.59			350,061			86.25			315,733			86.30			283,884			85.39

Consumer loans
Home equity		21,019			4.66			20,578			5.07			20,371			5.57			22,808			6.86			25,559			8.37			20,893			3.93			21,019			4.66			20,578			5.07			20,371			5.57			22,808			6.86
Consumer installment⁽¹⁾		4,123			0.92			4,208			1.04			4,078			1.12			4,070			1.22			4,008			1.31			4,350			0.82			4,123			0.92			4,208			1.04			4,078			1.12			4,070			1.22
Total consumer loans		25,142			5.58			24,786			6.11			24,449			6.69			26,878			8.08			29,567			9.68			25,243			4.75			25,142			5.58			24,786			6.11			24,449			6.69			26,878			8.08

Commercial loans		39,798			8.83			30,994			7.64			25,657			7.01			21,688			6.53			18,788			6.14			48,725			9.17			39,798			8.83			30,994			7.64			25,657			7.01			21,688			6.53

Total consumer loans and commercial loans		64,940			14.41			55,780			13.75			50,106			13.70			48,566			14.61			48,355			15.82			73,968			13.92			64,940			14.41			55,780			13.75			50,106			13.70			48,566			14.61

Total gross loans		450,755			100.00	%		405,841			100.00	%		365,839			100.00	%		332,450			100.00	%		305,620			100.00	%		531,290			100.00	%		450,755			100.00	%		405,841			100.00	%		365,839			100.00	%		332,450			100.00	%

Less:

Allowance for loan losses		(8,142	)					(7,419	)					(7,040	)					(6,177	)					(5,069	)					(9,485	)					(8,142	)					(7,419	)					(7,040	)					(6,177	)
Deferred fees and costs		883						887						627						478						495						959						883						887						627						478

Total loans receivable, net	$	443,496					$	399,309					$	359,426					$	326,751					$	301,046					$	522,764					$	443,496					$	399,309					$	359,426					$	326,751

⁽¹⁾	Includes direct automobile loans (on both new and used automobiles) and personal loans.

Index

Loan Maturity Schedule

The following table sets forth certain information as of June 30, ~~2015~~2016 regarding the amount of loans maturing or re-pricing in The Bank of Greene County's portfolio. Adjustable-rate loans are included in the period in which interest rates are next scheduled to adjust rather than the period in which they contractually mature, and fixed-rate loans are included in the period in which the final contractual repayment is due. Lines of credit with no specified maturity date are included in the category “within one year.”

(In thousands)	Within 1 Year		1 Year Through 3 Years		3 Years Through 5 Years		5 Years Through 10 Years		Beyond 10 Years		Total		Within 1 Year		1 Year Through 3 Years		3 Years Through 5 Years		5 Years Through 10 Years		Beyond 10 Years		Total
Residential real estate	$	4,006	$	4,617	$	10,888	$	48,526	$	158,611	$	226,648	$	4,359	$	5,091	$	14,377	$	53,124	$	158,041	$	234,992
Residential construction and land		3,224		-		108		289		-		3,621		5,190		37		87		261		-		5,575
Multi-family		651		639		1,892		380		725		4,287		291		553		1,941		732		401		3,918
Commercial real estate		17,431		14,914		46,473		37,305		26,200		142,323		21,342		22,559		60,561		61,440		26,776		192,678
Commercial construction		8,936		-		-		-		-		8,936		18,434		1,725		-		-		-		20,159
Consumer loans		15,390		1,801		3,908		3,939		104		25,142		16,353		1,979		3,220		3,593		98		25,243
Commercial loans		20,625		2,611		5,457		9,898		1,207		39,798		25,615		2,733		7,061		13,141		175		48,725
Total loan portfolio	$	70,263	$	24,582	$	68,726	$	100,337	$	186,847	$	450,755	$	91,584	$	34,677	$	87,247	$	132,291	$	185,491	$	531,290

The total amount of the above loans that mature or are due after June 30, ~~2016~~2017 that have fixed interest rates is ~~$294.2~~$320.0 million while the total amount of loans that mature or are due after such date that have adjustable interest rates is ~~$86.3~~$119.7 million. The interest rate risk implications of The Bank of Greene County’s substantial preponderance of fixed-rate loans is discussed in detail above within the section Management of Interest Rate Risk.

Potential Problem Loans

Nonaccrual Loans and Nonperforming Assets

Loans are reviewed on a regular basis to assess collectability of all principal and interest payments due. Management determines that a loan is impaired or nonperforming when it is probable at least a portion of the principal or interest will not be collected in accordance with contractual terms of the note. When a loan is determined to be impaired, the measurement of the loan is based on present value of estimated future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral.

Generally, management places loans on nonaccrual status once the loans have become 90 days or more delinquent or sooner if there is a significant reason for management to believe the collectability is questionable and, therefore, interest on the loan will no longer be recognized on an accrual basis. 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 viewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreement. The measurement of impaired loans is generally based on the fair value of the underlying collateral. The majority of The Bank of Greene County loans, including most nonaccrual loans, are small homogenous loan types adequately supported by collateral. Management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors. ~~Loans that are~~Based on this evaluation, a delinquent loan’s risk rating may be downgraded to either ~~delinquent a minimum of 60 days~~pass-watch, special mention, or ~~are on nonaccrual status, and are not individually considered impaired, are either designated as Special Mention or Substandard,~~substandard, and the allocation of the ~~Allowance~~allowance for ~~Loan Loss~~loan loss is based upon the risk associated with such designation. For further discussion and detail regarding the Allowance for Loan Losses and impaired loans please refer to Part II, Item 8 Financial Statements and Supplemental Data, Note 4 Loans of this Report. A loan does not have to be 90 days delinquent in order to be classified as nonperforming. Foreclosed real estate is considered to be a nonperforming asset.

Index

Analysis of Nonaccrual Loans, Nonperforming Assets and Restructured Loans

The table below details additional information related to nonaccrual loans for the periods indicated:

	At June 30,															At June 30,
(Dollars in thousands)	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
Nonaccrual loans:
Residential real estate	$	1,087		$	2,473		$	3,599		$	4,206		$	3,074		$	1,207		$	1,087		$	2,473		$	3,599		$	4,206
Multi-family		-			-			463			431			577			-			-			-			463			431
Commercial real estate		2,964			2,775			2,018			1,868			2,171			1,899			2,964			2,775			2,018			1,868
Commercial construction		-			-			-			-			238			-			-			-			-			-
Home equity		169			339			51			60			49			18			169			339			51			60
Consumer installment		-			-			-			25			41			-			-			-			-			25
Commercial		388			312			195			303			144			202			388			312			195			303
Total nonaccrual loans		4,608			5,899			6,326			6,893			6,294			3,326			4,608			5,899			6,326			6,893

Accruing loans delinquent 90 days or more:
Residential real estate		84			266			559			83			-			77			84			266			559			83
Home equity		-			-			-			41			-			-			-			-			-			41
Total accruing loans delinquent 90 days or more		84			266			559			124			-			77			84			266			559			124
Foreclosed real estate:
Residential construction & land																	61			-			-			-			-
Residential real estate		847			473			100			60			363			65			847			473			100			60
Commercial real estate		-			-			196			200			80			244			-			-			196			200
Total foreclosed real estate		847			473			296			260			443			370			847			473			296			260

Total nonperforming assets	$	5,539		$	6,638		$	7,181		$	7,277		$	6,737		$	3,773		$	5,539		$	6,638		$	7,181		$	7,277

Troubled debt restructuring:
Nonperforming (included above)	$	2,002		$	3,093		$	1,518		$	835		$	585		$	1,645		$	2,002		$	3,093		$	1,518		$	835
Performing (accruing and excluded above)		965			1,504			1,261			569			546			934			965			1,504			1,261			569

Nonperforming assets to total assets		0.75	%		0.98	%		1.13	%		1.23	%		1.23	%		0.43	%		0.75	%		0.98	%		1.13	%		1.23	%

Nonperforming loans to net loans		1.06	%		1.54	%		1.92	%		2.15	%		2.09	%		0.65	%		1.06	%		1.54	%		1.92	%		2.15	%

The table below details additional information related to nonaccrual loans:

For the years ended June 30,
(In thousands) 2015 2014 2013
Interest income that would have been recorded if loans had been performing in accordance with original terms $ 340 $ 352 $ 433
Interest income that was recorded on nonaccrual loans 250 128 158

~~The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “Receivables – Loan Impairment”~~. A loan is considered impaired 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.

	For the years ended June 30,
(In thousands)	2016		2015		2014
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	247	$	340	$	352
Interest income that was recorded on nonaccrual loans		142		250		128

Index

The table below details additional information on impaired loans as of the dates indicated:

	For the years ended June 30,						For the years ended June 30,
(In thousands)	2015		2014		2013		2016		2015		2014
Balance of impaired loans, with a valuation allowance	$	2,399	$	6,075	$	6,051	$	1,947	$	2,399	$	6,075
Allowances relating to impaired loans included in allowance for loan losses		451		869		1,179		330		451		869
Balance of impaired loans, without a valuation allowance		1,792		763		1,635		1,295		1,792		763
Average balance of impaired loans for the years ended		6,139		7,495		7,969		3,363		6,139		7,495
Interest income recorded on impaired loans during the years ended		251		229		324		122		251		229

Nonperforming assets amounted to $3.8 million at June 30, 2016 and $5.5 million at June 30, 2015, ~~and $6.6 million at June 30, 2014,~~ a decrease of ~~$1.1~~$1.7 million, or ~~16.7%~~30.9%, and total impaired loans amounted to $3.2 million at June 30, 2016 compared to $4.2 million at June 30, 2015, ~~compared to $6.8 million at June 30, 2014,~~ a decrease of ~~$2.6~~$1.0 million, or ~~38.2%~~23.8%.

Loans on nonaccrual status totaled ~~$4.6~~$3.3 million at June 30, ~~2015~~2016 of which ~~$1.2~~$1.4 million were in the process of foreclosure. Included in nonaccrual loans were ~~$2.6~~$1.9 million of loans which were less than 90 days past due at June 30, ~~2015,~~2016, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Included in total loans past due were ~~$276,000~~$77,000 of loans which were making payments pursuant to forbearance agreements. Under the forbearance agreements, the customers have made arrangements with The Bank of Greene County to bring the loans current over a specified period of time (resulting in an insignificant delay in repayment). During this term of the forbearance agreement, The Bank of Greene County has agreed not to continue foreclosure proceedings. Loans on nonaccrual status totaled ~~$5.9~~$4.6 million at June 30, ~~2014~~2015 of which ~~$3.0~~$1.2 million were in the process of foreclosure. Included in nonaccrual loans were ~~$922,000~~$2.6 million of loans which were less than 90 days past due at June 30, ~~2014,~~2015, but have a recent history of delinquency greater than 90 days past due.

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 an allowance for loan loss. 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 and installment loans to customers as small, homogeneous loans, which are evaluated for impairment collectively based on historical loss experience. Larger balance residential and 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 loan 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 business 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. 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.

Index

Analysis of allowance for loan losses activity

	At or for the Years Ended June 30,															At or for the Years Ended June 30,
(Dollars in thousands)	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
Balance at the beginning of the period	$	7,419		$	7,040		$	6,177		$	5,069		$	4,024		$	8,142		$	7,419		$	7,040		$	6,177		$	5,069
Charge-offs:
Residential real estate		390			420			421			208			140			-			390			420			421			208
Multi-family		-			24			-			-			200			-			-			24			-			-
Commercial real estate		133			309			233			212			106			162			133			309			233			212
Home equity		121			44			-			-			-			-			121			44			-			-
Consumer installment		236			215			246			280			232			245			236			215			246			280
Commercial loans		48			205			71			67			9			20			48			205			71			67
Total loans charged off		928			1,217			971			767			687			427			928			1,217			971			767

Recoveries:
Residential real estate		6			10			-			7			-			-			6			10			-			7
Multi-family		-			7			-			-			-			-			-			7			-			-
Commercial real estate																	17			-			-			-			-
Consumer installment		61			75			88			82			95			78			61			75			88			82
Commercial loans		28			4			-			2			9			2			28			4			-			2
Total recoveries		95			96			88			91			104			97			95			96			88			91

Net charge-offs		833			1,121			883			676			583			330			833			1,121			883			676

Provisions charged to operations		1,556			1,500			1,746			1,784			1,628			1,673			1,556			1,500			1,746			1,784
Balance at the end of the period	$	8,142		$	7,419		$	7,040		$	6,177		$	5,069		$	9,485		$	8,142		$	7,419		$	7,040		$	6,177

Net charge-offs to average loans outstanding		0.20	%		0.29	%		0.26	%		0.22	%		0.20	%		0.07	%		0.20	%		0.29	%		0.26	%		0.22	%
Net charge-offs to nonperforming assets		15.04			16.89			12.30			9.29			8.65			8.75			15.04			16.89			12.30			9.29
Allowance for loan losses to nonperforming loans		173.53			120.34			102.25			88.03			80.54			278.72			173.53			120.34			102.25			88.03
Allowance for loan losses to total loans receivable		1.81			1.83			1.92			1.86			1.66			1.79			1.81			1.83			1.92			1.86
Net charge-offs to average assets		0.12			0.17			0.14			0.12			0.11			0.04			0.12			0.17			0.14			0.12

Allocation of Allowance for Loan Losses

The following table sets forth the allocation of the allowance for loan losses by loan category at the dates indicated. The allowance is allocated to each loan category based on historical loss experience and economic conditions.

(Dollars in thousands)	2015					2014					At June 30, 2013					2012					2011
(Dollars in thousands)																										At June 30,
																										2016					2015					2014					2013					2012
(Dollars in thousands)	Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans			Amount of loan loss allowance		Percent of loans in each category to total loans
(Dollars in thousands)	$	2,454		50.3	%	$	2,731		56.1	%	$	2,627		58.1	%	$	2,163		58.2	%	$	1,767		59.4	%	$	2,396		44.2	%	$	2,454		50.3	%	$	2,731		56.1	%	$	2,627		58.1	%	$	2,163		58.2	%
Residential construction and land		50		0.8			42		0.7			37		0.7			19		0.6			27		1.2			75		1.1			50		0.8			42		0.7			37		0.7			19		0.6
Multi-family		40		0.9			59		1.0			139		1.5			337		1.7			410		2.0			22		0.7			40		0.9			59		1.0			139		1.5			337		1.7
Commercial real estate		3,699		31.6			2,936		28.1			2,476		25.0			2,076		24.3			1,859		20.9			4,541		36.3			3,699		31.6			2,936		28.1			2,476		25.0			2,076		24.3
Commercial construction		233		2.0			38		0.4			392		1.0			407		0.6			89		0.7			502		3.8			233		2.0			38		0.4			392		1.0			407		0.6
Home equity		314		4.7			361		5.1			275		5.6			187		6.9			186		8.4			309		3.9			314		4.7			361		5.1			275		5.6			187		6.9
Consumer installment		223		0.9			240		1.0			222		1.1			207		1.2			203		1.3			228		0.8			223		0.9			240		1.0			222		1.1			207		1.2
Commercial loans		1,129		8.8			811		7.6			809		7.0			645		6.5			528		6.1			1,412		9.2			1,129		8.8			811		7.6			809		7.0			645		6.5
Unallocated		-		-			201		-			63		-			136		-			-		-			-		-			-		-			201		-			63		-			136		-
Totals	$	8,142		100.0	%	$	7,419		100.0	%	$	7,040		100.0	%	$	6,177		100.0	%	$	5,069		100.0	%	$	9,485		100.0	%	$	8,142		100.0	%	$	7,419		100.0	%	$	7,040		100.0	%	$	6,177		100.0	%

Index

PREMISES AND EQUIPMENT

Premises and equipment amounted to $14.2 million at June 30, 2016 and $14.5 million at June 30, ~~2015 and $14.3 million at June 30, 2014.~~2015. Purchases totaled ~~$753,000~~$290,000 during the year ended June 30, 2015 and primarily consisted of renovations of our new lending center and the leasehold improvements associated with our new Kingston branch, which were both opened in the quarter ended March 31, 2015.2016. Depreciation for the year ended June 30, ~~2015~~2016 totaled ~~$545,000.~~$629,000. There were no disposals of premise and equipment during the fiscal year ended June 30, 2015. During the fiscal year ended June 30, 2014 the Company disposed of furniture and equipment that was no longer in use. The original cost of these assets totaled $3.2 million and they were fully depreciated at the time of disposal.2016.

OTHER ASSETS

Other assets, consisting primarily of accrued interest receivable, foreclosed real estate and prepaid expenses, totaled $5.9 million at June 30, 2016, compared to $6.3 million at June 30, 2015, ~~compared to $6.8 million at June 30, 2014,~~ a decrease of ~~$488,000.~~$414,000. This decrease was primarily the result of a decrease of ~~$2.0 million~~$319,000 in prepaid income taxes, $202,000 in other prepaid expenses, and $477,000 in foreclosed real estate partially offset by an increase of ~~$316,000~~$584,000 in accrued interest receivable, a $374,000 increase in foreclosed real estate, and a $783,000 increase in other prepaid expenses. The increase in other prepaid expenses consisted of prepaid rent, and computer licensing fees, as well as, prepaid insurance premiums related to Greene Risk Management, Inc., the Company’s captive insurance subsidiary.receivable.

Real estate acquired as a result of foreclosure, or in-substance foreclosure, is classified as foreclosed real estate (“FRE”) until such time as it is sold. When real estate is classified as foreclosed real estate, it is recorded at its fair value, less estimated costs of disposal establishing a new cost basis. IfUpon transfer to foreclosed real estate, if the value of the property is less than the loan, less any related specific loan loss provisions, the difference is charged against the allowance for loan losses. Any subsequent write-down of FRE is charged against earnings. ~~During the year ended~~Foreclosed assets (FRE) totaled $847,000 at June 30, 2015 ~~nine~~and consisted of eight properties, consisting of residential real estate. Four new properties were ~~transferred~~added to FRE ~~at a total fair value~~for $384,000 consisting of ~~$1.4 million. Subsequent write-downs of properties held in FRE during the year ended~~commercial real estate and vacant land. At June 30, ~~2015 totaled $180,000. Also during this period,~~2016, six properties were sold ~~for a total of $844,000,~~and three properties were written down based on sales offers or updated listing prices. This resulted in recognizing net losses totaling $177,000 during the period. FRE totaled $370,000 at ~~a net gain on sale of $44,000. At~~ June 30, ~~2015, The Bank of Greene County had eight properties held in foreclosed real estate totaling $847,000.~~2016.

DEPOSITS

Total deposits increased to $738.9 million at June 30, 2016 from $622.7 million at June 30, 2015, ~~from $589.6 million at June 30, 2014,~~ an increase of ~~$33.1~~$116.2 million, or ~~5.6%~~18.7%. ~~The growth in deposits was primarily in checking and money market products.~~ Noninterest-bearing deposits increased ~~$5.9~~$14.6 million, or ~~8.8%~~19.8%, NOW deposits increased ~~$17.9~~$71.2 million, or ~~8.1%~~29.8%, savings deposits increased $13.4 million, or 8.2%, certificates of deposit increased $7.5 million, or 17.5%, and money market deposits increased ~~$16.4~~$9.5 million, or ~~18.7%~~9.2%, when comparing June 30, ~~2015~~2016 and ~~2014.~~2015. These increases were ~~partially offset by~~the result of a ~~decrease~~$48.7 million increase in ~~savings~~municipal deposits at Greene County Commercial Bank. This increase was the result of ~~$1.3 million, or 0.8%, and a continued decline~~growth in ~~certificate~~new account relationships as well as tax collection. The remainder of the increase was the result of growth in new deposit ~~balances, which decreased $5.8 million, or 11.8%, when comparing~~relationships from our newest branch location in Kingston. Also, as the result of merger activity of competitors within our market, the Company has been able to acquire new account relationships. Included within certificates of deposits at June 30, ~~2015 and 2014.~~2016 were $10.0 million in brokered certificates of deposit.

	At June 30,
	2016					2015					2014
(Dollars in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Transaction and savings deposits:
Noninterest-bearing deposits	$	88,254		11.9	%	$	73,678		11.8	%	$	67,446		11.5	%
Certificates of deposit		50,666		6.9			43,121		6.9			48,900		8.3
Savings deposits		177,309		24.0			163,927		26.3			165,227		28.0
Money market deposits		112,905		15.3			103,405		16.7			87,363		14.8
NOW deposits		309,753		41.9			238,586		38.3			220,638		37.4
Total deposits	$	738,887		100.0	%	$	622,717		100.0	%	$	589,574		100.0	%

The amount of certificates of deposit by time remaining to maturity as of June 30, ~~2015~~2016 is set forth in Part II, Item 8 Financial Statements and Supplemental Data, Note 6, Deposits of this Report.

At June 30,
2015 2014 2013
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
Transaction and savings deposits:
Noninterest-bearing deposits $ 73,359 11.8 % $ 67,446 11.5 % $ 57,926 10.4 %
Certificates of deposit 43,121 6.9 48,900 8.3 56,181 10.1
Savings deposits 163,927 26.3 165,227 28.0 160,004 28.6
Money market deposits 103,724 16.7 87,363 14.8 85,685 15.3
NOW deposits 238,586 38.3 220,638 37.4 198,643 35.6
Total deposits $ 622,717 100.0 % $ 589,574 100.0 % $ 558,439 100.0 %

BORROWINGS

Total borrowings from the Federal Home Loan Bank (“FHLB”) increased ~~$24.0~~$4.7 million to $46.4 million at June 30, 2016 compared to $41.7 million at June 30, ~~2015 compared to $17.7 million at June 30, 2014.~~2015. Borrowings from overnight advances increased ~~$19.7~~$3.2 million to $26.1 million at June 30, 2016 from $22.9 million at June 30, ~~2015 from $3.2~~2015. Term borrowings increased $1.5 million to $20.3 million at June 30, ~~2014. Term borrowings increased $4.3 million to~~2016 from $18.8 million at June 30, ~~2015 from $14.5 million at June 30, 2014.~~2015. The ~~Bank has recently increased its~~Bank’s level of long-term borrowing has been maintained to strengthen its overall interest rate risk position, to help mitigate the potential negative impact of rising interest rates. The Company’s borrowing agreements are discussed further within Part II, Item 8 Financial Statements and Supplemental Data, Note 7 Borrowings of this Report.

Index

The table below details additional information related to short-term borrowings for the years ended June 30,

(Dollars in thousands)	2015			2014			2016			2015
Average outstanding balance	$	6,766		$	5,582		$	7,962		$	6,766
Interest expense		27			20			45			27
Weighted average interest rate during the year		0.41	%		0.35	%		0.57	%		0.41	%
Weighted average interest rate at end of year		0.38	%		0.42	%		0.61	%		0.38	%

OTHER LIABILITIES

Other liabilities, consisting primarily of accrued liabilities and a net deferred tax liability, totaled $9.2 million at June 30, 2016, compared to $7.3 million at June 30, 2015, ~~compared to $5.7 million at June 30, 2014,~~ an increase of ~~$1.6~~$1.9 million. This increase was due primarily to increased accrued expenses for various employee benefit plans, including the defined benefit pension plan, and supplemental executive retirement plan. For further information regarding these changes, see Part II, Item 8 Financial Statements and Supplemental Data, Note 9 Employee Benefits Plans and Note 10 Stock Based Compensation of this Report.Also contributing to the increase in other liabilities was a $423,000 increase in the liability associated with the unearned premiums and loss reserves related to Greene Risk Management, Inc., the Company’s captive insurance subsidiary.

SHAREHOLDERS’ EQUITY

Shareholders’ equity increased to $74.3 million at June 30, 2016 from $66.9 million at June 30, 2015, ~~from $61.2 million at June 30, 2014,~~ as net income of ~~$7.2~~$9.0 million and a ~~$252,000~~$73,000 decrease in accumulated other comprehensive loss for the year, ~~was~~were partially offset by dividends declared and paid of ~~$1.8~~$1.9 million. The remaining change in equity, representing a ~~$77,000~~$199,000 increase, was the result of options exercised under the Company’s 2008 Stock Option Plan.

Selected Equity Data:	At June 30,
	2016			2015
Shareholders’ equity to total assets, at end of period		8.55	%		9.06	%

Book value per share³	$	8.77		$	7.92
Closing market price of common stock³	$	16.27		$	14.25

	For the years ended June 30,
	2016			2015
Average shareholders’ equity to average assets		8.88	%		9.13	%
Dividend payout ratio¹		34.91	%		42.35	%
Actual dividends paid to net income²		20.69	%		25.01	%

¹The dividend payout ratio has been calculated based on the dividends declared per share divided by basic earnings per share. No adjustments have been made for dividends waived by Greene County Bancorp, MHC (“MHC”), the owner of 54.4% of the Company’s shares outstanding.

²Dividends declared divided by net income. The MHC waived its right to receive dividends declared during the quarters ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, December 31, 2014, and September 30, 2014. Dividends were paid to the MHC during the quarters ended June 30, 2016 and March 31, 2015. The MHC’s ability to waive the receipt of dividends is dependent upon annual approval of its members as well as receiving the non-objection of the Federal Reserve Board.

³ June 30, 2015 amount restated for comparability to reflect the 2-for-1 stock split effective March 15, 2016.

Index

Comparison of Operating Results for the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

Average Balance Sheet

The following table sets forth certain information relating to Greene County Bancorp, Inc. for the years ended June 30, ~~2015~~2016 and ~~2014.~~2015. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances are based on daily averages. Average loan balances include nonperforming loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields.

	Fiscal Years Ended June 30,																Fiscal Years Ended June 30,
	2015								2014											2016								2015
(Dollars in thousands)	Average Outstanding Balance			Interest Earned/Paid		Average Yield/Rate			Average Outstanding Balance			Interest Earned/Paid		Average Yield/Rate			Average Outstanding Balance			Interest Earned/Paid		Average Yield/Rate			Average Outstanding Balance			Interest Earned/Paid		Average Yield/Rate
Interest-earning Assets:
Loans receivable¹	$	427,506		$	19,919		4.66	%	$	389,870		$	18,521		4.75	%	$	484,999		$	22,118		4.56	%	$	427,506		$	19,919		4.66	%
Securities²		250,247			5,693		2.28			236,220			5,172		2.19			281,308			6,559		2.33			250,247			5,693		2.28
Interest-earning bank balances and federal funds		5,703			18		0.32			13,518			40		0.30			9,351			48		0.51			5,703			18		0.32
FHLB stock		1,716			70		4.08			1,425			55		3.86			1,881			77		4.09			1,716			70		4.08
Total interest-earning assets		685,172			25,700		3.75	%		641,033			23,788		3.71	%		777,539			28,802		3.70	%		685,172			25,700		3.75	%
Cash and due from banks		7,456								6,968								7,978								7,456
Allowance for loan losses		(7,713	)							(7,111	)							(8,643	)							(7,713	)
Other noninterest-earning assets		18,600								17,906								18,945								18,600
Total assets	$	703,515							$	658,796							$	795,819							$	703,515

Interest-Bearing Liabilities:
Savings and money market deposits	$	264,121		$	830		0.31	%	$	253,626		$	939		0.37	%	$	281,401		$	878		0.31	%	$	264,121		$	830		0.31	%
NOW deposits		232,576			890		0.38			217,204			945		0.44			285,420			1,054		0.37			232,576			890		0.38
Certificates of deposit		45,836			310		0.68			51,503			338		0.66			44,252			309		0.70			45,836			310		0.68
Borrowings		24,760			272		1.10			15,243			165		1.08			27,835			340		1.22			24,760			272		1.10
Total interest-bearing liabilities		567,293			2,302		0.41	%		537,576			2,387		0.44	%		638,908			2,581		0.40	%		567,293			2,302		0.41	%
Noninterest-bearing deposits		67,637								59,852								79,922								67,637
Other noninterest-bearing liabilities		4,363								2,974								6,320								4,363
Shareholders' equity		64,222								58,394								70,669								64,222
Total liabilities and equity	$	703,515							$	658,796							$	795,819							$	703,515

Net interest income				$	23,398							$	21,401							$	26,221							$	23,398
Net interest rate spread							3.34	%							3.27	%							3.30	%							3.34	%
Net earnings assets	$	117,879							$	103,457							$	138,631							$	117,879
Net interest margin							3.41	%							3.34	%							3.37	%							3.41	%
Average interest-earning assets to average interest-bearing liabilities		120.78	%							119.25	%							121.70		%						120.78		%

¹	Calculated net of deferred loan fees and costs, loan discounts, and loans in process.

²	Includes tax-free securities, mortgage-backed securities, asset-backed securities and long term certificates of deposit.

Taxable-equivalent net interest income and net interest margin

	For the year ended June 30,
(Dollars in thousands)	2016			2015
Net interest income (GAAP)	$	26,221		$	23,398
Tax-equivalent adjustment⁽¹⁾		1,922			1,518
Net interest income (fully taxable-equivalent)	$	28,143		$	24,916

Average interest-earning assets	$	777,539		$	685,172
Net interest margin (fully taxable-equivalent)		3.62	%		3.64	%

¹Net interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if the Company’s investment in tax-exempt securities and loans had been subject to federal and New York State income taxes yielding the same after-tax income. The rate used for this adjustment was approximately 34% for federal income taxes and 3.63% for New York State income taxes.

Index

Rate / Volume Analysis

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Greene County Bancorp, Inc.’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to:

(i)

Change attributable to changes in volume (changes in volume multiplied by prior rate);

(ii)

Change attributable to changes in rate (changes in rate multiplied by prior volume); and

(iii)

The net change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	Years Ended June 30,																		Years Ended June 30,
	2015 versus 2014									2014 versus 2013									2016 versus 2015									2015 versus 2014
	Increase/(Decrease) Due To						Total Increase/			Increase/(Decrease) Due To						Total Increase/			Increase/(Decrease) Due To						Total Increase/			Increase/(Decrease) Due To						Total Increase/
(In thousands)	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)			Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
Interest-earning Assets:
Loans receivable, net¹	$	1,755		$	(357	)	$	1,398		$	1,963		$	(1,611	)	$	352		$	2,634		$	(435	)	$	2,199		$	1,755		$	(357	)	$	1,398
Securities²		308			213			521			16			(637	)		(621	)		736			130			866			308			213			521
Interest-earning bank balances and federal funds		(25	)		3			(22	)		2			(4	)		(2	)		16			14			30			(25	)		3			(22	)
FHLB stock		12			3			15			9			(10	)		(1	)		7			-			7			12			3			15
Total interest-earning assets		2,050			(138	)		1,912			1,990			(2,262	)		(272	)		3,393			(291	)		3,102			2,050			(138	)		1,912

Interest-Bearing Liabilities:
Savings and money market deposits		40			(149	)		(109	)		80			(273	)		(193	)		48			-			48			40			(149	)		(109	)
NOW deposits		70			(125	)		(55	)		80			(132	)		(52	)		189			(25	)		164			70			(125	)		(55	)
Certificates of deposit		(38	)		10			(28	)		(91	)		(60	)		(151	)		(10	)		9			(1	)		(38	)		10			(28	)
Borrowings		104			3			107			86			(120	)		(34	)		36			32			68			104			3			107
Total interest-bearing liabilities		176			(261	)		(85	)		155			(585	)		(430	)		263			16			279			176			(261	)		(85	)
Net change in net interest income	$	1,874		$	123		$	1,997		$	1,835		$	(1,677	)	$	158		$	3,130		$	(307	)	$	2,823		$	1,874		$	123		$	1,997

¹	~~Calculated net of deferred loan fees, loan discounts, and loans in process.~~

²	¹Calculated net of deferred loan fees, loan discounts, and loans in process. ²Includes tax-free securities, mortgage-backed securities, asset-backed securities and long term certificates of deposit.

As the above table shows, net interest income for the fiscal year ended June 30, ~~2015~~2016 has been affected most significantly by the increase in the volume of loans and securities which has been partially offset by a decrease in yields on ~~loans and was complemented by the decrease in rates paid on interest-bearing liabilities.~~loans. Net interest rate spread ~~increased 7~~decreased 4 basis points to ~~3.34%~~3.30% for the fiscal year ended June 30, ~~2015 as compared to 3.27% for the fiscal year ended June 30, 2014. Net interest margin increased 7 basis points to 3.41% for the fiscal year ended June 30, 2015~~2016 as compared to 3.34% for the fiscal year ended June 30, ~~2014.~~2015. Net interest margin decreased 4 basis points to 3.37% for the fiscal year ended June 30, 2016 as compared to 3.41% for the fiscal year ended June 30, 2015.

Index

INTEREST INCOME

Interest income for the year ended June 30, ~~2015~~2016 amounted to ~~$25.7~~$28.8 million as compared to ~~$23.8~~$25.7 million for the year ended June 30, ~~2014,~~2015, an increase of ~~$1.9~~$3.1 million, or ~~8.0%~~12.1%. The increase in average loan and securities balances and the increase in securities yields had the greatest impact on interest income when comparing the years ended June 30, 2016 and 2015, ~~and 2014,~~ which ~~was~~were offset by a decrease in the yield on loans. Interest income is derived from loans, securities and other interest-earning assets. Total average interest-earning assets increased to $777.5 million for the year ended June 30, 2016 as compared to $685.2 million for the year ended June 30, 2015, ~~as compared to $641.0 million for the year ended June 30, 2014,~~ an increase of ~~$44.2~~$92.3 million, or ~~6.9%~~13.5%. The yield earned on such assets ~~increased 4~~decreased 5 basis points to 3.70% for the year ended June 30, 2016 as compared to 3.75% for the year ended June 30, ~~2015 as compared to 3.71% for the year ended June 30, 2014.~~2015.

Interest income earned on loans amounted to $22.1 million for the year ended June 30, 2016 as compared to $19.9 million for the year ended June 30, ~~2015 as compared~~2015. Average loans outstanding increased $57.5 million, or 13.5%, to ~~$18.5~~$485.0 million for the year ended June 30, ~~2014. Average loans outstanding increased $37.6 million, or 9.6%,~~2016 as compared to $427.5 million for the year ended June 30, ~~2015 as compared~~2015. The yield on such loans decreased 10 basis points to ~~$389.9 million~~4.56% for the year ended June 30, ~~2014. The yield on such loans decreased 9 basis points~~2016 as compared to 4.66% for the year ended June 30, ~~2015 as compared to 4.75% for the year ended June 30, 2014.~~2015. At June 30, ~~2015,~~2016, approximately ~~31.1%~~35.7% of the loan portfolio was adjustable rate, of which a large portion is tied to the Prime Rate. However, many of these loans have interest rate floors, which are intended to lessen the impact of any future interest rate reductions within this portfolio.

Interest income earned on securities (excluding FHLB stock) increased to $6.6 million for the year ended June 30, 2016 as compared to $5.7 million for the year ended June 30, ~~2015 as compared~~2015. The average balance of securities increased $31.1 million to ~~$5.2~~$281.3 million for the year ended June 30, ~~2014. The average balance of securities increased $14.0 million~~2016 as compared to $250.2 million for the year ended June 30, ~~2015 as compared to $236.2 million for the year ended June 30, 2014.~~2015. The average yield on such securities increased 95 basis points to 2.33% for the year ended June 30, 2016 as compared to 2.28% for the year ended June 30, ~~2015 as compared to 2.19% for the year ended June 30, 2014.~~2015. No adjustments were made to tax-effect the income for the state and political subdivision securities, which often carry a lower yield because of the offset expected from income tax benefits gained from holding such securities. Adjusting for this tax effect, the tax equivalent yield on securities was 2.97% for the year ended June 30, 2016 as compared to 2.84% for the year ended June 30, 2015.

Interest income earned on federal funds and interest-earning deposits amounted to $48,000 for the year ended June 30, 2016 as compared to $18,000 for the year ended June 30, ~~2015 as compared to $40,000 for the year ended June 30, 2014.~~2015. The average balance of federal funds and interest-earning deposits ~~decreased $7.8~~increased $3.7 million during this same period. Dividends on FHLB stock increased to $77,000 for the year ended June 30, 2016 as compared to $70,000 for the year ended June 30, ~~2015 as compared to $55,000 for the year ended June 30, 2014.~~2015.

INTEREST EXPENSE

Interest expense for the year ended June 30, ~~2015~~2016 amounted to ~~$2.3~~$2.6 million as compared to ~~$2.4~~$2.3 million for the year ended June 30, ~~2014, a decrease~~2015, an increase of ~~$85,000,~~$279,000, or ~~3.6%~~12.1%. This ~~decrease~~increase was the result of ~~a decrease~~an increase in the average ~~rate paid on deposits, which was complemented by a shift in the mix~~balance of interest-bearing liabilities. Total average interest-bearing liabilities ~~out of higher costing certificates of deposits~~increased to ~~lower costing checking and savings deposits. Interest expense includes interest on deposits and borrowings. The rate paid on such liabilities decreased 3 basis points to 0.41%~~$638.9 million for the year ended June 30, ~~2015~~2016 as compared ~~to 0.44% for the year ended June 30, 2014. Total average interest-bearing liabilities increased~~ to $567.3 million for the year ended June 30, 2015, ~~as compared~~an increase of $71.6 million, or 12.6%. Much of this increase related to ~~$537.6 million~~deposits, specifically, NOW accounts. With the continued low interest rate environment, deposit rates remained flat and the overall rate paid on interest-bearing liabilities decreased by only one basis point to 40 basis points for the year ended June 30, ~~2014, an increase of $29.7 million, or 5.5%.~~2016 compared to 41 basis points for the year ended June 30, 2015.

Interest expense paid on savings and money market accounts amounted to $878,000 for the year ended June 30, 2016 as compared to $830,000 for the year ended June 30, 2015, ~~as compared to $939,000 for the year ended June 30, 2014, a decrease~~an increase of ~~$109,000,~~$48,000, or ~~11.6%~~5.8%. The rate paid on savings and money market accounts ~~decreased 6 basis points to~~remained unchanged at 0.31% for the ~~year~~years ended June 30, ~~2015 as compared to 0.37% for the year ended June 30, 2014.~~2016 and 2015. The average balance of savings and money market accounts increased by ~~$10.5~~$17.3 million to $281.4 million for the year ended June 30, 2016 as compared to $264.1 million for the year ended June 30, ~~2015 as compared to $253.6 million for the year ended June 30, 2014.~~2015.

Interest expense paid on NOW accounts amounted to ~~$890,000~~$1.1 million and ~~$945,000~~$890,000 for the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The average balance of NOW accounts increased to $285.4 million for the year ended June 30, 2016 as compared to $232.6 million for the year ended June 30, 2015, ~~as compared to $217.2 million for the year ended June 30, 2014,~~ an increase of ~~$15.4~~$52.8 million. The average rate paid on NOW accounts decreased 61 basis points to 0.37% for the year ended June 30, 2016 as compared to 0.38% for the year ended June 30, ~~2015 as compared to 0.44% for the year ended June 30, 2014.~~2015.

Interest expense paid on certificates of deposit amounted to $309,000 for the year ended June 30, 2016 as compared to $310,000 for the year ended June 30, 2015, ~~as compared to $338,000 for the year ended June 30, 2014,~~ a decrease of ~~$28,000.~~$1,000. The average rate paid on certificates of deposit increased 2 basis points to 0.70% for the year ended June 30, 2016 as compared to 0.68% for the year ended June 30, ~~2015 as compared to 0.66% for the year ended June 30, 2014.~~2015. The average balance on certificates of deposit decreased to $44.3 million for the year ended June 30, 2016 as compared to $45.8 million for the year ended June 30, ~~2015 as compared to $51.5 million for the year ended June 30, 2014.~~2015. The rate paid on certificates of deposit has increased as a result of an increase in balances within the five year maturity category. The Bank has promoted its five year certificate of deposit product during the ~~year~~years ended June 30, 2015 and 2016 in order to lock in the rate on lower costing liabilities as part of its overall interest rate risk strategy.

Interest expense on borrowings amounted to $340,000 for the year ended June 30, 2016 as compared to $272,000 for the year ended June 30, 2015, as ~~compared to $165,000 for the year ended June 30, 2014, as~~ the rate paid on such borrowings increased 212 basis points to ~~1.10%~~1.22% from ~~1.08%~~1.10% for these same periods. The average balance of borrowings increased ~~$9.6~~$3.0 million to $27.8 million for the year ended June 30, 2016 as compared to $24.8 million for the year ended June 30, ~~2015 as compared to $15.2 million for the year ended June 30, 2014.~~2015.

Index

PROVISION FOR LOAN LOSSES

Management continues to closely monitor asset quality and adjust the level of the allowance for loan losses when necessary. The amount recognized for the provision for loan losses is determined by management based on its ongoing analysis of the adequacy of the allowance for loan losses. The provision for loan losses amounted to ~~$1.6~~$1.7 million and ~~$1.5~~$1.6 million for the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The level of provision has remained flat as the result of the growth in commercial real estate and commercial loans, which has been offset by a continued decline in ~~delinquencies~~nonperforming loans and loans adversely classified. ~~Delinquencies decreased $3.7 million to $4.3 million at June 30, 2015 compared to $8.0 million at June 30, 2014.~~ Loans designated special mention or watch and loans adversely classified as substandard decreased ~~$1.9~~$1.6 million to $6.6 million at June 30, 2016 compared to $8.2 million at June 30, ~~2015 compared~~2015. Nonperforming loans amounted to ~~$10.1~~$3.4 million and $4.7 million at June 30, ~~2014.~~2016 and 2015, respectively. At June 30, 2016, nonperforming assets were 0.43% of total assets and nonperforming loans were 0.65% of net loans. Net charge-offs amounted to $330,000 and $833,000 for the years ended June 30, 2016 and 2015, respectively, a decrease of $503,000. The level of allowance for loan losses to total loans receivable decreased to 1.79% at June 30, 2016 compared to 1.81% at June 30, 2015 compared to 1.83% at June 30, 2014. Net charge-offs amounted to $833,000 and $1.1 million for the years ended June 30, 2015 and 2014, respectively, a decrease of $288,000. Nonperforming loans amounted to $4.7 million at June 30, 2015 and $6.2 million at June 30, 2014. At June 30, 2015, nonperforming assets were 0.75% of total assets and nonperforming loans were 1.06% of net loans.2015. We have not originated “no documentation” mortgage loans and our loan portfolio does not include any mortgage loans that we classify as sub-prime.

NONINTEREST INCOME

(Dollars in thousands)	For the Years ended June 30,				Change from Prior Year						For the Years ended June 30,				Change from Prior Year
Noninterest income:	2015		2014		Amount			Percent			2016		2015		Amount			Percent
Service charges on deposit accounts	$	2,779	$	2,558	$	221			8.64	%	$	2,880	$	2,779	$	101			3.63	%
Debit card fees		1,694		1,565		129			8.24			1,824		1,694		130			7.67
Investment services		403		424		(21	)		(4.95	)		383		403		(20	)		(4.96	)
E-commerce fees		101		96		5			5.21			97		101		(4	)		(3.96	)
Other operating income		631		637		(6	)		(0.94	)		781		720		61			8.47
Total noninterest income	$	5,608	$	5,280	$	328			6.21	%	$	5,965	$	5,697	$	268			4.70	%

Noninterest income ~~amounted~~increased $268,000, or 4.7%, to ~~$5.6 million and $5.3~~$6.0 million for the year ended June 30, ~~2015 and 2014, respectively, an increase of $328,000. The increase was primarily the result of higher fees earned on debit cards and service charges on deposit accounts. The Company has continued~~2016 as compared to ~~increase the number of checking accounts, which has resulted in the issuance of more debit cards to customers, and consequently a higher number of debit card transactions processed.~~

~~NONINTEREST EXPENSE~~

(Dollars in thousands)
For the Years
ended June 30,
Change from Prior Year
Noninterest expense: 2015 2014 Amount Percent
Salaries and employee benefits $ 9,855 $ 9,281 $ 574 6.18 %
Occupancy expense 1,548 1,322 226 17.10
Equipment and furniture expense 524 436 88 20.18
Service and data processing fees 1,714 1,452 262 18.04
Computer software, supplies and support 522 400 122 30.50
Advertising and promotion 294 278 16 5.76
FDIC insurance premiums 404 371 33 8.89
Legal and professional fees 1,037 822 215 26.16
Other 2,045 1,754 291 16.59
Total noninterest expense $ 17,943 $ 16,116 $ 1,827 11.34 %

~~Noninterest expense increased $1.8 million, or 11.3%, to $17.9~~$5.7 million for the year ended June 30, ~~2015 as compared~~2015. This increase was primarily due to ~~$16.1~~increases in debit card fees and service charges on deposit accounts resulting from continued growth in the number of checking accounts with debit cards. Also, impacting the year ended June 30, 2016, was an increase in other operating income which was primarily the result of income generated by loan fees.

NONINTEREST EXPENSE

(Dollars in thousands)	For the Years ended June 30,				Change from Prior Year
Noninterest expense:	2016		2015		Amount			Percent
Salaries and employee benefits	$	10,490	$	9,855	$	635			6.44	%
Occupancy expense		1,432		1,548		(116	)		(7.49	)
Equipment and furniture expense		537		524		13			2.48
Service and data processing fees		1,912		1,714		198			11.55
Computer software, supplies and support		443		522		(79	)		(15.13	)
Advertising and promotion		373		294		79			26.87
FDIC insurance premiums		417		404		13			3.22
Legal and professional fees		1,023		1,037		(14	)		(1.35	)
Other		2,244		2,134		110			5.15
Total noninterest expense	$	18,871	$	18,032	$	839			4.65	%

Noninterest expense increased $839,000, or 4.7%, to $18.9 million for the year ended June 30, ~~2014. As can be seen in~~2016 as compared to $18.0 million for the ~~chart above, all expense categories~~year ended June 30, 2015. Salaries and employee benefits expenses increased when comparing these periods. The increase in salaries and employees benefits was in part due to normal increases in salaries as well as an increase in the number of employees resulting from the opening of a new branch location, as well as an increase in expenses related to various benefit plans$635,000 when comparing the years ended June 30, 2016 and 2015, ~~and 2014. The increase in occupancy expense and equipment and furniture expense is also the result of~~respectively, primarily due to the opening of a new branch ~~location~~in Kingston during the third quarter of fiscal 2015, as well as ~~the relocation of~~additional staffing within our lending ~~operations to a new building. The increase in~~department and customer service center. Service and data processing fees ~~were~~also increased $198,000 when comparing the ~~result of higher debit card processing fees. During the year~~years ended June 30, ~~2014, the Company had paid reduced fees~~2016 and 2015, respectively, as a result of ~~renegotiation of the contract between the Company and its vendor. These incentives have since expired, resulting in the higher fees paid~~an upgrade to a new online banking platform during the ~~year~~second quarter of fiscal 2016. Advertising and promotion costs increased $79,000 when comparing the years ended June 30, ~~2015. The increase~~2016 and 2015, respectively, as a result of increased marketing within our new market area in ~~computer software, supplies~~Ulster County. Partially offsetting these increases was a decrease in occupancy expense of $116,000 when comparing the years ended June 30, 2016 and ~~support~~2015, respectively, which was ~~the~~primarily due to lower fuel prices and lower snow removal costs as a result of a ~~fee paid~~mild winter season. Additionally, other noninterest expense increased $110,000 when comparing the years ended June 30, 2016 and 2015. Contributing to ~~one of the Company’s vendors~~this increase were increased costs related to the renegotiation of the contract for support services. The increase in legal and professional fees was the result of implementation costs associated with the formation of the Company’s pooled captive insurance subsidiary, which was established in December 2014. This newly formed company, Greene Risk Management, Inc., ~~was formed as a subsidiary of Greene County Bancorp, Inc.~~service charges paid to ~~provide additional insurance coverage for the Company~~correspondent banks, and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible. Included in other expenses were write-downs on foreclosed real estate in the amount of $181,000 for the year ended June 30, 2015. These write-downs were the result of either obtaining updated appraisals on the properties or the acceptance of an offer to purchase the property at a value lower than the recorded fair value. These write-downs were partially offset by net gains realized on the sale of foreclosed real estate of $44,000.increased postage costs resulting from increased advertising and promotion.

Index

INCOME TAXES

The provision for income taxes directly reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements. The effective tax rate was 23.0% for the year ended June 30, 2016, compared to 24.4% for the year ended June 30, ~~2015, compared to 28.0% for the year ended June 30, 2014.~~2015. The effective tax rate has continued to decline as a result of income derived from tax exempt bonds and loans as well as continued loan growth within the Company’s real estate investment trust subsidiary. Also contributing to the lower effective income tax rate is the tax benefits derived from the Company’s pooled captive insurance company, as premium income received by the pooled captive insurance company is exempt from income taxes. The premiums paid to the pooled captive insurance company by the Company and its banking subsidiaries are tax deductible.

LIQUIDITY AND CAPITAL RESOURCES

Greene County Bancorp, Inc.’s primary sources of funds are deposits and proceeds from principal and interest payments on loans and securities, as well as lines of credit and term borrowing facilities available through the Federal Home Loan Bank as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and borrowings are greatly influenced by general interest rates, economic conditions and competition.

Greene County Bancorp, Inc.’s primary investing activities are the origination of residential one- to four-family and commercial real estate mortgage loans, other consumer and commercial loans, and the purchase of securities. Loan originations exceeded repayments by ~~$47.5~~$81.7 million and ~~$42.4~~$47.5 million and purchases of securities totaled ~~$68.5~~$123.4 million and ~~$39.0~~$68.5 million for the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. These activities were funded primarily through deposit growth, and principal payments on loans and securities. Loan sales did not provide an additional source of liquidity during the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, as Greene County Bancorp, Inc. originated loans for retention in its portfolio.

Greene County Bancorp, Inc. experienced a net increase in total deposits of ~~$33.1~~$116.2 million and ~~$31.2~~$33.1 million for the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The level of interest rates and products offered by local competitors are some factors affecting deposit flows. The Company continues to benefit from consolidation of other depository institutions within its market area and has successfully launched several marketing campaigns aimed at different segments of the market.

Greene County Bancorp, Inc. monitors its liquidity position on a daily basis. Excess short-term liquidity is usually invested in overnight federal funds. In the event Greene County Bancorp, Inc. requires funds beyond its ability to generate them internally, additional sources of funds are available through the use of FHLB advance programs made available to The Bank of Greene County. During the year ended June 30, ~~2015,~~2016, The Bank of Greene County’s maximum borrowing from FHLB reached ~~$61.0~~$64.0 million and the minimum amounted to ~~$14.5~~$18.8 million. The ~~$41.7~~$46.4 million borrowing at June 30, ~~2015~~2016 consisted of ~~$22.9~~$26.1 million in overnight borrowings, ~~$18.8~~$20.3 million in term borrowings with maturities ranging between 2016 through 2021. The liquidity position can be significantly impacted on a daily basis by funding needs associated with Greene County Commercial Bank. These funding needs are also impacted by the collection of taxes and state aid for the municipalities using the services of Greene County Commercial Bank.

The Bank of Greene County’s unfunded loan commitments and unused lines of credit are as follows at June 30, ~~2015~~2016 and ~~2014:~~2015:

(In thousands) 2015 2014
Residential real estate loan commitments $ 5,087 $ 2,380
Construction and land loan commitments 5,622 3,138
Commercial real estate loan commitments 15,855 8,757
Home equity available lines of credit 8,295 8,159
Consumer overdraft available lines of credit 698 706
Commercial loan available lines of credit 21,264 14,419
Commercial loan commitments 885 226
Total commitments $ 57,706 $ 37,785

(In thousands)	2016		2015
Unfunded loan commitments	$	41,383	$	27,449
Unused lines of credit		30,636		30,257
Total commitments	$	72,019	$	57,706

~~Index~~

Greene County Bancorp, Inc. anticipates that it will have sufficient funds available to meet current loan commitments. Certificates of deposit scheduled to mature in one year or less from June 30, 2015 totaled ~~$21.4~~$27.9 million. Based upon Greene County Bancorp, Inc.’s experience and its current pricing strategy, management believes that a significant portion of such deposits will remain with Greene County Bancorp, Inc.

At June 30, ~~2015~~2016 and ~~2014,~~2015, The Bank of Greene County and Greene County Commercial Bank exceeded all of their regulatory capital requirements, as illustrated in Part II, Item 8 Financial Statements and Supplementary Data Note 17. Regulatory Matters of this Report. Shareholders’ equity represented 8.6% and 9.1% of total consolidated assets at June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

Greene County Bancorp, Inc.’s most liquid assets are cash and cash equivalent accounts. The levels of these assets are dependent on Greene County Bancorp, Inc.’s operating, financing, lending and investing activities during any given period. At June 30, ~~2015,~~2016, cash and cash equivalents totaled ~~$15.5~~$15.9 million, or ~~2.1%~~1.8% of total assets.

Index

IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements of Greene County Bancorp, Inc. and notes thereto, presented elsewhere herein, have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of Greene County Bancorp, Inc.’s operations. Unlike most industrial companies, nearly all the assets and liabilities of Greene County Bancorp, Inc. are monetary. As a result, interest rates have a greater impact on Greene County Bancorp, Inc.’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements which may impact the Company’s financial statements are discussed within Part II, Item 8 Financial Statements and Supplementary Data, Note 1 Summary of significant accounting policies of this Report.

Index

UNAUDITED QUARTERLY FINANCIAL DATA

The following table sets forth a summary of selected financial data at and for the years ended June 30, ~~2015~~2016 and ~~2014~~2015 and quarter ends within those years.

(In thousands, except per share data)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		First Quarter		Second Quarter		Third Quarter		Fourth Quarter

The year ended June 30, 2016
Loans receivable, net									$	460,458	$	478,204	$	493,131	$	522,764
Deposits										664,308		669,189		750,309		738,887

Interest income										6,863		7,136		7,263		7,540
Interest expense										614		626		652		689
Net interest income										6,249		6,510		6,611		6,851
Provision for loan losses										374		343		421		535
Noninterest income										1,484		1,531		1,418		1,532
Noninterest expense										4,558		4,680		4,804		4,829
Income before provision for income taxes										2,801		3,018		2,804		3,019
Net income										2,150		2,320		2,161		2,332
Basic earnings per share¹										0.25		0.27		0.26		0.28
Diluted earnings per share¹										0.25		0.27		0.25		0.28

The year ended June 30, 2015
Loans receivable, net	$	406,694	$	422,716	$	435,310	$	443,496	$	406,694	$	422,716	$	435,310	$	443,496
Deposits		611,308		583,181		644,841		622,717		611,308		583,181		644,841		622,717

Interest income		6,241		6,407		6,467		6,585		6,241		6,407		6,467		6,585
Interest expense		562		563		579		598		562		563		579		598
Net interest income		5,679		5,844		5,888		5,987		5,679		5,844		5,888		5,987
Provision for loan losses		411		305		416		424		411		305		416		424
Noninterest income		1,469		1,440		1,251		1,448		1,469		1,440		1,318		1,470
Noninterest expense		4,277		4,496		4,454		4,716		4,277		4,496		4,521		4,738
Income before provision for income taxes		2,460		2,483		2,269		2,295		2,460		2,483		2,269		2,295
Net income		1,775		1,811		1,784		1,819		1,775		1,811		1,784		1,819
Basic earnings per share		0.42		0.43		0.42		0.43
Diluted earnings per share		0.42		0.43		0.42		0.43

The year ended June 30, 2014
Loans receivable, net	$	374,138	$	387,083	$	392,480	$	399,309
Deposits		580,482		549,435		621,238		589,574

Interest income		5,826		5,951		5,954		6,057
Interest expense		578		582		600		627
Net interest income		5,248		5,369		5,354		5,430
Provision for loan losses		313		508		288		391
Noninterest income		1,350		1,316		1,248		1,366
Noninterest expense		3,812		3,751		4,275		4,278
Income before provision for income taxes		2,473		2,426		2,039		2,127
Net income		1,754		1,725		1,496		1,553
Basic earnings per share		0.42		0.41		0.35		0.37
Diluted earnings per share		0.41		0.41		0.35		0.37
Basic earnings per share¹										0.21		0.21		0.21		0.22
Diluted earnings per share¹										0.21		0.21		0.21		0.21

¹Amounts in period during the year ended June 30, 2015 and the six months ended December 31, 2015 have been restated for comparability to reflect the 2-for-1 stock split effective March 15, 2016.

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Index

ITEM 8.

Financial Statements and Supplementary Data

MANAGEMENT’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

The management of Greene County Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Greene County Bancorp Inc.’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published consolidated financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Greene County Bancorp, Inc.’s management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, ~~2015.~~2016. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment, we believe that, as of June 30, ~~2015,~~2016, the Company’s internal control over financial reporting was effective based on those criteria.

	/s/ Donald E Gibson		/s/ Michelle Plummer
	Donald E. Gibson		Michelle Plummer, CPA
	President and Chief Executive Officer		Executive Vice President, Chief Operating Officer and Chief Financial Officer

Index

Greene County Bancorp, Inc.

Consolidated Statements of Income

For the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands, except share and per share amounts)

	2015		2014		2016		2015
Interest income:
Loans	$	19,919	$	18,521	$	22,118	$	19,919
Investment securities - taxable		548		646		566		548
Mortgage-backed securities		2,865		2,544		3,080		2,865
Investment securities - tax exempt		2,350		2,037		2,990		2,350
Interest-bearing deposits and federal funds sold		18		40		48		18
Total interest income		25,700		23,788		28,802		25,700

Interest expense:
Interest on deposits		2,030		2,222		2,241		2,030
Interest on borrowings		272		165		340		272
Total interest expense		2,302		2,387		2,581		2,302

Net interest income		23,398		21,401		26,221		23,398
Provision for loan losses		1,556		1,500		1,673		1,556
Net interest income after provision for loan losses		21,842		19,901		24,548		21,842

Noninterest income:
Service charges on deposit accounts		2,779		2,558		2,880		2,779
Debit card fees		1,694		1,565		1,824		1,694
Investment services		403		424		383		403
E-commerce fees		101		96		97		101
Other operating income		631		637		781		720
Total noninterest income		5,608		5,280		5,965		5,697

Noninterest expense:
Salaries and employee benefits		9,855		9,281		10,490		9,855
Occupancy expense		1,548		1,322		1,432		1,548
Equipment and furniture expense		524		436		537		524
Service and data processing fees		1,714		1,452		1,912		1,714
Computer software, supplies and support		522		400		443		522
Advertising and promotion		294		278		373		294
FDIC insurance premiums		404		371		417		404
Legal and professional fees		1,037		822		1,023		1,037
Other		2,045		1,754		2,244		2,134
Total noninterest expense		17,943		16,116		18,871		18,032

Income before provision for income taxes		9,507		9,065		11,642		9,507
Provision for income taxes		2,318		2,537		2,679		2,318
Net income	$	7,189	$	6,528	$	8,963	$	7,189

Basic earnings per share	$	1.70	$	1.55	$	1.06	$	0.85
Basic average shares outstanding		4,218,671		4,205,945		8,459,327		8,437,342
Diluted earnings per share	$	1.69	$	1.54	$	1.06	$	0.85
Diluted average shares outstanding		4,248,687		4,241,256		8,476,292		8,497,374
Dividends per share	$	0.720	$	0.70	$	0.37	$	0.36

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Years ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

2015 2014
Net income $ 7,189 $ 6,528
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale securities, net of income taxes of $182 and ($327), respectively 288 (518 )

Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $139 and $175, respectively⁽¹⁾
220 277

Pension actuarial loss, net of income taxes of ($162) and ($37)⁽²⁾
(256 ) (59 )

Total other comprehensive income (loss), net of taxes 252 (300 )

Comprehensive income $ 7,441 $ 6,228

	2016			2015
Net income	$	8,963		$	7,189
Other comprehensive income:
Unrealized holding gains on available-for-sale securities, net of income taxes of $328 and $182, respectively		520			288

Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $6 and $139, respectively		9			220

Pension actuarial loss, net of income tax benefit of ($340) and ($259)		(539	)		(409	)

Amortization of pension actuarial losses recognized in salaries and benefits, net of income taxes of $52 and $97, respectively		83			153

Total other comprehensive income net of taxes		73			252

Comprehensive income	$	9,036		$	7,441

⁽¹⁾

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

⁽²⁾	These accumulated other comprehensive income components are included in the computation of net periodic benefit cost and are included in salaries and employee benefit expense within noninterest expense (see Note 9 for additional details).

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Treasury Stock			Total Shareholders' Equity			Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Treasury Stock			Total Shareholders' Equity
Balance at June 30, 2013	$	431	$	11,168		$	46,112		$	(750	)	$	(853	)	$	56,108
Options exercised				13									159			172
Tax benefit of stock based compensation				27												27
Dividends declared¹							(1,335	)								(1,335	)
Net income							6,528									6,528
Other comprehensive loss, net of taxes										(300	)					(300	)
Balance at June 30, 2014	$	431	$	11,208		$	51,305		$	(1,050	)	$	(694	)	$	61,200		$	431	$	11,208		$	51,305		$	(1,050	)	$	(694	)	$	61,200
Options exercised				(4	)								65			61					(4	)								65			61
Tax benefit of stock based compensation				16												16					16												16
Dividends declared¹							(1,798	)								(1,798	)
Dividends declared²																								(1,798	)								(1,798	)
Net income							7,189									7,189								7,189									7,189
Other comprehensive income, net of taxes										252						252											252						252
Balance at June 30, 2015	$	431	$	11,220		$	56,696		$	(798	)	$	(629	)	$	66,920		$	431	$	11,220		$	56,696		$	(798	)	$	(629	)	$	66,920
Options exercised																					76									117			193
Tax benefit of stock based compensation																					6												6
2-for-1 stock split¹																			430		(430	)											-
Dividends declared²																								(1,854	)								(1,854	)
Net income																								8,963									8,963
Other comprehensive income, net of taxes																											73						73
Balance at June 30, 2016																		$	861	$	10,872		$	63,805		$	(725	)	$	(512	)	$	74,301

¹	On March 15, 2016, the Company issued an additional 4,305,670 shares at a par value of $0.10 per share as a result of the payment of a 2-for-1 stock split.

Dividends declared were ~~$0.72~~$0.37 per share and ~~$0.70~~$0.36 per share for the years ended June 30, 2016 and 2015, ~~and 2014.~~adjusted for 2-for-1 stock split. This is based on total number of shares outstanding. However, Greene County Bancorp, MHC, the owner of ~~54.6%~~54.4% of the Company’s shares outstanding at June 30, 2016, waived its right to receive dividends ~~each quarter~~declared during the ~~fiscal years~~quarters ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, December 31, 2014, and ~~2014 with the exception of the quarter ended March 31, 2015.~~September 30, 2014. Dividends were paid to the MHC during the ~~quarter~~quarters ended June 30, 2016 and March 31, ~~2015 to provide liquidity based on the MHC’s cash flow requirements.~~2015. The MHC’s ability to waive the receipt of dividends is dependent upon annual approval of its members as well as receiving the non-objection of the Federal Reserve Board.

See notes to consolidated financial statements.

Index

Greene County Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

	2015			2014			2016			2015
Cash flows from operating activities:
Net Income	$	7,189		$	6,528		$	8,963		$	7,189
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		545			617			629			545
Deferred income tax expense		488			18
Deferred income tax (benefit) expense								(714	)		488
Net amortization of premiums and discounts		1,145			1,815			716			1,145
Net amortization of deferred loan costs and fees		369			340			393			369
Provision for loan losses		1,556			1,500			1,673			1,556
Loss on sale of foreclosed real estate		136			57			177			136
Excess tax benefit from stock based compensation		(16	)		(27	)		(6	)		(16	)
Net increase (decrease) in accrued income taxes		1,703			(682	)
Net increase in accrued income taxes								597			1,703
Net increase in accrued interest receivable		(316	)		(47	)		(584	)		(316	)
Net increase in prepaid expenses and other assets		(819	)		(88	)
Net decrease (increase) in prepaid expenses and other assets								202			(819	)
Net increase in other liabilities		818			1,354			1,535			818
Net cash provided by operating activities		12,798			11,385			13,581			12,798

Cash flows from investing activities:
Securities available-for-sale:
Proceeds from maturities		6,672			2,515			47,939			6,672
Purchases of securities		(41,682	)		(7,341	)		(65,364	)		(41,682	)
Principal payments on securities		5,241			5,862			3,996			5,241
Securities held-to-maturity:
Proceeds from maturities		30,993			29,069			13,376			30,993
Purchases of securities		(26,840	)		(31,610	)		(58,003	)		(26,840	)
Principal payments on securities		8,363			7,363			8,179			8,363
Net purchase of Federal Home Loan Bank Stock		(933	)		(173	)		(258	)		(933	)
Purchase of long term certificate of deposit		(980	)		-			(980	)		(980	)
Net increase in loans receivable		(47,466	)		(42,388	)		(81,718	)		(47,466	)
Proceeds from sale of foreclosed real estate		844			431			684			844
Purchases of premises and equipment		(753	)		(575	)		(290	)		(753	)
Net cash used in investing activities		(66,541	)		(36,847	)		(132,439	)		(66,541	)

Cash flows from financing activities:
Net decrease in short-term FHLB advances		19,750			(7,450	)
Net increase in short-term FHLB advances								3,200			19,750
Proceeds from long-term FHLB advances		4,300			10,500			1,500			4,300
Payment of cash dividends		(1,798	)		(1,335	)		(1,854	)		(1,798	)
Proceeds from issuance of stock options		61			172			193			61
Excess tax benefit from stock based compensation		16			27			6			16
Net increase in deposits		33,143			31,135			116,170			33,143
Net cash provided by financing activities		55,472			33,049			119,215			55,472

Net increase in cash and cash equivalents		1,729			7,587			357			1,729
Cash and cash equivalents at beginning of year		13,809			6,222			15,538			13,809
Cash and cash equivalents at end of year	$	15,538		$	13,809		$	15,895		$	15,538

Non-cash investing activities:
Foreclosed loans transferred to other real estate	$	1,354		$	665		$	384		$	1,354
Securities transferred from available-for-sale to held-to-maturity		-			11,735
Cash paid during period for:
Interest	$	2,304		$	2,376		$	2,571		$	2,304
Income taxes	$	127		$	3,201		$	2,795		$	127

See notes to consolidated financial statements

Index

Greene County Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1. Summary of significant accounting policies

Basis of Presentation

The consolidated financial statements include the accounts of Greene County Bancorp, Inc. (the “Company”) and its subsidiaries, The Bank of Greene County (the “Bank”) and Greene Risk Management, Inc., and the Bank’s subsidiaries Greene County Commercial Bank and Greene Property Holdings, Ltd. All material inter-company accounts and transactions have been eliminated. Amounts in the prior year’s consolidated financial statements have been reclassified whenever necessary to conform to the current year’s presentation. These reclassifications had no effect on net income or shareholders’ equity as previously reported. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.

Nature of Operations

Greene County Bancorp, Inc.’s primary business is the ownership and operation of its subsidiaries. The Bank of Greene County has 13 full-service offices and an operations center located in its market area consisting of the Hudson Valley of New York. The Bank of Greene County is primarily engaged in the business of attracting deposits from the general public in The Bank of Greene County’s market area, and investing such deposits, together with other sources of funds, in loans and investment securities. Greene County Commercial Bank’s primary business is to attract deposits from, and provide banking services to, local municipalities. Greene Property Holdings, Ltd. was formed as a New York corporation that has elected under the Internal Revenue Code to be a real estate investment trust. Currently, certain mortgages and loan notes held by The Bank of Greene County are transferred and beneficially owned by Greene Property Holdings, Ltd. The Bank of Greene County continues to service these loans. Greene Risk Management, Inc. was formed in December 2014 as a pooled captive insurance company subsidiary of Greene County Bancorp, Inc., incorporated in the State of Nevada. The purpose of this company is to provide additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.

Charter

Greene County Bancorp, Inc. and its parent mutual holding company (the “MHC”) are federally chartered and regulated and examined by the Federal Reserve Board. The Bank of Greene County, the subsidiary of Greene County Bancorp, Inc., is also federally chartered and regulated and examined by the Office of the Comptroller of the Currency (the “OCC”).

Greene County Commercial Bank is a New York State-chartered financial institution, regulated and examined by the New York State Banking Department. Greene Property Holdings, Ltd. is a New York corporation.

As a ~~federally chartered~~federal savings ~~bank,~~association, The Bank of Greene County must satisfy the qualified thrift lender, or “QTL”, requirement by meeting one of two tests: the Home Owners’ Loan Act (“HOLA”) QTL test or the Internal Revenue Service (IRS) Domestic Building and Loan Association (DBLA) test. The federal savings association may use either test to qualify and may switch from one test to the other.

Under the HOLA QTL test, The Bank of Greene County must maintain at least 65% of its “portfolio assets” ~~(total~~in “qualified thrift investments” in at least nine of the most recent 12-month period. “Portfolio assets” generally means total assets ~~minus~~of a savings institution, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, ~~office~~and the value of property used in the conduct of the savings association’s business.

“Qualified thrift investments” include various types of loans made for residential and ~~specified liquid~~housing purposes, investments related to such purposes, including certain mortgage-backed and related securities, and loans for personal, family, household and certain other purposes up to a limit of 20% of ~~total assets) in certain “qualified~~portfolio assets. “Qualified thrift investments” ~~(primarily~~also include 100% of an institution’s credit card loans, ~~to purchase, refinance, construct, improve or repair domestic residential housing, home equity~~education loans ~~securities backed~~and small business loans. The Bank of Greene County also may satisfy the QTL test by ~~or representing an~~qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.

Under the IRS DBLA test, the Bank must meet the business operations test and the 60% of assets test. The business operations test requires that the federal savings association’s business consists primarily of acquiring the savings of the public (75% of its deposits, withdrawable shares, and other obligations must be held by the general public) and investing in loans (more than 75% of its gross income consists of interest ~~in mortgages~~ on ~~domestic residential housing,~~loans and ~~Federal Home Loan~~government obligations and various other specified types of operating income that federal savings associations ordinarily earn). For the 60% of assets test, the Bank ~~stock) in~~must maintain at least ~~9 months out~~60% of ~~every 12 month period.~~ its total in “qualified investments” as of the close of the taxable year or, at the option of the taxpayer, may be computed on the basis of the average assets outstanding during the taxable year.

Index

A savings ~~institution~~association that fails the qualified thrift lender test ~~is subject to certain operating restrictions and may be required to~~must either convert to a bank ~~charter. At~~charter or operate under specified restrictions. During the years ended June 30, ~~2015~~2016 and ~~2014 and for the years then ended,~~2015, The Bank of Greene County opted to utilize the HOLA QTL test and satisfied the ~~requirement~~requirements of this test for the ~~qualified thrift lender test.~~entire 12-month period.

Use of Estimates

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

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

~~Index~~

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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits at other financial institutions, investments (with original maturity of three months or less), and overnight federal funds sold. The amounts of interest-bearing deposits included as cash equivalents at June 30, 2016 and 2015 ~~and 2014~~ were ~~$7.0~~$6.0 million and ~~$4.8~~$7.0 million, respectively.

Securities

Greene County Bancorp, Inc. has classified its investments in debt and equity securities as either available-for-sale or held-to-maturity. Available-for-sale securities are reported at fair value, with net unrealized gains and losses reflected in the accumulated other comprehensive income (loss) component of shareholders’ equity, net of applicable income taxes. Held-to-maturity securities are those debt securities which management has the intent ~~and the Company has~~ the ability to hold to maturity and are reported at amortized cost. The Company does not have trading securities in its portfolio.

Realized gains or losses on security transactions are reported in earnings and computed using the specific identification cost basis. Fair values of securities are based on quoted market prices, where available. Valuation of securities is further described in Note ~~16.~~16, Fair Value Measurements and Fair Value of Financial Instruments. Amortization of bond premiums and accretion of bond discounts are amortized over the expected life of the securities using the interest method.

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.

Index

For debt securities, credit-related OTTI is recognized in earnings while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“OCI”). Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis. Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized. For securities classified as held-to-maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods. For equity securities, the entire amount of OTTI is recognized in earnings.

Loans

Loans are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan origination fees and costs. Interest on loans is accrued and credited to income based upon the principal amount outstanding. Unearned discount on installment loans is recognized as income over the term of the loan, principally using a method that approximates the effective yield method. Nonrefundable loan fees and related direct costs are deferred and amortized over the life of the loan as an adjustment to loan yield using the effective interest method.

~~Index~~

Allowance for Loan Losses

The allowance for loan losses is maintained by a provision for loan losses charged to expense, reduced by net charge-offs and increased by recoveries of loans previously charged off. The level of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, payment status of the loan and economic conditions. The Bank of Greene County considers smaller balance residential mortgages, home equity loans, commercial real estate, business 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 real estate mortgage and business 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 agreements. The measurement of impaired loans is generally based on the fair value of the underlying collateral, less estimated costs to sell. The majority of The Bank of Greene County loans, including most nonaccrual loans, are small homogenous loan types adequately supported by collateral. As a result, the level of impaired loans may only be a portion of nonaccrual loans. Loans that are delinquent or slow paying may not be impaired. Management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors. ~~Loans that are~~Based on this evaluation, a delinquent loan’s risk rating may be downgraded to either ~~delinquent a minimum of 60 days~~pass-watch, special mention, or ~~are on nonaccrual status, and are not individually considered impaired, are either designated as Special Mention or Substandard,~~substandard, and the allocation of the allowance for loan loss is based upon the risk associated with such designation.

Income Recognition on Impaired and Nonaccrual loans

The Bank of Greene County generally places a loan, including impaired loans, on nonaccrual status when it is specifically determined to be impaired or when principal and interest is delinquent for 90 days or more. Any unpaid interest previously accrued on these loans is reversed from income. When a loan is specifically determined to be impaired, collection of interest and principal are generally applied as a reduction to principal outstanding until the collection of the remaining balance is reasonably assured. Interest income on all nonaccrual loans is recognized on a cash basis.

Foreclosed Real Estate (FRE)

FRE consists of properties acquired through mortgage loan foreclosure proceedings or in full or partial satisfaction of loans. FRE is initially recorded at fair value (less estimated costs to sell) at the date the collateral is acquired establishing a new cost basis and any shortfall is charged to the allowance for loan losses at this time. Subsequently, management reviews the value of FRE and write-downs, if any, are charged to expense. All expenses and income related to FRE are included in consolidated results of operations as part of noninterest expense.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using principally the straight-line method over the estimated useful lives of the related assets (39 years for building and improvements, 3-8 years for furniture and equipment). Maintenance and repairs are typically charged to expense when incurred. Gains and losses from sales or other dispositions of premises and equipment are included in consolidated results of operations. Leasehold improvements are amortized over the lesser of the related terms of the leases or their useful life.

Index

Treasury Stock

Common stock repurchases are recorded at cost and then held as treasury stock. From time to time, Greene County Bancorp, Inc. may repurchase shares of common stock under an approved plan if, in its judgment, such shares are an attractive investment, in view of the current price at which the common stock is trading relative to Greene County Bancorp, Inc.’s earnings per share, book value per share and general market and economic factors. The Company has a stock repurchase program which allows for the repurchase of up to ~~92,346~~181,692 shares. As of June 30, ~~2015, 62,478~~2016, 124,956 shares had been repurchased under this plan. There were no shares repurchased during fiscal ~~2015~~2016 or ~~2014.~~2015. The Company currently does not intend to repurchase any additional shares under this stock repurchase program. Common stock may also be acquired in order to have shares available for issuance under the Stock Option Plans. ~~See Note 10 to the consolidated financial statements, Stock-Based Compensation, for~~For more information regarding these ~~plans.~~plans see Note 10, Stock-Based Compensation of this Report. No repurchases of stock were made during the year ended June 30, ~~2015~~2016 or ~~2014.~~2015.

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 years ended June 30, ~~2015~~2016 or ~~2014.~~2015.

~~Index~~

Advertising

Greene County Bancorp, Inc. follows a policy of charging the costs of advertising to expense as incurred. Advertising costs included in other operating expenses were ~~$294,000~~$373,000 and ~~$278,000~~$294,000 for the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under lines of credit. Such financial instruments are recorded when they are funded.

Income Taxes

Provisions for income taxes are based on taxes currently payable or refundable and deferred income taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are reported at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

Earnings Per Share (EPS)

Basic EPS 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. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for either the basic or diluted earnings per share calculations.

Index

Impact of Recent Accounting Pronouncements

In ~~January~~May 2014, the Financial Accounting Standards Board (“FASB”) issued an amendment (ASU 2014-04) to its guidance on “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”. ThisAccounting Standard Update has been issued to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The adoption of these amendments is not expected to have an effect on our consolidated results of operations or financial position.

~~In May 2014, the FASB issued and amendment~~(“ASU) (ASU 2014-09) to isamend its guidance on “Revenue from Contracts with Customers (Topic 606). The objective of the ASU is to align the recognition of revenue with the transfer of promised goods or services provided to customers in an amount that reflects the consideration which the entity expects to be entitled in exchange for those goods or services. This ASU will replace most existing revenue recognition guidance under GAAP when it becomes effective. In August, 2015, the FASB issued an amendment (ASU 2015-14) which defers the effective date of this new guidance by one year. More detailed implementation guidance on Topic 606 was issued in March 2016 (ASU 2016-08), April 2016 (ASU 2016-10) and May 2016 (ASU 2016-12), and the effective date and transition requirements for these ASUs are the same as the effective date and transition requirements of ASU 2014-09. The amendments in ~~this~~ ASU 2014-09 are effective for public business entities for annual periods, beginning after December 15, ~~2016.~~2017. The Company has not yet determined the effect of the standard on its ongoing financial reporting.

In August 2014, the FASB issued an amendment (ASU 2014-14) to its guidance on “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40)”. The objective of the ASU is to reduce the diversity in how creditors classify government-guaranteed mortgage loans, including FHA or VA guaranteed loans, upon foreclosure, to provide more decision-useful information about a creditor’s foreclosed mortgage loans that are expected to be recovered, at least in part, through government guarantees. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Public entities would be permitted to elect to early adopt for annual reporting periods beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

~~Index~~

In January 2015, the FASB issued an Update (ASU 2015-01) to its guidance on “Income Statement-Extraordinary and Unusual Items (Subtopic 225-20)”. The objective of the ASU is to simplify the income statement presentation by eliminating the concept of extraordinary items, and will align GAAP more closely with International Accounting Standards which prohibits the presentation and disclosure of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

In ~~May 2015,~~January 2016, the FASB issued an Update (ASU ~~2015-09)~~2016-01) to its guidance on “Financial ~~Services-Insurance~~Instruments (Subtopic 825-10)”. This amendment addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. These amendments require equity securities to be measured at fair value with changes in the fair value to be recognized through net income. The amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this Update is not permitted. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

In February 2016, the FASB issued an Update (ASU 2016-02) to its guidance on “Leases (Topic ~~944): Disclosures about Short-Duration Contracts”~~842)”. The ~~objective~~new leases standard applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. The new leases standard requires a lessor to classify leases as either sales-type, direct financing or operating, similar to existing U.S. GAAP. Classification depends on the same five criteria used by lessees plus certain additional factors. The subsequent accounting treatment for all three lease types is substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases, and operating leases. However, the new standard updates certain aspects of the ~~ASU is~~lessor accounting model to ~~improve~~align it with the ~~transparency~~new lessee accounting model, as well as with the new revenue standard under Topic 606. Lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of ~~significant estimates made in measuring liabilities related~~financial statements to ~~short-duration insurance contracts, improve comparability by requiring consistent disclosure of information, and provide financial statement users with additional information to facilitate analysis of~~assess the amount, timing, and uncertainty of cash flows arising from ~~contracts~~leases. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact on our consolidated results of operations or financial position.

In March 2016, the FASB issued ~~by insurance entities~~an Update (ASU 2016-09) to its guidance on “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This amendment is intended to simplify the accounting for stock compensation. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the ~~development~~statement of ~~loss reserve estimates.~~cash flows. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, ~~2015,~~2016, and interim periods within those annual ~~periods~~periods. Early adoption is permitted for any entity in any interim or annual period. The adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position.

Index

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. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after December 15, ~~2016.~~2019, including interim periods within those fiscal years. 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. 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). The Company ~~has not yet determined~~is currently evaluating the ~~effect~~potential impact on our consolidated results of ~~the standard on its ongoing~~operations or financial ~~reporting.~~position.

Note 2. Balances at other banks

The Bank of Greene County is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank. The amount of this reserve requirement, included in cash and due from banks, was ~~$1.3~~$1.7 million and ~~$1.2~~$1.3 million at June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

Note 3. Securities

Greene County Bancorp, Inc.’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations and certain mutual funds. In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations issued by these entities. As of June 30, ~~2015,~~2016, 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 does not engage in any derivative or hedging transactions, such as interest rate swaps or caps.

5657

Index

Securities at June 30, 2016 consisted of the following:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	4,587	$	304	$	-	$	4,891
State and political subdivisions		60,491		8		-		60,499
Mortgage-backed securities-residential		6,360		185		5		6,540
Mortgage-backed securities-multi-family		22,594		1,285		-		23,879
Asset-backed securities		5		-		-		5
Corporate debt securities		4,028		129		-		4,157
Total debt securities		98,065		1,911		5		99,971
Equity securities		62		90		-		152
Total securities available-for-sale		98,127		2,001		5		100,123
Securities held-to-maturity:
U.S. government sponsored enterprises		2,000		32		-		2,032
State and political subdivisions		99,040		5,003		3		104,040
Mortgage-backed securities-residential		13,543		606		-		14,149
Mortgage-backed securities-multi-family		87,204		3,471		4		90,671
Corporate debt securities		1,000		-		-		1,000
Other securities		2,148		18		-		2,166
Total securities held-to-maturity		204,935		9,130		7		214,058
Total securities	$	303,062	$	11,131	$	12	$	314,181

Securities at June 30, 2015 consisted of the following:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	7,608	$	247	$	-	$	7,855	$	7,608	$	247	$	-	$	7,855
State and political subdivisions		39,574		9		1		39,582		39,574		9		1		39,582
Mortgage-backed securities-residential		7,797		155		10		7,942		7,797		155		10		7,942
Mortgage-backed securities-multi-family		25,291		486		42		25,735		25,291		486		42		25,735
Asset-backed securities		10		-		1		9		10		-		1		9
Corporate debt securities		4,544		242		12		4,774		4,544		242		12		4,774
Total debt securities		84,824		1,139		66		85,897		84,824		1,139		66		85,897
Equity securities and other		62		75		-		137
Equity securities										62		75		-		137
Total securities available-for-sale		84,886		1,214		66		86,034		84,886		1,214		66		86,034
Securities held-to-maturity:
U.S. government sponsored enterprises		2,000		-		49		1,951		2,000		-		49		1,951
State and political subdivisions		81,501		2,137		187		83,451		81,501		2,137		187		83,451
Mortgage-backed securities-residential		17,468		768		-		18,236		17,468		768		-		18,236
Mortgage-backed securities-multi-family		67,239		990		665		67,564		67,239		990		665		67,564
Other securities		792		-		18		774		792		-		18		774
Total securities held-to-maturity		169,000		3,895		919		171,976		169,000		3,895		919		171,976
Total securities	$	253,886	$	5,109	$	985	$	258,010	$	253,886	$	5,109	$	985	$	258,010

~~Securities~~

Index

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, ~~2014 consisted of the following:~~2016.

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
									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	$	10,648	$	250	$	-	$	10,898
State and political subdivisions		1,324		23		-		1,347
Mortgage-backed securities-residential		9,345		213		13		9,545	$	924	$	5		1	$	-	$	-		-	$	924	$	5		1
Mortgage-backed securities-multi-family		29,268		89		339		29,018
Asset-backed securities		15		-		2		13
Corporate debt securities		4,811		375		16		5,170
Total debt securities		55,411		950		370		55,991
Equity securities and other		62		98		-		160
Total securities available-for-sale		55,473		1,048		370		56,151		924		5		1		-		-		-		924		5		1
Securities held-to-maturity:
U.S. government sponsored enterprises		2,000		-		102		1,898
State and political subdivisions		91,634		787		204		92,217		272		2		1		175		1		2		447		3		3
Mortgage-backed securities-residential		22,785		1,150		-		23,935
Mortgage-backed securities-multi-family		64,605		759		2,381		62,983		499		4		4		-		-		-		499		4		4
Other securities		922		1		24		899
Total securities held-to-maturity		181,946		2,697		2,711		181,932		771		6		5		175		1		2		946		7		7
Total securities	$	237,419	$	3,745	$	3,081	$	238,083	$	1,695	$	11		6	$	175	$	1		2	$	1,870	$	12		8

~~Index~~

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:
State and political subdivisions $ 799 $ 1 1 $ - $ - - $ 799 $ 1 1
Mortgage-backed securities-residential - - - 1,630 10 1 1,630 10 1
Mortgage-backed securities-multi-family 2,023 26 1 753 16 1 2,776 42 2
Asset-backed securities - - - 9 1 1 9 1 1
Corporate debt securities 273 2 1 491 10 2 764 12 3
Total securities available-for-sale 3,095 29 3 2,883 37 5 5,978 66 8
Securities held-to-maturity:
U.S. government sponsored enterprises - - - 1,951 49 1 1,951 49 1
State and political subdivisions 11,171 143 49 1,221 44 9 12,392 187 58
Mortgage-backed securities-multi-family 14,464 100 4 28,187 565 6 42,651 665 10
Other securities 334 11 1 202 7 1 536 18 2
Total securities held-to-maturity 25,969 254 54 31,561 665 17 57,530 919 71
Total securities $ 29,064 $ 283 57 $ 34,444 $ 702 22 $ 63,508 $ 985 79

	Less Than 12 Months						More Than 12 Months						Total						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		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:
State and political subdivisions																			$	799	$	1		1	$	-	$	-		-	$	799	$	1		1
Mortgage-backed securities-residential	$	4,302	$	13		2	$	-	$	-		-	$	4,302	$	13		2		-		-		-		1,630		10		1		1,630		10		1
Mortgage-backed securities-multi-family		4,448		5		3		19,404		334		7		23,852		339		10		2,023		26		1		753		16		1		2,776		42		2
Asset-backed securities		-		-		-		13		2		1		13		2		1		-		-		-		9		1		1		9		1		1
Corporate debt securities		767		16		2		-		-		-		767		16		2		273		2		1		491		10		2		764		12		3
Total securities available-for-sale		9,517		34		7		19,417		336		8		28,934		370		15		3,095		29		3		2,883		37		5		5,978		66		8
Securities held-to-maturity:
U.S. government sponsored enterprises		1,898		102		1		-		-		-		1,898		102		1		-		-		-		1,951		49		1		1,951		49		1
State and political subdivisions		6,693		175		34		1,815		29		11		8,508		204		45		11,171		143		49		1,221		44		9		12,392		187		58
Mortgage-backed securities-multi-family		26,522		1,617		7		15,440		764		6		41,962		2,381		13		14,464		100		4		28,187		565		6		42,651		665		10
Other securities		130		2		2		401		22		2		531		24		4		334		11		1		202		7		1		536		18		2
Total securities held-to-maturity		35,243		1,896		44		17,656		815		19		52,899		2,711		63		25,969		254		54		31,561		665		17		57,530		919		71
Total securities	$	44,760	$	1,930		51	$	37,073	$	1,151		27	$	81,833	$	3,081		78	$	29,064	$	283		57	$	34,444	$	702		22	$	63,508	$	985		79

Management evaluated these securities considering the factors as outlined in Note 1 of these consolidated financial statements, and based on this evaluation, the Company does not consider these investments to be other-than-temporarily impaired at June 30, ~~2015.~~2016. Management believes that the reasons for the decline in fair value are due to interest rates, widening credit spreads and market illiquidity at the reporting date.

There were no transfers of securities available-for-sale to held-to-maturity during the year ended June 30, 2016 or 2015. During the year ended June 30, 2014, $11.7 million of securities available-for-sale were transferred to held-to-maturity and included primarily mortgage-backed securities. These securities were transferred at fair value which reflected a net unrealized loss of $805,000. This unrealized loss is being accreted to other comprehensive income over the remaining average lives of these securities.

During the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, there were no sales of securities and no gains or losses were recognized. There ~~was~~were no other-than-temporary impairment ~~loss~~losses recognized during the years ended June 30, ~~2015~~2016 and ~~2014.~~2015.

5859

Index

The estimated fair values of debt securities at June 30, ~~2015,~~2016, 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		Amortized Cost		Fair Value
Within one year	$	41,951	$	41,972	$	60,946	$	60,960
After one year through five years		9,235		9,669		8,160		8,587
After five years through ten years		540		570		-		-
After ten years		-		-		-		-
Total available-for-sale debt securities		51,726		52,211		69,106		69,547
Mortgage-backed and asset-backed securities		33,098		33,686		28,959		30,424
Equity securities		62		137		62		152
Total available-for-sale securities		84,886		86,034		98,127		100,123

Held-to-maturity debt securities
Within one year		12,371		12,554		14,049		14,336
After one year through five years		44,217		45,172		52,196		54,076
After five years through ten years		20,044		20,497		26,629		28,324
After ten years		7,661		7,953		11,314		12,502
Total held-to-maturity debt securities		84,293		86,176		104,188		109,238
Mortgage-backed		84,707		85,800		100,747		104,820
Total held-to-maturity securities		169,000		171,976		204,935		214,058
Total securities	$	253,886	$	258,010	$	303,062	$	314,181

As of June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, securities with an aggregate fair value of ~~$223.1~~$291.6 million and ~~$210.0~~$223.1 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. As of June 30, ~~2015~~2016 and ~~2014,~~2015, securities with an aggregate fair value of ~~$4.8~~$4.2 million and ~~$5.2~~$4.8 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. Greene County Bancorp, Inc. did not participate in any securities lending programs during the years ended June 30, ~~2015~~2016 or ~~2014.~~2015.

Note 4. Loans

Loan segments and classes at June 30, ~~2015~~2016 and ~~2014~~2015 are summarized as follows:

At June 30,
(In thousands) 2015 2014
Residential real estate:
Residential real estate $ 226,648 $ 227,373
Residential construction and land 3,621 3,005
Multi-family 4,287 4,059
Commercial real estate:
Commercial real estate 142,323 114,066
Commercial construction 8,936 1,558
Consumer loan:
Home equity 21,019 20,578
Consumer installment 4,123 4,208
Commercial loans 39,798 30,994
Total gross loans 450,755 405,841
Allowance for loan losses (8,142 ) (7,419 )
Deferred fees and costs 883 887
Loans receivable, net $ 443,496 $ 399,309

	At June 30,
(In thousands)	2016			2015
Residential real estate:
Residential real estate	$	234,992		$	226,648
Residential construction and land		5,575			3,621
Multi-family		3,918			4,287
Commercial real estate:
Commercial real estate		192,678			142,323
Commercial construction		20,159			8,936
Consumer loan:
Home equity		20,893			21,019
Consumer installment		4,350			4,123
Commercial loans		48,725			39,798
Total gross loans		531,290			450,755
Allowance for loan losses		(9,485	)		(8,142	)
Deferred fees and costs		959			883
Loans receivable, net	$	522,764		$	443,496

At June 30, ~~2015~~2016 and ~~2014,~~2015, loans to related parties including officers and directors were immaterial as a percentage of our loan portfolio.

5960

Index

Credit Quality Indicators

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 multifamily loan classes. Commercial real estate loans consist of commercial real estate and commercial construction loan classes. Consumer loans consist of home equity loan and consumer installment loan classes. The inherent risk within the loan portfolio varies depending upon each of these loan types.

The Bank of Greene County’s primary lending activity is the origination of residential mortgage loans, including home equity loans, which are collateralized by residences. Generally, residential mortgage loans are made in amounts up to 89.9% of the appraised value of the property. However, The Bank of Greene County will originate residential mortgage loans with loan-to-value ratios of up to 95.0%, with private mortgage insurance. In the event of default by the borrower, The Bank of Greene County will acquire and liquidate the underlying collateral. By originating the loan at a loan-to-value ratio of 89.9% or less or obtaining private mortgage insurance, The Bank of Greene County limits its risk of loss in the event of default. However, the market values of the collateral may be adversely impacted by declines in the economy. Home equity loans may have an additional inherent risk if The Bank of Greene County does not hold the first mortgage. The Bank of Greene County may stand in a secondary position in the event of collateral liquidation resulting in a greater chance of insufficiency to meet all obligations.

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.

~~Index~~

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.

Index

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

Loan balances by internal credit quality indicator as of June 30, ~~2015~~2016 are shown below.

(In thousands)	Performing		Watch		Special Mention		Substandard		Total		Performing		Watch		Special Mention		Substandard		Total
Residential real estate	$	224,195	$	638	$	97	$	1,718	$	226,648	$	232,321	$	757	$	94	$	1,820	$	234,992
Residential construction and land		3,621		-		-		-		3,621		5,575		-		-		-		5,575
Multi-family		4,182		-		-		105		4,287		3,820		-		-		98		3,918
Commercial real estate		138,468		-		986		2,869		142,323		190,293		52		531		1,802		192,678
Commercial construction		8,936		-		-		-		8,936		20,159		-		-		-		20,159
Home equity		20,731		-		15		273		21,019		20,555		321		12		5		20,893
Consumer installment		4,117		6		-		-		4,123		4,340		10		-		-		4,350
Commercial loans		38,334		-		844		620		39,798		47,598		26		8		1,093		48,725
Total gross loans	$	442,584	$	644	$	1,942	$	5,585	$	450,755	$	524,661	$	1,166	$	645	$	4,818	$	531,290

Loan balances by internal credit quality indicator as of June 30, ~~2014~~2015 are shown below.

(In thousands)	Performing		Watch		Special Mention		Substandard		Total		Performing		Watch		Special Mention		Substandard		Total
Residential real estate	$	223,772	$	221	$	99	$	3,281	$	227,373	$	224,195	$	638	$	97	$	1,718	$	226,648
Residential construction and land		3,005		-		-		-		3,005		3,621		-		-		-		3,621
Multi-family		3,946		-		-		113		4,059		4,182		-		-		105		4,287
Commercial real estate		109,281		-		1,789		2,996		114,066		138,468		-		986		2,869		142,323
Commercial construction		1,558		-		-		-		1,558		8,936		-		-		-		8,936
Home equity		20,239		-		-		339		20,578		20,731		-		15		273		21,019
Consumer installment		4,208		-		-		-		4,208		4,117		6		-		-		4,123
Commercial loans		29,686		-		385		923		30,994		38,334		-		844		620		39,798
Total gross loans	$	395,695	$	221	$	2,273	$	7,652	$	405,841	$	442,584	$	644	$	1,942	$	5,585	$	450,755

The Company had no loans classified Doubtful or Loss at June 30, ~~2015~~2016 or ~~2014.~~2015.

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 June 30, ~~2015~~2016 and 2014. While the Bank makes every reasonable effort to work with the borrowers to collect amounts due, the number of loans which have been foreclosed upon or are in process of foreclosure has remained historically high over the past several years. These high levels have been the result of adverse changes within the economy and increases in local unemployment. These levels are also due in part to the extended length of time required to meet all of the legal requirements mandated by New York state law prior to a foreclosure sale, which may be in excess of two years. During the year ended June 30, 2015, the Bank has been able to work through many of its nonperforming loans, and has reduced the overall level of delinquencies and loans in process of foreclosure. However, several of the properties acquired remain in foreclosed real estate as of June 30, 2015. Loans on nonaccrual status totaled ~~$4.6~~$3.3 million at June 30, ~~2015~~2016 of which ~~$1.2~~$1.5 million were in the process of foreclosure. At June 30, 2016, there were nine residential loans in the process of foreclosure totaling $867,000. Included in nonaccrual loans were ~~$2.6~~$1.9 million of loans which were less than 90 days past due at June 30, ~~2015,~~2016, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Included in total loans past due were ~~$276,000~~$77,000 of loans which were making payments pursuant to forbearance agreements. Under the forbearance agreements, the customers have made arrangements with the Bank to bring the loans current over a specified period of time (resulting in an insignificant delay in repayment). During this term of the forbearance agreement, the Bank has agreed not to continue foreclosure proceedings. Loans on nonaccrual status totaled ~~$5.9~~$4.6 million at June 30, ~~2014~~2015 of which ~~$3.0~~$1.2 million were in the process of foreclosure. Included in nonaccrual loans were ~~$922,000~~$2.6 million of loans which were less than 90 days past due at June 30, ~~2014,~~2015, but have a recent history of delinquency greater than 90 days past due.

6162

Index

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2016:

(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	$	1,533	$	637	$	938	$	3,108	$	231,884	$	234,992	$	1,207
Residential construction and land		-		-		-		-		5,575		5,575		-
Multi-family		47		-		-		47		3,871		3,918		-
Commercial real estate		324		793		590		1,707		190,971		192,678		1,899
Commercial construction		-		-		-		-		20,159		20,159		-
Home equity		17		321		17		355		20,538		20,893		18
Consumer installment		34		10		-		44		4,306		4,350		-
Commercial loans		392		112		-		504		48,221		48,725		202
Total gross loans	$	2,347	$	1,873	$	1,545	$	5,765	$	525,525	$	531,290	$	3,326

The following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2015:

(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	$	1,233	$	329	$	785	$	2,347	$	224,301	$	226,648	$	1,087
Residential construction and land		28		-		-		28		3,593		3,621		-
Multi-family		-		-		-		-		4,287		4,287		-
Commercial real estate		339		1		1,132		1,472		140,851		142,323		2,964
Commercial construction		-		-		-		-		8,936		8,936		-
Home equity		244		-		33		277		20,742		21,019		169
Consumer installment		25		6		-		31		4,092		4,123		-
Commercial loans		-		-		175		175		39,623		39,798		388
Total gross loans	$	1,869	$	336	$	2,125	$	4,330	$	446,425	$	450,755	$	4,608

The ~~following table sets forth information regarding delinquent and/or nonaccrual loans as of June 30, 2014:~~

(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 $ 1,047 $ 290 $ 1,938 $ 3,275 $ 224,098 $ 227,373 $ 2,473
Residential construction and land - - - - 3,005 3,005 -
Multi-family - - - - 4,059 4,059 -
Commercial real estate - 504 2,688 3,192 110,874 114,066 2,775
Commercial construction - - - - 1,558 1,558 -
Home equity 260 - 339 599 19,979 20,578 339
Consumer installment 51 - - 51 4,157 4,208 -
Commercial loans 509 123 278 910 30,084 30,994 312
Total gross loans $ 1,867 $ 917 $ 5,243 $ 8,027 $ 397,814 $ 405,841 $ 5,899

~~The~~ Bank of Greene County had accruing loans delinquent 90 days or more totaling $77,000 and $84,000 as of June 30, 2016 and 2015, ~~totaling $84,000 and had accruing loans delinquent more than 90 days as of June 30, 2014 totaling $266,000.~~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 borrowers have made arrangements with the Bank to bring the ~~loan~~loans current within a specified time period and have made a series of payments as agreed.

The table below details additional information related to nonaccrual loans:

	For the years ended June 30,				For the years ended June 30,
(In thousands)	2015		2014		2016		2015
Interest income that would have been recorded if loans had been performing in accordance with original terms	$	340	$	352	$	247	$	340
Interest income that was recorded on nonaccrual loans		250		128		142		250

~~Index~~

Impaired Loan Analysis

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

Index

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

		As of June 30, 2015						For the year ended June 30, 2015				As of June 30, 2016						For the year ended June 30, 2016
(In thousands)		Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized		Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:	With no related allowance recorded:
Residential real estate		$	432	$	432	$	-	$	508	$	27	$	266	$	266	$	-	$	243	$	5
Commercial real estate			1,206		1,412		-		1,000		45		1,024		1,231		-		1,085		29
Home equity			154		154		-		70		1		5		5		-		48		1
Commercial loans			-		-		-		208		14
Total impaired loans with no allowance			1,792		1,998		-		1,786		87		1,295		1,502		-		1,376		35

With an allowance recorded:
Residential real estate			1,411		1,411		263		2,176		80		1,457		1,457		267		1,411		57
Commercial real estate			895		895		187		1,675		61		405		405		61		487		25
Home equity			-		-		-		154		-
Commercial loans			93		93		1		348		23		85		85		2		89		5
Total impaired loans with allowance			2,399		2,399		451		4,353		164		1,947		1,947		330		1,987		87

Total impaired loans:
Residential real estate			1,843		1,843		263		2,684		107		1,723		1,723		267		1,654		62
Commercial real estate			2,101		2,307		187		2,675		106		1,429		1,636		61		1,572		54
Home equity			154		154		-		224		1		5		5		-		48		1
Commercial loans			93		93		1		556		37		85		85		2		89		5
Total impaired loans		$	4,191	$	4,397	$	451	$	6,139	$	251	$	3,242	$	3,449	$	330	$	3,363	$	122

	As of June 30, 2015						For the year ended June 30, 2015
(In thousands)	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential real estate	$	432	$	432	$	-	$	508	$	27
Commercial real estate		1,206		1,412		-		1,000		45
Home equity		154		154		-		70		1
Commercial loans		-		-		-		208		14
Total impaired loans with no allowance		1,792		1,998		-		1,786		87

With an allowance recorded:
Residential real estate		1,411		1,411		263		2,176		80
Commercial real estate		895		895		187		1,675		61
Home equity		-		-		-		154		-
Commercial loans		93		93		1		348		23
Total impaired loans with allowance		2,399		2,399		451		4,353		164

Total impaired loans:
Residential real estate		1,843		1,843		263		2,684		107
Commercial real estate		2,101		2,307		187		2,675		106
Home equity		154		154		-		224		1
Commercial loans		93		93		1		556		37
Total impaired loans	$	4,191	$	4,397	$	451	$	6,139	$	251

6364

Index

As of June 30, 2014 For the year ended June 30, 2014
(In thousands) Recorded Investment Unpaid Principal Related Allowance Average Recorded Investment Interest Income Recognized
With no related allowance recorded:
Residential real estate $ 206 $ 206 $ - $ 330 $ 14
Commercial real estate 461 461 - 518 29
Home equity 96 96 - 24 3
Total impaired loans with no allowance 763 763 - 872 46

With an allowance recorded:
Residential real estate 2,700 2,790 441 2,978 64
Multi-family - - - 193 -
Commercial real estate 2,572 2,959 338 2,346 63
Commercial construction - - - 350 17
Home equity 200 200 87 150 -
Commercial loans 603 603 3 606 39
Total impaired loans with allowance 6,075 6,552 869 6,623 183

Total impaired loans
Residential real estate 2,906 2,996 441 3,308 78
Multi-family - - - 193 -
Commercial real estate 3,033 3,420 338 2,864 92
Commercial construction - - - 350 17
Home equity 296 296 87 174 3
Commercial loans 603 603 3 606 39
Total impaired loans $ 6,838 $ 7,315 $ 869 $ 7,495 $ 229

The table below details additional information regarding loans modified as a troubled debt restructuring during the years ended June 30, 2016 and 2015:

(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Current Outstanding Recorded Investment
Year ended June 30, 2016 Residential real estate		-	$	-	$	-	$	-

Year ended June 30, 2015 Residential real estate		1	$	164	$	184	$	183

There were no loans that ~~have~~had been modified as a troubled debt restructuring during the ~~year~~twelve months prior to June 30, 2015 or 2014 which have subsequently defaulted during the years ended June 30, ~~2015.~~2016 or 2015, respectively.

(Dollars in thousands) Number of Contracts
Pre-Modification
Outstanding
Recorded Investment

Post-Modification
Outstanding
Recorded Investment

Current Outstanding
Recorded Investment

Residential real estate 1 $ 164 $ 184 $ 183

~~This~~The loan ~~has~~presented in the above table had been classified as a troubled debt ~~restructurings~~restructuring due to concessions granted to the debtors that The Bank of Greene County would not otherwise consider as a result of financial difficulties of the borrowers. For this loan, concessions consisted of additional funds advanced, interest rate reduction and extension of the maturity. At June 30, 2015, this loan was returned to accrual status as it has performed under the terms of the modification, and the ultimate collectability of all amounts contractually due under the modified terms is not in doubt. This loan identified as a troubled debt restructuring has been evaluated for impairment and the impact to the allowance for loan losses was immaterial.

~~The table below details loans that have been modified as a troubled debt restructuring during the year ended June 30, 2014.~~

These loans have been classified as troubled debt restructurings due to concessions granted to the debtors that The Bank of Greene County would not otherwise consider as a result of financial difficulties of the borrowers. For these loans, concessions consisted of any combination of the following: additional funds were advanced, the interest rate was reduced and/or the term extended. At June 30, 2014, two of the eight loans were returned to accrual status but the remaining loans modified during the period as a troubled debt restructuring were included in non-accrual loans.

~~Index~~

~~The Company had no loans that had been modified as troubled debt restructurings during the twelve months prior to June 30, 2015 which had subsequently defaulted during the year ended June 30, 2015.~~

The table below details loans that have been modified as troubled debt restructurings during the twelve months prior to June 30, 2014 which have subsequently defaulted during the year ended June 30, 2014:

(Dollars in thousands) Number of Contracts Recorded Investment
Allowance for
Loan Loss

Residential real estate 2 $ 284 $ 65
Commercial real estate 2 894 192

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 business 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. 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.

Index

The following tables set forth the activity and allocation of the allowance for loan losses by loan class during and at the periods indicated. The allowance is allocated to each loan class based on historical loss experience, current economic conditions, and other considerations.

	Activity for the year ended June 30, 2016
(In thousands)	Balance June 30, 2015		Charge-offs		Recoveries		Provision			Balance June 30, 2016
Residential real estate	$	2,454	$	-	$	-	$	(58	)	$	2,396
Residential construction and land		50		-		-		25			75
Multi-family		40		-		-		(18	)		22
Commercial real estate		3,699		162		17		987			4,541
Commercial construction		233		-		-		269			502
Home equity		314		-		-		(5	)		309
Consumer installment		223		245		78		172			228
Commercial loans		1,129		20		2		301			1,412
Total	$	8,142	$	427	$	97	$	1,673		$	9,485

	Allowance for Loan Losses				Loans Receivable
	Ending Balance June 30, 2016 Impairment Analysis				Ending Balance June 30, 2016 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	267	$	2,129	$	1,723	$	233,269
Residential construction and land		-		75		-		5,575
Multi-family		-		22		-		3,918
Commercial real estate		61		4,480		1,429		191,249
Commercial construction		-		502		-		20,159
Home equity		-		309		5		20,888
Consumer installment		-		228		-		4,350
Commercial loans		2		1,410		85		48,640
Total	$	330	$	9,155	$	3,242	$	528,048

	Activity for the year ended June 30, 2015
(In thousands)	Balance June 30, 2014		Charge-offs		Recoveries		Provision			Balance June 30, 2015
Residential real estate	$	2,731	$	390	$	6	$	107		$	2,454
Residential construction and land		42		-		-		8			50
Multi-family		59		-		-		(19	)		40
Commercial real estate		2,936		133		-		896			3,699
Commercial construction		38		-		-		195			233
Home equity		361		121		-		74			314
Consumer installment		240		236		61		158			223
Commercial loans		811		48		28		338			1,129
Unallocated		201		-		-		(201	)		-
Total	$	7,419	$	928	$	95	$	1,556		$	8,142

6566

Index

Allowance for Loan Losses Loans Receivable

Ending Balance June 30, 2015
Impairment Analysis
Ending Balance June 30, 2015 Impairment Analysis
(In thousands)
Individually
Evaluated

Collectively
Evaluated

Individually
Evaluated

Collectively
Evaluated

Residential real estate $ 263 $ 2,191 $ 1,843 $ 224,805
Residential construction and land - 50 - 3,621
Multi-family - 40 - 4,287
Commercial real estate 187 3,512 2,101 140,222
Commercial construction - 233 - 8,936
Home equity - 314 154 20,865
Consumer installment - 223 - 4,123
Commercial loans 1 1,128 93 39,705
Unallocated - - - -
Total $ 451 $ 7,691 $ 4,191 $ 446,564

Activity for the year ended June 30, 2014
(In thousands)
Balance June 30,
2013
Charge-offs Recoveries Provision
Balance June 30,
2014

Residential real estate $ 2,627 $ 420 $ 10 $ 514 $ 2,731
Residential construction and land 37 - - 5 42
Multi-family 139 24 7 (63 ) 59
Commercial real estate 2,476 309 - 769 2,936
Commercial construction 392 - - (354 ) 38
Home equity 275 44 - 130 361
Consumer installment 222 215 75 158 240
Commercial loans 809 205 4 203 811
Unallocated 63 - - 138 201
Total $ 7,040 $ 1,217 $ 96 $ 1,500 $ 7,419

	Allowance for Loan Losses				Loans Receivable				Allowance for Loan Losses				Loans Receivable
	Ending Balance June 30, 2014 Impairment Analysis				Ending Balance June 30, 2014 Impairment Analysis				Ending Balance June 30, 2015 Impairment Analysis				Ending Balance June 30, 2015 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	441	$	2,290	$	2,906	$	224,467	$	263	$	2,191	$	1,843	$	224,805
Residential construction and land		-		42		-		3,005		-		50		-		3,621
Multi-family		-		59		-		4,059		-		40		-		4,287
Commercial real estate		338		2,598		3,033		111,033		187		3,512		2,101		140,222
Commercial construction		-		38		-		1,558		-		233		-		8,936
Home equity		87		274		296		20,282		-		314		154		20,865
Consumer installment		-		240		-		4,208		-		223		-		4,123
Commercial loans		3		808		603		30,391		1		1,128		93		39,705
Unallocated		-		201		-		-		-		-		-		-
Total	$	869	$	6,550	$	6,838	$	399,003	$	451	$	7,691	$	4,191	$	446,564

66Foreclosed 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 as of June 30, 2016 and 2015:

~~Index~~

(in thousands)	2016		2015
Residential real estate	$	61	$	847
Land		65		-
Commercial real estate		244		-
Total foreclosed real estate	$	370	$	847

Note 5. Premises and Equipment

A summary of premises and equipment at June 30, ~~2015~~2016 and ~~2014,~~2015, is as follows:

(In thousands)	2015			2014			2016			2015
Land	$	2,883		$	2,883		$	2,883		$	2,883
Building and improvements		15,693			15,411			15,792			15,693
Furniture and equipment		4,042			3,572			4,233			4,042
Less: accumulated depreciation		(8,103	)		(7,559	)		(8,732	)		(8,103	)
Total premises and equipment	$	14,515		$	14,307		$	14,176		$	14,515

Note 6. Deposits

Major classifications of deposits at June 30, ~~2015~~2016 and ~~2014~~2015 are summarized as follows:

(In thousands)	2015		2014		2016		2015
Noninterest-bearing deposits	$	73,359	$	67,446	$	88,254	$	73,678
Certificates of deposit		43,121		48,900		50,666		43,121
Savings deposits		163,927		165,227		177,309		163,927
Money market deposits		103,724		87,363		112,905		103,405
NOW deposits		238,586		220,638		309,753		238,586
Total deposits	$	622,717	$	589,574	$	738,887	$	622,717

Advance payments by borrowers for taxes and insurance totaling ~~$6,092,000~~$6,590,000 and ~~$5,495,000~~$6,092,000 at June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, are included in savings deposits.

Related party deposits are not material.

Index

The following indicates the amount of certificates of deposit by time remaining to maturity as of June 30, ~~2015.~~2016.

(In thousands)	3 months or less		3 to 6 Months		7 to 12 Months		Over 12 Months		Total		3 months or less		3 to 6 Months		7 to 12 Months		Over 12 Months		Total
Certificates of deposit less than $100,000	$	6,740	$	5,124	$	4,452	$	11,934	$	28,250	$	15,222	$	4,165	$	3,246	$	13,346	$	35,979
Certificates of deposit $100,000 or more		2,635		949		1,466		9,821		14,871		2,276		1,002		1,984		9,425		14,687
Total certificates of deposit	$	9,375	$	6,073	$	5,918	$	21,755	$	43,121	$	17,498	$	5,167	$	5,230	$	22,771	$	50,666

The aggregate amount of certificates of deposit in denominations of $250,000 or more (the amount which exceeds the FDIC insurance limit) was ~~$2,793,000~~$2,824,000 at June 30, ~~2015.~~2016. Certificates of deposit less than $100,000 due within 3 months or less, includes $10.0 million in brokered deposits.

Scheduled maturities of certificates of deposit at June 30, ~~2015~~2016 were as follows:

(In thousands)
The year ended June 30,
2016	$	21,366
2017		4,805	$	27,895
2018		7,196		7,849
2019		4,765		7,555
2020		4,989		5,322
2021				2,045
	$	43,121	$	50,666

~~Index~~

Note 7. Borrowings

During the year ended June 30, 2014, the Company entered into an Irrevocable Letter of Credit Reimbursement Agreement with the Federal Home Loan Bank (“FHLB”), whereby upon The Bank of Greene County’s request, on behalf of Greene County Commercial Bank, an irrevocable letter of credit is issued to secure municipal transactional deposit accounts. At June 30, ~~2015,~~2016, The Bank of Greene County had pledged approximately ~~$207.5~~$210.7 million of its residential mortgage portfolio as collateral for borrowing and stand-by letters of credit at the ~~FHLB.~~Federal Home Loan Bank of New York (“FHLB”). The maximum amount of funding available from the FHLB was ~~$167.7~~$177.0 million at June 30, ~~2015,~~2016, of which ~~$41.7~~$46.4 million in borrowings were outstanding at June 30, ~~2015.~~2016. There were ~~$22.9~~$26.1 million inof short term borrowings outstanding at June 30, ~~2015. There were no stand-by letters of credit outstanding at June 30, 2015.~~2016. Interest rates on short term borrowings are determined at the time of borrowing. ~~The remaining $18.8 million consisted of long-term~~Long-term fixed rate, fixed term advances totaled $20.3 million with a weighted average rate of 1.48% and a weighted average maturity of 4030 months. The Bank has recently increased its level of long-term borrowing to strengthen its overall interest rate risk position, to help mitigate the potential negative impact of rising interest rates. The Bank of Greene County has established an Irrevocable Letter of Credit Reimbursement Agreement with the FHLB, whereby upon The Bank of Greene County’s request, on behalf of Greene County Commercial Bank, an irrevocable stand-by letter of credit is issued to secure municipal transactional deposit accounts. At June 30, 2016 and 2015, there were no outstanding letters of credit.

The Bank of Greene County also pledges securities as collateral at the Federal Reserve Bank discount window for overnight borrowings. At June 30, ~~2015,~~2016, approximately ~~$4.8~~$4.2 million of collateral was available to be pledged against potential borrowings at the Federal Reserve Bank discount window. There were no balances outstanding with the Federal Reserve Bank at June 30, ~~2015~~2016 or ~~2014.~~2015.

The Bank of Greene County has established unsecured lines of credit with Atlantic Central Bankers Bank and another financial institution for $6.0 million and $5.0 million, respectively. Greene County Bancorp, Inc. has also established an unsecured line of credit with Atlantic Central Bankers Bank for $5.0 million. The lines of credit provide for overnight borrowing and the interest rate is determined at the time of the borrowing. At June 30, ~~2015~~2016 and ~~2014~~2015, there were no balances outstanding on ~~either~~any of these lines of ~~credit, and there was no activity during the years ended June 30, 2015 and 2014.~~credit.

Scheduled maturities of long-term borrowings at June 30, ~~2015~~2016 were as follows:

(In thousands)
The year ended June 30,
2016	$	-
Within the year ended June 30,
2017		2,500	$	2,500
2018		4,500		4,500
2019		5,500		5,500
2020		6,000		6,000
Due after 2020		300
2021				1,800
	$	18,800	$	20,300

Index

Note 8. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, are presented in the following table:

(In thousands)	2015			2014			2016			2015
Unrealized gains on available-for-sale securities, net of tax	$	704		$	416		$	1,224		$	704
Unrealized loss on securities transferred to held-to-maturity, net of tax		(11	)		(231	)		(2	)		(11	)
Net losses and past service liability for defined benefit plan, net of tax		(1,491	)		(1,235	)		(1,947	)		(1,491	)
Accumulated other comprehensive loss	$	(798	)	$	(1,050	)	$	(725	)	$	(798	)

Note 9. Employee Benefit Plans

Defined Benefit Plan

The Bank of Greene County maintains a single-employer defined benefit pension plan (the “Pension Plan”). Effective January 1, 2006, the Board of Directors of the Bank resolved to exclude from membership in the Pension Plan employees hired on or after January 1, 2006 and elected to cease additional benefit accruals to existing Pension Plan participants effective July 1, 2006. Substantially all Bank employees who were hired before January 1, 2006 and attained the age of 21 are covered by the Pension Plan. Under the Pension Plan, retirement benefits are primarily a function of both years of service and level of compensation, at July 1, 2006. This defined benefit pension plan is accounted for in accordance with FASB ASC Topic 715 guidance on “Compensation – Retirement Benefits, Defined Benefit Plans – Pension”, which requires the Company to recognize in its consolidated financial statements an asset for a plan’s overfunded status or a liability for a plan’s underfunded status. Changes in the funded status of the single-employer defined benefit pension plan are reported as a component of other comprehensive income, net of applicable taxes, in the year in which changes occur.

~~Index~~

Information regarding the single-employer defined benefit pension plan at June 30, ~~2015~~2016 and ~~2014~~2015 is as follows:

(In thousands)
Change in projected benefit obligation:	2015			2014			2016			2015
Benefit obligation at beginning of year	$	5,311		$	4,971		$	5,457		$	5,311
Interest cost		220			223			232			220
Actuarial loss		428			297			695			428
Benefits paid		(502	)		(180	)		(213	)		(502	)
Benefit obligation at June 30		5,457			5,311			6,171			5,457

Change in fair value of plan assets:
Fair value of plan assets at beginning of year		4,887			4,637			4,481			4,887
Actual return on plan assets		96			430			123			96
Employer contributions		-			-			-			-
Benefits paid		(502	)		(180	)		(213	)		(502	)
Fair value of plan assets at June 30		4,481			4,887			4,391			4,481
Underfunded status at June 30 included in other liabilities	$	976		$	424		$	1,780		$	976

The Company does not anticipate that it will make any contributions during the year ended June 30, ~~2016.~~2017.

The components of net periodic pension costs related to the defined benefit pension plan for the years ended June 30, ~~2015~~2016 and ~~2014~~2015 were as follows:

(In thousands)	2015			2014			2016			2015
Interest cost	$	220		$	223		$	232		$	220
Expected return on plan assets		(335	)		(318	)		(307	)		(335	)
Amortization of net loss		106			89			135			106
Effect of settlement		144			-			-			144
Net periodic pension (income) cost	$	135		$	(6	)
Net periodic pension cost							$	60		$	135

The accumulated benefit obligation for the pension plan was ~~$5.5~~$6.2 million and ~~$5.3~~$5.5 million at June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The Society of Actuaries released new mortality tables in 2014 which the Company utilized in its pension plan revaluation at June 30, 2015. The change in mortality assumption resulted in an increase to the pension plan’s accumulated benefit obligation of ~~$468,600.~~$468,600 at June 30, 2015.

Index

Changes in plan assets and benefit obligations recognized in other comprehensive loss during the years ended June 30, ~~2015~~2016 and ~~2014~~2015 consisted of the following:

(In thousands)	2015		2014		2016		2015
Actuarial loss on plan assets and benefit obligations	$	418	$	96	$	744	$	418
Deferred tax benefit		162		37		288		162
Net change in plan assets and benefit obligations recognized in other comprehensive income (loss)	$	256	$	59
Net change in plan assets and benefit obligations recognized in other comprehensive income					$	456	$	256

Amounts recognized in our consolidated statements of financial condition related to our pension plan for the years ended June 30, ~~2015~~2016 and ~~2014~~2015 are as follows:

(In thousands)
Other liabilities:	2015			2014			2016			2015
Projected benefit obligation in excess of fair value of pension plan	$	976		$	424		$	1,780		$	976

Accumulated other comprehensive loss, net of taxes:
Net losses and past service liability	$	(1,491	)	$	(1,235	)	$	(1,947	)	$	(1,491	)

~~Index~~

The principal actuarial assumptions used were as follows:

Projected benefit obligation:	2015			2014			2016			2015
Discount rate		4.32	%		4.22	%		3.55	%		4.32	%

Net periodic pension expense:
Amortization period, in years		14			15			13			14
Discount rate		4.22	%		4.57	%		4.32	%		4.22	%
Expected long-term rate of return on plan assets		7.00	%		7.00	%		7.00	%		7.00	%

The discount rate used in the measurement of the Company’s pension obligation is based on the Citigroup Pension Liability Index based on expected benefit payments of the plan. The discount rates are evaluated at each measurement date to give effect to changes in the general interest rates. The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The selected rate considers the historical and expected future investment trends of the present and expected assets in the plan. Since this is a frozen plan, the compensation rate is zero percent.

The weighted average asset allocation and fair value of our funded pension plan at June 30, ~~2015~~2016 and ~~2014~~2015 was as follows:

(Dollars in thousands)	2015				2014				2016				2015
	Fair Value				Fair Value				Fair Value				Fair Value
Money market accounts	$	15	0.3	%	$	15	0.3	%	$	16	0.4	%	$	15	0.3	%
Mutual funds		4,466	99.7	%		4,872	99.7	%		4,375	99.6			4,466	99.7
Total plan assets	$	4,481	100.0	%	$	4,887	100.0	%	$	4,391	100.0	%	$	4,481	100.0	%

The fair value of assets within the pension plan was determined utilizing a quoted price in active markets at the measurement date. As such, these assets are classified as Level 1 within the “Fair Value Measurement” hierarchy.

The target allocation for investment in mutual funds is 80% consisting of short-term and intermediate-term fixed income bond funds and 20% large cap value funds. This allocation is consistent with our goal of preserving capital while achieving investment results that will contribute to the proper funding of pension obligations and cash flow requirements. Asset rebalancing is performed on a quarterly basis, with adjustments made when the investment mix varies by more than 5% from the target.

The amortization of accumulated other comprehensive income associated with the single employer defined benefit pension plan for the year ended June 30, ~~2016~~2017 is expected to be ~~nominal.~~$197,000.

Index

Expected benefit payments under the pension plan over the next ten years at June 30, ~~2015~~2016 are as follows:

(In thousands)
2016	$	184
2017		215	$	221
2018		215		221
2019		215		220
2020		214		219
2021-2025		1,184
2021				225
2022-2026				1,208

Defined Contribution Plan

The Bank of Greene County also participates in a defined contribution plan (the “Contribution Plan”) covering substantially all employees who have completed three months of service. The plan includes Section 401(k) and thrift provisions as defined under the Internal Revenue Code. The provisions permit employees to contribute up to 50% of their total compensation on a pre-tax basis. The Bank of Greene County matches employee contributions dollar for dollar for the first 3% and then 50% of the employee contributions up to the next 3%. Company contributions associated with the contribution plan amounted to ~~$221,000~~$246,000 and ~~$215,000~~$221,000 in the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

~~Index~~

~~ESOP~~Employee Stock Ownership Plan (“ESOP”)

All Bank employees meeting certain age and service requirements are eligible to participate in the ESOP. Participant’s benefits become fully vested after three years of service. During the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, the Board of Directors authorized the payment of ~~$84,000~~$100,000 and $84,000 respectively, to the ESOP trustee for the purposes of purchasing additional shares of stock to be allocated to employees as of December ~~2015~~2016 and ~~2014,~~2015, respectively. ESOP expense was $84,000 for the years ended June 30, ~~2015~~2016 and ~~2014.~~2015. There were no unearned shares at June 30, ~~2015~~2016 or ~~2014.~~2015.

~~SERP~~Supplemental Executive Retirement Plan

On June 21, 2010, 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 are 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”). Accordingly, the SERP Plan obligates the Bank to make an allocation to each executive’s account on the first business day of each July and permits each executive to defer up to 50% of his or her base salary and 100% of his or her annual bonus to the SERP Plan, subject to the requirements of Section 409A of the Internal Revenue Code (“Code”). In addition, the Bank may, but is not required to, make additional discretionary contributions to the executives’ accounts from time to time. An executive becomes vested in the Bank’s contributions after 10 calendar years of service following the effective date of the SERP Plan, and is fully vested immediately for all deferral of salary and bonus. However, the Executive will vest in the present value of his or her account in the event of death, disability or a change in control of the Bank or the Company. In the event the executive is terminated involuntarily or resigns for good reason following a change in control, the present value of all remaining Bank contributions is accelerated and paid to the executive’s account, subject to potential reduction to avoid an excess parachute payment under Code Section 280G. In the event of the executive’s death, disability or termination within two years after a change in control, executive’s account will be paid in a lump sum to the executive or his beneficiary, as applicable. In the event the executive is entitled to a benefit from the SERP Plan due to retirement or other termination of employment, the benefit will be paid in 10 annual installments.

The net periodic pension costs related to the SERP for the years ended June 30, 2016 and 2015 were $398,000, and ~~2014 were~~ $248,000, ~~and $167,000,~~ respectively, consisting primarily of service and interest costs. The total liability for the SERP was ~~$1.4~~$2.0 million and ~~$899,000~~$1.4 million as of June 30, ~~2015~~2016 and June 30, ~~2014, respectively.~~2015, respectively, and is included in accrued expenses and other liabilities.

Index

Note 10. Stock-Based Compensation

At June 30, 2016, Greene County Bancorp, Inc. had two stock-based compensation plans, which are described below. All share and per share data has been restated in all periods presented to reflect the 2-for-1 stock split, which was paid on March 15, 2016, as if the new share options had been granted at the same time as the original share options.

Stock Option Plan

Greene County Bancorp, Inc. has a stock-based compensation plan (the “2008 Option Plan”) which allows the Company to issue up to ~~180,000~~360,000 options and stock appreciation rights. In 2008, the Board of Directors granted ~~164,500~~329,000 options and stock appreciation rights (in tandem) to buy stock under the 2008 Option Plan at an exercise price of ~~$12.50,~~$6.25, the fair value of the stock on that date. These options have a 10-year term and vested over a three year period upon meeting specific earnings performance goals.

A summary of the Company’s stock option activity and related information for its option plans for the years ended June 30, ~~2015~~2016 and ~~2014~~2015 is as follows:

	2015					2014					2016					2015
	Options			Weighted Average Exercise Price Per Share		Options			Weighted Average Exercise Price Per Share		Options			Weighted Average Exercise Price Per Share		Options			Weighted Average Exercise Price Per Share
Outstanding at beginning of year		59,435		$	12.50		87,400		$	12.50		95,670		$	6.25		118,870		$	6.25
Exercised		(11,600	)	$	12.50		(27,965	)	$	12.50		(30,900	)	$	6.25		(23,200	)	$	6.25
Outstanding at year end		47,835		$	12.50		59,435		$	12.50		64,770		$	6.25		95,670		$	6.25

Exercisable at year end		47,835		$	12.50		59,435		$	12.50		64,770		$	6.25		95,670		$	6.25

~~Index~~

The following table presents stock options outstanding and exercisable at June 30, 2015:

Options Outstanding and Exercisable	Options Outstanding and Exercisable							Options Outstanding and Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price			Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$12.50			47,835		3.25	$	12.50
$6.25										64,770		2.25	$	6.25

At June 30, ~~2015~~2016 and ~~2014,~~2015, all outstanding shares were fully vested, with no remaining compensation cost to be recognized. There were no stock options granted during the years ended June 30, ~~2015~~2016 or ~~2014.~~2015. The total intrinsic value of the options exercised during the year ended June 30, 2016 was approximately $339,000. The total intrinsic value of the options exercised during the year ended June 30, 2015 was approximately ~~$182,000. The total intrinsic value of the options exercised during the year ended June 30, 2014 was approximately $378,000~~$182,000

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. Effective July 1, 2014, the Plan was amended to increase the number of phantom stock options available for awards from 900,000 to 1,800,000. Effective March 15, 2016, the Plan was amended to increase the number of phantom stock options available for awards to 3,600,000 as a result of the 2-for-1 stock split. 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 participant receives an amount equal to the positive difference between the strike price on the grant date and the book value of a share of the Company stock on the determination date, which is the last day of the plan year that is the end of the third plan year after the grant date of the award, unless otherwise specified by the Committee. The strike price will be the price established by the Committee, which will not be less than 100% of the book value of a share on a specified date, as determined under generally accepted accounting principles (GAAP) as of the last day of the quarter ending on or immediately preceding the valuation date with adjustments made, in the sole discretion of the Committee, to exclude accumulated other comprehensive income (loss).

Index

A summary of the Company’s phantom stock option activity and related information for its option plan for the years ended June 30, ~~2015~~2016 and ~~2014~~2015 is as follows:

	2015			2014			2016			2015
Number of options outstanding at beginning of year		665,426			462,464			1,257,508			1,330,852
Options granted		235,380			236,308			493,760			470,760
Options forfeited		--			(6,840	)		(1,000	)		--
Options paid in cash upon vesting		(272,052	)		(26,506	)		(396,714	)		(544,104	)
Number of options outstanding at period end		628,754			665,426			1,353,554			1,257,508

The Company paid out ~~$845,000~~$710,500 and ~~$26,900~~$845,000 in cash during the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively on options vested. The Company recognized ~~$830,000~~$1.0 million and ~~$786,800~~$830,000 in compensation costs related to the Plan during the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The total liability for the long-term incentive plan was ~~$1.1~~$1.4 million and ~~$1.2~~$1.1 million at June 30, 2016 and 2015, respectively, and ~~2014, respectively.~~is included in accrued expenses and other liabilities.

Note 11. 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 anti-dilutive securities or contracts outstanding during the years ended June 30, 2016 and 2015. On February 17, 2016, the Company announced that its Board of Directors has declared a 2-for-1 stock split on the Company’s common stock. The stock split was paid on March 15, 2016 to stockholders of record as of March 7, 2016. Weighted-average number of shares and earnings per share have been restated for June 30, 2015 as if the new shares had been issued and ~~2014.~~outstanding at the same time as the original shares.

	Net Income		Weighted Average Number Of Shares Outstanding		Earnings per Share			Net Income		Weighted Average Number Of Shares Outstanding		Earnings per Share

Year ended June 30, 2016								$	8,963,000
Basic											8,459,327	$	1.06
Effect of dilutive stock options											16,965		--
Diluted											8,476,292	$	1.06

Year ended June 30, 2015	$	7,189,000						$	7,189,000
Basic				4,218,671	$	1.70					8,437,342	$	0.85
Effect of dilutive stock options				30,016		(0.01	)				60,032		--
Diluted				4,248,687	$	1.69					8,497,374	$	0.85

Year ended June 30, 2014	$	6,528,000
Basic				4,205,945	$	1.55
Effect of dilutive stock options				35,311		(0.01	)
Diluted				4,241,256	$	1.54

~~Index~~

Note 12. Income Taxes

The provision for income taxes consists of the following for the years ended June 30, ~~2015~~2016 and ~~2014:~~2015:

(In thousands)	2015		2014		2016			2015
Current expense:
Federal	$	1,722	$	2,246	$	3,137		$	1,722
State		108		273		256			108
Total current expense		1,830		2,519		3,393			1,830
Deferred expense		488		18
Deferred (benefit) expense						(714	)		488
Total provision for income taxes	$	2,318	$	2,537	$	2,679		$	2,318

Index

The effective tax rate differs from the federal statutory rate as follows for the years ended June 30, ~~2015~~2016 and ~~2014:~~2015:

	2015			2014			2016			2015
Tax based on federal statutory rate		34.00	%		34.00	%		34.00	%		34.00	%
State income taxes, net of federal benefit		0.50			1.02			0.75			0.38
Tax-exempt income		(8.75	)		(7.97	)		(9.05	)		(8.75	)
Captive insurance premium income								(2.95	)		(1.79	)
Other, net		(1.39	)		0.94			0.26			0.54
Total income tax expense		24.36	%		27.99	%		23.01	%		24.38	%

The components of the deferred tax assets and liabilities at June 30 were as follows:

(In thousands)	2015			2014			2016			2015
Deferred tax assets:
Allowance for loan losses	$	3,150		$	2,870		$	3,669		$	3,150
Pension benefits		377			164			689			377
Other benefit plans		697			511			1,137			697
Other		114			142			-			114
Total deferred tax assets		4,338			3,687			5,495			4,338

Deferred tax liabilities:
Depreciation		1,416			1,405			1,346			1,416
Loan costs		706			634			894			706
Real estate investment trust income		2,252			1,614			2,283			2,252
Unrealized gains on securities		437			116			771			437
Other		219			-			225			219
Total deferred tax liabilities		5,030			3,769			5,519			5,030
Net deferred tax liability included in other liabilities	$	(692	)	$	(82	)	$	(24	)	$	(692	)

Income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

~~Index~~

The Company accounts for uncertain tax positions if it is more likely than not, based on technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgments.

The Company recognizes interest and penalties on income taxes, if any, as a component of the provision for income taxes.

As of June 30, ~~2015~~2016 and ~~2014,~~2015, the Company did not have any uncertain tax positions. The Company does not expect to have any changes in unrecognized tax benefits as a result of settlements with taxing authorities during the next twelve months. As of June 30, ~~2015,~~2016, tax years ended June 30, ~~2012~~2013 through June 30, ~~2014,~~2015, remain open and are subject to Federal and State taxing authority examination.

Note 13. Commitments and Contingent Liabilities

In the normal course of business there are various commitments and contingent liabilities outstanding pertaining to the granting of loans and the lines of credit, which are not reflected in the accompanying consolidated financial statements.

Index

The Bank of Greene County’s unfunded loan commitments and unused lines of credit are as follows at June 30, ~~2015~~2016 and ~~2014:~~2015:

(In thousands)	2016		2015
Unfunded loan commitments	$	41,383	$	27,449
Unused lines of credit		30,636		30,257
Total commitments	$	72,019	$	57,706

Commitments to extend credit in the form of loan commitments and lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank of Greene County evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral, if any, required upon an extension of credit is based on management’s evaluation of customer credit. Commitments to extend mortgage credit are primarily collateralized by first liens on real estate. Collateral on extensions of commercial lines of credit vary but may include accounts receivable, inventory, property, plant and equipment, and income producing commercial property.

Note 14. Operating Leases

The Bank of Greene County has non-cancelable lease commitments for ~~three~~four branch locations. These leases include obligations for real estate taxes, insurance and maintenance expenses. Total lease expense was ~~$127,000~~$152,000 and ~~$69,000~~$127,000 for the years ended June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. Minimum non-cancelable lease commitments for future years ending June 30 are as follows:

(In thousands)

The year ended June 30,	Annual Lease Payments		Annual Lease Payments
2016	$	152
2017		121	$	156
2018		95		159
2019		34		100
2020		14		81
2021				73
Thereafter		6		30
Total payments	$	422

~~Index~~

Note 15. Concentrations of Credit Risk

The Bank of Greene County grants residential, consumer and commercial loans to customers primarily located in the mid-Hudson valley region of New York, including Greene County. Over the last several years the Company has emphasized expansion into new markets in southern Albany and Columbia counties. In fiscal 2015, it expanded its lending area south into Ulster County. Although The Bank of Greene County has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon employment and other economic factors throughout Greene and its contiguous counties.

Note 16. 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 as of June 30, ~~2015~~2016 and ~~2014~~2015 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:

Index

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
			Fair Value Measurements Using								Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	June 30, 2015		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2016		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Government sponsored enterprises	$	7,855	$	-	$	7,855	$	-	$	4,891	$	-	$	4,891	$	-
State and political subdivisions		39,582		-		39,582		-		60,499		-		60,499		-
Mortgage-backed securities-residential		7,942		-		7,942		-		6,540		-		6,540		-
Mortgage-backed securities-multi-family		25,735		-		25,735		-		23,879		-		23,879		-
Asset-backed securities		9		9		-		-		5		5		-		-
Corporate debt securities		4,774		4,774		-		-		4,157		4,157		-		-
Equity securities		137		137		-		-		152		152		-		-
Securities available-for-sale	$	86,034	$	4,920	$	81,114	$	-	$	100,123	$	4,314	$	95,809	$	-

			Fair Value Measurements Using
			Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	June 30, 2015		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Government sponsored enterprises	$	7,855	$	-	$	7,855	$	-
State and political subdivisions		39,582		-		39,582		-
Mortgage-backed securities-residential		7,942		-		7,942		-
Mortgage-backed securities-multi-family		25,735		-		25,735		-
Asset-backed securities		9		9		-		-
Corporate debt securities		4,774		4,774		-		-
Equity securities		137		137		-		-
Securities available-for-sale	$	86,034	$	4,920	$	81,114	$	-

~~Index~~

Fair Value Measurements Using

(In thousands)

June 30, 2014

Quoted Prices
In Active Markets
For Identical
Assets
(Level 1)

Significant
Other Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:
U.S. Government sponsored enterprises $ 10,898 $ - $ 10,898 $ -
State and political subdivisions 1,347 - 1,347 -
Mortgage-backed securities-residential 9,545 - 9,545 -
Mortgage-backed securities-multi-family 29,018 - 29,018 -
Asset-backed securities 13 13 - -
Corporate debt securities 5,170 5,170 - -
Equity securities 160 160 - -
Securities available-for-sale $ 56,151 $ 5,343 $ 50,808 $ -

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 for which the Company has re-measured impairment generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount may not necessarily represent the actual fair value of the loan. Real estate collateral is typically valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Fair Value Measurements Using
(In thousands) Fair Value (Level 1) (Level 2) (Level 3)
June 30, 2015
Impaired loans $ 922 $ - $ - $ 922
Foreclosed real estate 490 - - 490

June 30, 2014
Impaired loans $ 3,527 $ - $ - $ 3,527
Foreclosed real estate 382 - - 382

Index

			Fair Value Measurements Using
(In thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2016
Impaired loans	$	491	$	-	$	-	$	491
Foreclosed real estate		370		-		-		370

June 30, 2015
Impaired loans	$	922	$	-	$	-	$	922
Foreclosed real estate		490		-		-		490

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			Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
June 30, 2016
Impaired loans											$	491	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00%-38.85	%		21.01	%
														Liquidation expenses⁽³⁾		0.00%-8.35	%		4.92	%
Foreclosed real estate												370	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00-54.17	%		8.83	%
														Liquidation expenses⁽³⁾		0.42%-12.67	%		7.81	%
June 30, 2015
Impaired loans	$	922	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00%-38.85	%		22.81	%	$	922	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00%-38.85	%		22.81	%
				Liquidation expenses⁽³⁾		0.00%-7.50	%		3.91	%				Liquidation expenses⁽³⁾		0.00%-7.50	%		3.91	%
Foreclosed real estate		490	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		7.41%-54.17	%		24.65	%		490	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		7.41%-54.17	%		24.65	%
				Liquidation expenses⁽³⁾		0.42%-10.86	%		6.40	%				Liquidation expenses⁽³⁾		0.42%-10.86	%		6.40	%
June 30, 2014
Impaired loans	$	3,527	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		0.00%-38.85	%		15.26	%
				Liquidation expenses⁽³⁾	0.00%-9.22		%	3.82		%
Foreclosed real estate		382	Appraisal of collateral⁽¹⁾	Appraisal adjustments⁽²⁾		9.30%-19.00	%		12.18	%
				Liquidation expenses⁽³⁾		6.00%-10.86	%	7.95		%

⁽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 may be adjusted downwards by management for items such as the estimated costs to liquidate the collateral.

At June 30, 2016, loans subject to nonrecurring fair value measurement had a recorded investment of $655,000 with related allowances of $164,000. At June 30, 2015, loans subject to nonrecurring fair value measurement had a recorded investment of $1.2 million with related allowances of $277,000. ~~At June 30, 2014, loans subject to nonrecurring fair value measurement had a recorded investment of $4.2 million with related allowances of $721,000.~~ No other financial assets or liabilities were re-measured during the year on a nonrecurring basis.

The carrying amounts reported in the statements of financial condition for cash and cash equivalents, long term certificate of deposits, 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. 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 are estimated using discounted cash flows and interest rates currently being offered on similar borrowings. The carrying value of short-term Federal Home Loan Bank borrowings approximates its fair value.

Index

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 June 30, ~~2015~~2016 and ~~2014,~~2015, the estimated fair values of these off-balance sheet financial instruments were immaterial, and are therefore excluded from the table below.

~~Index~~

The carrying amounts and estimated fair value of financial instruments are as follows:

(In thousands)	June 30, 2016				Fair Value Measurements Using
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	15,895	$	15,895	$	15,895	$	-	$	-
Long term certificate of deposit		2,210		2,210		2,210		-		-
Securities available-for-sale		100,123		100,123		4,314		95,809		-
Securities held-to-maturity		204,935		214,058		-		214,058		-
Federal Home Loan Bank stock		2,752		2,752		-		2,752		-
Net loans receivable		522,764		533,721		-		-		533,721
Accrued interest receivable		3,610		3,610		-		3,610		-
Deposits		738,887		739,087		-		739,087		-
Borrowings from Federal Home Loan Bank		46,400		46,562		-		46,562		-
Accrued interest payable		74		74		-		74		-

(In thousands)	June 30, 2015				Fair Value Measurements Using
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	15,538	$	15,538	$	15,538	$	-	$	-
Long term certificate of deposit		1,230		1,230		1,230		-		-
Securities available-for-sale		86,034		86,034		4,920		81,114		-
Securities held-to-maturity		169,000		171,976		-		171,976		-
Federal Home Loan Bank stock		2,494		2,494		-		2,494		-
Net loans receivable		443,496		450,437		-		-		450,437
Accrued interest receivable		3,026		3,026		-		3,026		-
Deposits		622,717		622,900		-		622,900		-
Borrowings from Federal Home Loan Bank		41,700		41,598		-		41,598		-
Accrued interest payable		64		64		-		64		-

(In thousands) June 30, 2014 Fair Value Measurements Using

Carrying
Amount
Fair Value (Level 1) (Level 2) (Level 3)
Cash and cash equivalents $ 13,809 $ 13,809 $ 13,809 $ - $ -
Long term certificate of deposit 250 250 250 - -
Securities available-for-sale 56,151 56,151 5,343 50,808 -
Securities held-to-maturity 181,946 181,932 - 181,932 -
Federal Home Loan Bank stock 1,561 1,561 - 1,561 -
Net loans receivable 399,309 406,718 - - 406,718
Accrued interest receivable 2,710 2,710 - 2,710 -
Deposits 589,574 589,681 - 589,681 -
Borrowings from Federal Home Loan Bank 17,650 17,465 - 17,465 -
Accrued interest payable 66 66 - 66 -

Note 17. Regulatory Matters

The Bank of Greene County and its wholly-owned subsidiary, Greene County Commercial Bank, are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material impact on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Commercial Bank must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. As of June 30, ~~2015,~~2016, the most recent notification from regulators categorized the banks as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Index

Quantitative measures established by regulation to ensure capital adequacy require The Bank of Greene County and Greene County Commercial Bank to maintain minimum amounts and ratios (set forth in the table below). In July 2013, the Office of the Comptroller of the Currency and the other federal bank regulatory agencies issued a final rule that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out is exercised. Additional constraints will also be imposed on the inclusion in regulatory capital of mortgage-servicing assets, defined tax assets and minority interests. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule became effective for The Bank of Greene County and Greene County Commercial Bank on January 1, 2015. The capital conservation buffer requirement will be phased in, increasing incrementally by 0.625% each year, beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective. Management believes that, as of June 30, ~~2015,~~2016, The Bank of Greene County and Greene County Commercial Bank met all capital adequacy requirements to which they are subject.

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions					Capital Conservation Buffer
The Bank of Greene County	Amount		Ratio			Amount		Ratio			Amount		Ratio			Actual			Required

As of June 30, 2016:

Total risk-based capital	$	76,666		16.3	%	$	37,577		8.0	%	$	46,972		10.0	%		8.322	%		0.625	%
Tier 1 risk-based capital		70,709		15.1			28,183		6.0			37,577		8.0			9.054			0.625
Common equity tier 1 capital		70,709		15.1			21,137		4.5			30,532		6.5			10.554			0.625
Tier 1 leverage ratio		70,709		8.4			33,815		4.0			42,268		5.0			4.364			0.625

As of June 30, 2015:

Total risk-based capital	$	71,572		17.9	%	$	32,082		8.0	%	$	40,102		10.0	%		-			-
Tier 1 risk-based capital		66,487		16.6			24,061		6.0			32,082		8.0			-			-
Common equity tier 1 capital		66,487		16.6			18,046		4.5			26,066		6.5			-			-
Tier 1 leverage ratio		66,487		9.1			29,256		4.0			36,571		5.0			-			-

Greene County Commercial Bank

As of June 30, 2016:

Total risk-based capital	$	23,065		40.8	%	$	4,518		8.0	%	$	5,648		10.0	%		32.840			0.625	%
Tier 1 risk-based capital		23,065		40.8			3,389		6.0			4,518		8.0			34.840			0.625
Common equity tier 1 capital		23,065		40.8			2,541		4.5			3,671		6.5			36.340			0.625
Tier 1 leverage ratio		23,065		8.1			11,409		4.0			14,262		5.0			4.086			0.625

As of June 30, 2015:

Total risk-based capital	$	19,853		45.0	%	$	3,526		8.0	%	$	4,408		10.0	%		-			-
Tier 1 risk-based capital		19,853		45.0			2,645		6.0			3,526		8.0			-			-
Common equity tier 1 capital		19,853		45.0			1,984		4.5			2,865		6.5			-			-
Tier 1 leverage ratio		19,853		9.0			8,796		4.0			10,995		5.0			-			-

7879

Index

(Dollars in thousands) Actual
For Capital
Adequacy Purposes

To Be Well
Capitalized Under
Prompt Corrective
Action Provisions

The Bank of Greene County
Amount Ratio Amount Ratio Amount Ratio

As of June 30, 2015:

Total risk-based capital $ 71,572 17.9 % $ 32,082 8.0 % $ 40,102 10.0 %
Tier 1 risk-based capital 66,487 16.6 24,061 6.0 32,082 8.0
Common equity tier 1 capital 66,487 16.6 18,046 4.5 26,066 6.5
Tier 1 leverage ratio 66,487 9.1 29,256 4.0 36,571 5.0

As of June 30, 2014:

Total risk-based capital $ 63,918 18.5 % $ 27,600 8.0 % $ 34,499 10.0 %
Tier 1 risk-based capital 59,523 17.3 13,800 4.0 20,700 6.0
Tier 1 leverage ratio 59,523 8.8 20,257 3.0 33,761 5.0

Greene County Commercial Bank

As of June 30, 2015:

Total risk-based capital $ 19,853 45.04 % $ 3,526 8.0 % $ 4,408 10.0 %
Tier 1 risk-based capital 19,853 45.04 2,645 6.0 3,526 8.0
Common equity tier 1 capital 19,853 45.04 1,984 4.5 2,865 6.5
Tier 1 leverage ratio 19,853 9.03 8,796 4.0 10,995 5.0

As of June 30, 2014:

Total risk-based capital $ 17,211 40.6 % $ 3,388 8.0 % $ 4,236 10.0 %
Tier 1 risk-based capital 17,211 40.6 1,694 4.0 2,541 6.0
Tier 1 leverage ratio 17,211 8.2 8,369 4.0 10,461 5.0

~~Index~~

Note 18. Condensed Financial Statements of Greene County Bancorp, Inc.

The following condensed financial statements summarize the financial position and the results of operations and cash flows of Greene County Bancorp, Inc. as of and for the years ended June 30, ~~2015~~2016 and ~~2014.~~2015.

Greene County Bancorp, Inc.

Condensed Statements of Financial Condition

As of June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

ASSETS	2015		2014		2016		2015
Cash and cash equivalents	$	544	$	2,817	$	2,641	$	544
Investment in subsidiaries		66,412		58,419		71,723		66,412
Prepaid expenses and other assets		21		16		48		21
Total assets	$	66,977	$	61,252	$	74,412	$	66,977

LIABILITIES AND SHAREHOLDERS’ EQUITY
Total liabilities	$	57	$	52	$	111	$	57
Total shareholders’ equity		66,920		61,200		74,301		66,920
Total liabilities and shareholders’ equity	$	66,977	$	61,252	$	74,412	$	66,977

Greene County Bancorp, Inc.

Condensed Statements of Income

For the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

	2015		2014		2016		2015
INCOME:
Equity in undistributed net income of subsidiaries	$	7,491	$	4,682	$	5,239	$	7,491
Dividend distributed by subsidiary		4		2,004		4,004		4
Interest-earning deposits		5		7		6		5
Total income		7,500		6,693
						9,249		7,500

OPERATING EXPENSES:
Legal fees		201		62		66		201
Other		110		103		220		110
Total operating expenses		311		165		286		311
Net income	$	7,189	$	6,528	$	8,963	$	7,189

Index

Greene County Bancorp, Inc.

Condensed Statements of Comprehensive Income

For the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

2015 2014
Net income $ 7,189 $ 6,528
Other comprehensive income (loss) :
Unrealized holding gains (losses) on available-for-sale securities, net of income taxes of $182 and ($327), respectively 288 (518 )

Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $139 and $175, respectively⁽¹⁾
220 277

Pension actuarial loss, net of income taxes of ($162) and ($37)⁽²⁾
(256 ) (59 )

Total other comprehensive income (loss), net of taxes 252 (300 )

Comprehensive income $ 7,441 $ 6,228

	2016			2015
Net income	$	8,963		$	7,189
Other comprehensive income:
Unrealized holding gains on available-for-sale securities, net of income taxes of $328 and $182, respectively		520			288

Accretion of unrealized loss on securities transferred to held-to-maturity, net of income taxes of $6 and $139, respectively		9			220

Pension actuarial loss, net of income taxes of ($340) and ($259)		(539	)		(409	)

Amortization of pension actuarial losses recognized in salaries and benefits, net of Income taxes of $52 and $97, respectively		83			153

Total other comprehensive income net of taxes		73			252

Comprehensive income	$	9,036		$	7,441

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

⁽²⁾	These accumulated other comprehensive income components are included in the computation of net periodic benefit cost and are included in salaries and employee benefit expense within noninterest expense (see Note 9 for additional details).

Greene County Bancorp, Inc.

Condensed Statements of Cash Flows

For the Years Ended June 30, ~~2015~~2016 and ~~2014~~2015

(In thousands)

Cash flow from operating activities:	2015			2014			2016			2015
Net Income	$	7,189		$	6,528		$	8,963		$	7,189

Adjustments to reconcile net income to cash provided by (used by) operating activities:
Undistributed earnings of subsidiaries		(7,491	)		(4,682	)		(5,239	)		(7,491	)
Tax benefit of stock based compensation		(16	)		(28	)		(6	)		(16	)
Net increase in prepaid expenses and other assets		(5	)		-			(27	)		(5	)
Net increase in total liabilities		21			20			61			21
Net cash provided by (used by) operating activities		(302	)		1,838			3,752			(302	)

Cash flows from Investing Activities:
Investment in subsidiary		(250	)		-			-			(250	)
Net cash used by investing activities		(250	)		-			-			(250	)

Cash flows from financing activities:
Payment of cash dividends		(1,798	)		(1,335	)		(1,854	)		(1,798	)
Proceeds from exercise of stock options		61			172			193			61
Excess tax benefit from share-based payment arrangements		16			28			6			16
Net cash used in financing activities		(1,721	)		(1,135	)		(1,655	)		(1,721	)
Net (decrease) increase in cash and cash equivalents		(2,273	)		703
Net increase (decrease) in cash and cash equivalents								2,097			(2,273	)
Cash and cash equivalents at beginning of year		2,817			2,114			544			2,817
Cash and cash equivalents at end of year	$	544		$	2,817		$	2,641		$	544

Index

Note 19. Subsequent events

On July ~~21, 2015,~~19, 2016, the Board of Directors declared a cash dividend for the quarter ended June 30, ~~2015~~2016 of ~~$0.185~~$0.095 per share on Greene County Bancorp, Inc.’s common stock. The dividend reflects an annual cash dividend rate of ~~$0.74~~$0.38 per share, compared to an annual cash dividend rate of ~~$0.72~~$0.37 declared during the previous quarter. The dividend was payable to stockholders of record as of August ~~14, 2015,~~15, 2016, and was paid on August 31, ~~2015.~~2016. The MHC has waived its right to receive dividends declared on its shares of the Company’s common stock for the quarter ended June 30, ~~2015.~~2016.

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The “Proposal II - Ratification of Appointment of Auditors” section of Greene County Bancorp, Inc.’s ~~2015~~2016 Proxy Statement is incorporated herein by reference.

ITEM 9A.

Controls and Procedures

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) at the end of the period covered by the report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. There has been no change in the Company’s internal control over financial reporting during the Company’s fourth quarter of the year ended June 30, ~~2015~~2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s report on internal control over financial reporting appears in Part II, Item 8 of this Report. This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to exemption rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 9B.

Other Information

None.

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

The “Proposal I - Election of Directors” section of Greene County Bancorp, Inc.’s definitive Proxy Statement for Greene County Bancorp, Inc.’s ~~2015~~2016 Annual Meeting of Shareholders (the ~~“2015~~“2016 Proxy Statement”) is incorporated herein by reference.

The Company has adopted a Code of Ethics that is applicable to the Company’s officers, directors and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is available on the Company’s website at www.tbogc.com. Amendments to and waivers from the Code of Ethics will also be disclosed on the Company’s website.

ITEM 11.

Executive Compensation

The “Proposal I - Election of Directors” section of Greene County Bancorp, Inc.’s ~~2015~~2016 Proxy Statement is incorporated herein by reference.

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The “Proposal I - Election of Directors” section of Greene County Bancorp, Inc.’s ~~2015~~2016 Proxy Statement is incorporated herein by reference.

Index

ITEM 13.

Certain Relationships and Related Transactions and Director Independence

The “Transactions with Certain Related Persons” section of Greene County Bancorp, Inc.’s ~~2015~~2016 Proxy Statement is incorporated herein by reference.

~~Index~~

ITEM 14.

Principal Accountant Fees and Services

The “Proposal II - Ratification of Appointment of Auditors” section of Greene County Bancorp, Inc.’s ~~2015~~2016 Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15.

Exhibits and Financial Statement Schedules

(a)(1)

The following financial statements and Report of BDO USA, LLP are included in this Annual Report on Form 10-K:

Report of BDO USA, LLP, Independent Registered Public Accounting Firm

Consolidated Statements of Condition ~~for the years ended~~as of June 30, ~~2015~~2016 and ~~2014~~2015

Consolidated Statements of Income for the years ended June 30, ~~2015~~2016 and ~~2014~~2015

Consolidated ~~Statement~~Statements of Comprehensive Income for the years ended June 30, ~~2015~~2016 and ~~2014~~2015

Consolidated Statements of Cash Flows for the years ended June 30, ~~2015~~2016 and ~~2014~~2015

Consolidated Statements of Changes in Shareholders’ Equity for the years ended June 30, ~~2015~~2016 and ~~2014~~2015

Notes to Consolidated Financial Statements

Unaudited Quarterly Financial Data

(a)(2)

List of Financial Schedules

Not applicable

(a)(3)

Exhibits

3.1

Certification of Incorporation of Greene County Bancorp, Inc. (incorporated herein by reference to Greene County Bancorp, Inc.’s Registration statement on SB-2, file No. 333-63681 (the “SB-2”)).


	3.2	Bylaws of Greene County Bancorp, Inc. (incorporated herein by reference to Greene County Bancorp, Inc.’s SB-2)


	4.0	Form of Stock Certificate of Greene County Bancorp, Inc. (incorporated herein by reference to the Form SB-2)


	10.2	Employee Stock Ownership Plan (incorporated herein by reference to Greene County Bancorp, Inc.’s SB-2)


	21.0	Subsidiaries of Greene County Bancorp, Inc.


	23.1	Consent of BDO USA, LLP


	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


	32.1	Certification of Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


	32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	101*
	101	The following materials from Greene County Bancorp, Inc. Form 10-K for the year ended June 30, ~~2015,~~2016, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Financial Condition, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) related notes, tagged as blocks of text and in detail.

~~XBRL content to be filed by amendment.~~

Index

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		GREENE COUNTY BANCORP, INC.

Date:	September 28, ~~2015~~2016	By:	/s/ Donald E. Gibson
		Donald E. Gibson
		President and Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

~~By:~~ ~~/s/ Michelle Plummer~~

By:	/s/ Michelle Plummer
Michelle Plummer, CPA
Executive Vice President,
Chief Operating Officer and Chief Financial Officer
Date: September 28, 2016

~~Michelle Plummer, CPA~~

By:	/s/ Jay P. Cahalan
Jay P. Cahalan
Director
Date: September 28, 2016

By:	/s/ David H. Jenkins
David H. Jenkins, DVM
Director
Date: September 28, 2016

By:	/s/ Peter W. Hogan, CPA
Peter W. Hogan, CPA
Director
Date: September 28, 2016

By:	/s/ Charles Schaefer
Charles Schaefer
Director
Date: September 28, 2016

By:	/s/ Paul Slutzky
Paul Slutzky
Director
Date: September 28, 2016

By:	/s/ Martin C. Smith
Martin C. Smith
Chairman of the Board
Date: September 28, 2016

~~Executive Vice President,~~

~~Chief Operating Officer and Chief Financial Officer~~

~~Date: September 28, 2015~~

~~By:~~ ~~/s/~~ ~~Jay P. Cahalan~~

~~Jay P. Cahalan~~

~~Director~~

~~Date: September 28, 2015~~

~~By:~~ ~~/s/ David H. Jenkins~~

~~David H. Jenkins, DVM~~

~~Director~~

~~Date: September 28, 2015~~

~~By:~~ ~~/s/ Peter W. Hogan, CPA~~

~~Peter W. Hogan, CPA~~

~~Director~~

~~Date: September 28, 2015~~

~~By:~~ ~~/s/ Charles Schaefer~~

~~Charles Schaefer~~

~~Director~~

~~Date: September 28, 2015~~

~~By:~~ ~~/s/ Paul Slutzky~~

~~Paul Slutzky~~

~~Director~~

~~Date: September 28, 2015~~

~~By:~~ ~~/s/ Martin C. Smith~~

~~Martin C. Smith~~

~~Chairman of the Board~~

~~Date: September 28, 2015~~

United States		14-1809721
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Title of each class		Name of exchange on which registered
Common Stock, par value $0.10 per share		The Nasdaq Stock Market LLC

	Large accelerated filer ☐		Accelerated filer ☐
	Non-accelerated filer ☐		Smaller reporting company x☒

302 Main Street, Catskill, New York		12414
(Address of Principal Executive Office)		(Zip Code)

	Index
Part I
Item 1.	Business	~~4-21~~4-20
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23-24
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~26-43~~26-44
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 8.	Financial Statements and Supplementary Data	45-82
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	82
Item 9A.	Controls and Procedures	82
Item 9B.	Other Information	82

Part III
Item 10.	Directors, Executive Officers, and Corporate Governance	82
Item 11.	Executive Compensation	82
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82
Item 13.	Certain Relationships and Related Transactions and Director Independence	8283
Item 14.	Principal Accountant Fees and Services	83

Part IV
Item 15.	Exhibits and Financial Statement Schedules	83
	Signatures	84

Exhibit 21.0	Subsidiaries of Greene County Bancorp, Inc.	85
Exhibit 23.1	Consent of Independent Registered Public Accounting Firm – BDO USA, LLP	86
Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	87
Exhibit 31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	88
Exhibit 32.1	Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	89
Exhibit 32.2	Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	90
Exhibit 101	Extensible Business Reporting Language (XBRL)

	As of June 30, 2014						For the year ended June 30, 2014
(In thousands)	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential real estate	$	206	$	206	$	-	$	330	$	14
Commercial real estate		461		461		-		518		29
Home equity		96		96		-		24		3
Total impaired loans with no allowance		763		763		-		872		46

With an allowance recorded:
Residential real estate		2,700		2,790		441		2,978		64
Multi-family		-		-		-		193		-
Commercial real estate		2,572		2,959		338		2,346		63
Commercial construction		-		-		-		350		17
Home equity		200		200		87		150		-
Commercial loans		603		603		3		606		39
Total impaired loans with allowance		6,075		6,552		869		6,623		183

Total impaired loans
Residential real estate		2,906		2,996		441		3,308		78
Multi-family		-		-		-		193		-
Commercial real estate		3,033		3,420		338		2,864		92
Commercial construction		-		-		-		350		17
Home equity		296		296		87		174		3
Commercial loans		603		603		3		606		39
Total impaired loans	$	6,838	$	7,315	$	869	$	7,495	$	229

(Dollars in thousands)		Number of Contracts				Pre-Modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment				Current Outstanding Recorded Investment
Residential real estate			1			$	164			$	184			$	183

	Activity for the year ended June 30, 2014
(In thousands)	Balance June 30, 2013		Charge-offs		Recoveries		Provision			Balance June 30, 2014
Residential real estate	$	2,627	$	420	$	10	$	514		$	2,731
Residential construction and land		37		-		-		5			42
Multi-family		139		24		7		(63	)		59
Commercial real estate		2,476		309		-		769			2,936
Commercial construction		392		-		-		(354	)		38
Home equity		275		44		-		130			361
Consumer installment		222		215		75		158			240
Commercial loans		809		205		4		203			811
Unallocated		63		-		-		138			201
Total	$	7,040	$	1,217	$	96	$	1,500		$	7,419

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
The Bank of Greene County	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of June 30, 2015:

Total risk-based capital	$	71,572		17.9	%	$	32,082		8.0	%	$	40,102		10.0	%
Tier 1 risk-based capital		66,487		16.6			24,061		6.0			32,082		8.0
Common equity tier 1 capital		66,487		16.6			18,046		4.5			26,066		6.5
Tier 1 leverage ratio		66,487		9.1			29,256		4.0			36,571		5.0

As of June 30, 2014:

Total risk-based capital	$	63,918		18.5	%	$	27,600		8.0	%	$	34,499		10.0	%
Tier 1 risk-based capital		59,523		17.3			13,800		4.0			20,700		6.0
Tier 1 leverage ratio		59,523		8.8			20,257		3.0			33,761		5.0

Greene County Commercial Bank

As of June 30, 2015:

Total risk-based capital	$	19,853		45.04	%	$	3,526		8.0	%	$	4,408		10.0	%
Tier 1 risk-based capital		19,853		45.04			2,645		6.0			3,526		8.0
Common equity tier 1 capital		19,853		45.04			1,984		4.5			2,865		6.5
Tier 1 leverage ratio		19,853		9.03			8,796		4.0			10,995		5.0

As of June 30, 2014:

Total risk-based capital	$	17,211		40.6	%	$	3,388		8.0	%	$	4,236		10.0	%
Tier 1 risk-based capital		17,211		40.6			1,694		4.0			2,541		6.0
Tier 1 leverage ratio		17,211		8.2			8,369		4.0			10,461		5.0