| Securities | (4) Securities Securities at September 30, 2019 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 $ 4,517 $ 28 $ - $ 4,545 State and political subdivisions 120,630 346 - 120,976 Mortgage-backed securities-residential 8,589 51 19 8,621 Mortgage-backed securities-multi-family 20,256 323 1 20,578 Corporate debt securities 4,512 61 30 4,543 Total securities available-for-sale 158,504 809 50 159,263 Securities held-to-maturity: U.S. government sponsored enterprises 2,000 - 12 1,988 State and political subdivisions 155,729 6,383 70 162,042 Mortgage-backed securities-residential 10,154 164 - 10,318 Mortgage-backed securities-multi-family 132,795 4,257 2 137,050 Corporate debt securities 1,480 12 28 1,464 Other securities 2,424 36 - 2,460 Total securities held-to-maturity 304,582 10,852 112 315,322 Total securities $ 463,086 $ 11,661 $ 162 $ 474,585 Securities at June 30, 2019 consisted of the following: (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Securities available-for-sale: U.S. government sponsored enterprises $ 5,522 $ 31 $ - $ 5,553 State and political subdivisions 95,782 788 - 96,570 Mortgage-backed securities-residential 2,634 31 20 2,645 Mortgage-backed securities-multi-family 16,151 259 - 16,410 Corporate debt securities 1,513 37 - 1,550 Total securities available-for-sale 121,602 1,146 20 122,728 Securities held-to-maturity: U.S. government sponsored enterprises 9,249 1 14 9,236 State and political subdivisions 152,358 6,212 23 158,547 Mortgage-backed securities-residential 4,570 97 - 4,667 Mortgage-backed securities-multi-family 134,970 3,122 17 138,075 Corporate debt securities 1,478 18 25 1,471 Other securities 1,583 34 - 1,617 Total securities held-to-maturity 304,208 9,484 79 313,613 Total securities $ 425,810 $ 10,630 $ 99 $ 436,341 Greene County Bancorp, Inc.’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations and certain mutual funds. In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations issued by these entities. At September 30, 2019, all mortgage-backed securities including collateralized mortgage obligations were securities of government sponsored enterprises, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio. The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured. The obligations issued by school districts are supported by state aid. Primarily, these investments are issued by municipalities within New York State. The Company’s current securities investment strategy utilizes a risk management approach of diversified investing among three categories: short-, intermediate- and long-term. The emphasis of this approach is to increase overall investment securities yields while managing interest rate risk. The Company will only invest in high quality securities as determined by management’s analysis at the time of purchase. The Company generally does not engage in any derivative or hedging transactions, such as interest rate swaps or caps. The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2019. Less Than 12 Months More Than 12 Months Total (In thousands, except number of securities) Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Securities available-for-sale: Mortgage-backed securities-residential $ 3,078 $ 2 1 $ 803 $ 17 1 $ 3,881 $ 19 2 Mortgage-backed securities-multi-family 3,085 1 1 - - - 3,085 1 1 Corporate debt securities 2,970 30 5 - - - 2,970 30 5 Total securities available-for-sale 9,133 33 7 803 17 1 9,936 50 8 Securities held-to-maturity: U.S. government sponsored enterprises - - - 1,988 12 1 1,988 12 1 State and political subdivisions 10,966 58 94 2,424 12 16 13,390 70 110 Mortgage-backed securities-multi-family 2,764 2 2 - - - 2,764 2 2 Corporate debt securities - - - 452 28 1 452 28 1 Total securities held-to-maturity 13,730 60 96 4,864 52 18 18,594 112 114 Total securities $ 22,863 $ 93 103 $ 5,667 $ 69 19 $ 28,530 $ 162 122 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, 2019. Less Than 12 Months More Than 12 Months Total (In thousands, except number of securities) Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Securities available-for-sale: Mortgage-backed securities-residential $ 856 $ 20 1 $ - $ - - $ 856 $ 20 1 Total securities available-for-sale 856 20 1 - - - 856 20 1 Securities held-to-maturity: U.S. government sponsored enterprises - - - 1,986 14 1 1,986 14 1 State and political subdivisions 3,541 17 22 2,111 6 13 5,652 23 35 Mortgage-backed securities-multi-family 1,250 6 1 3,799 11 3 5,049 17 4 Corporate debt securities - - - 452 25 1 452 25 1 Total securities held-to-maturity 4,791 23 23 8,348 56 18 13,139 79 41 Total securities $ 5,647 $ 43 24 $ 8,348 $ 56 18 $ 13,995 $ 99 42 When the fair value of a held-to-maturity or available-for-sale security is less than its amortized cost basis, an assessment is made as to whether other-than-temporary impairment (“OTTI”) is present. The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover. The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issuer (and guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a rating agency, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies. For debt securities, OTTI is considered to have occurred if (1) the Company intends to sell the security before recovery of its amortized cost basis, (2) it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, or (3) if the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. In determining the present value of expected cash flows, the Company discounts the expected cash flows at the effective interest rate implicit in the security at the date of acquisition. In estimating cash flows expected to be collected, the Company uses available information with respect to security prepayment speeds, default rates and severity. In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. For debt securities, credit-related OTTI is recognized in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“OCI”). Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis. Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized. For securities classified as held-to-maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods. Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2019. 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 three months ended September 30, 2019 or 2018. During the three months ended September 30, 2019 and 2018, there were no sales of securities and no gains or losses were recognized. There was no other-than-temporary impairment loss recognized during the three months ended September 30, 2019 and 2018. The estimated fair values of debt securities at September 30, 2019, by contractual maturity are shown below. Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. (In thousands) Available-for-sale debt securities Amortized Cost Fair Value Within one year $ 125,147 $ 125,521 After one year through five years 510 526 After five years through ten years 2,002 2,046 After ten years 2,000 1,971 Total available-for-sale debt securities 129,659 130,064 Mortgage-backed securities 28,845 29,199 Total available-for-sale securities 158,504 159,263 Held-to-maturity debt securities Within one year 25,105 25,395 After one year through five years 74,861 76,755 After five years through ten years 43,093 45,660 After ten years 18,574 20,144 Total held-to-maturity debt securities 161,633 167,954 Mortgage-backed securities 142,949 147,368 Total held-to-maturity securities 304,582 315,322 Total debt securities $ 463,086 $ 474,585 At September 30, 2019 and June 30, 2019, respectively, securities with an aggregate fair value of $460.9 Federal Home Loan Bank Stock Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is carried at cost. FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position. After evaluating these considerations, Greene County Bancorp, Inc. concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no other-than-temporary impairment charge was recorded during the three months ended September 30, 2019 or 2018. (5) Loans and Allowance for Loan Losses Loan segments and classes at September 30, 2019 and June 30, 2019 are summarized as follows: (In thousands) September 30, 2019 June 30, 2019 Residential real estate: Residential real estate $ 267,245 $ 267,802 Residential construction and land 8,377 7,462 Multi-family 25,021 24,592 Commercial real estate: Commercial real estate 332,185 329,668 Commercial construction 48,751 36,361 Consumer loan: Home equity 23,288 23,185 Consumer installment 5,677 5,481 Commercial loans 107,632 103,554 Total gross loans 818,176 798,105 Allowance for loan losses (13,444 ) (13,200 ) Unearned origination fees and costs, net 807 833 Loans receivable, net $ 805,539 $ 785,738 Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality and profitability of the Company’s loan portfolio. The credit quality grade helps management make a consistent assessment of each loan relationship’s credit risk. Consistent with regulatory guidelines, The Bank of Greene County provides for the classification of loans considered being of lesser quality. Such ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. Substandard assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in assets classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as Loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a full loss reserve and/or charge-off is not warranted. Assets that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.” Management also maintains a listing of loans designated “Watch.” These loans represent borrowers with declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average risk. When The Bank of Greene County classifies problem assets as either Substandard or Doubtful, it generally establishes a specific valuation allowance or “loss reserve” in an amount deemed prudent by management. General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular loans. When The Bank of Greene County identifies problem loans as being impaired, it is required to evaluate whether the Bank will be able to collect all amounts due either through repayments or the liquidation of the underlying collateral. If it is determined that impairment exists, the Bank is required either to establish a specific allowance for losses equal to the amount of impairment of the assets, or to charge-off such amount. The Bank of Greene County’s determination as to the classification of its loans and the amount of its valuation allowance is subject to review by its regulatory agencies, which can order the establishment of additional general or specific loss allowances. The Bank of Greene County reviews its portfolio monthly to determine whether any assets require classification in accordance with applicable regulations. The Bank primarily has four segments within its loan portfolio that it considers when measuring credit quality: residential real estate loans, commercial real estate loans, consumer loans and commercial loans. The residential real estate portfolio consists of residential, construction, and multi-family loan classes. Commercial real estate loans consist of commercial real estate and commercial construction loan classes. Consumer loans consist of home equity loan and consumer installment loan classes. The inherent risk within the loan portfolio varies depending upon each of these loan types. The Bank of Greene County’s primary lending activity historically has been the origination of residential mortgage loans, including home equity loans, which are collateralized by residences. Generally, residential mortgage loans are made in amounts up to 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. Consumer loans generally have shorter terms and higher interest rates than residential mortgage loans. In addition, consumer loans expand the products and services offered by The Bank of Greene County to better meet the financial services needs of its customers. Consumer loans generally involve greater credit risk than residential mortgage loans because of the difference in the nature of the underlying collateral. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation in the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections depend on the borrower’s personal financial stability. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. Commercial lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate mortgage lending. Real estate lending is generally considered to be collateral-based, with loan amounts based on fixed loan-to-collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment. Over the past few years, The Bank of Greene County has shifted more focus on the origination of commercial loans including commercial real estate. The Bank of Greene County has also formed relationships with other community banks within our region to participate in larger commercial loan relationships. These types of loans are generally considered to be riskier due to the size and complexity of the loan relationship. By entering into a participation agreement with the other bank, The Bank of Greene County can obtain the loan relationship while limiting its exposure to credit loss. Management completes its due diligence in underwriting these loans and monitors the servicing of these loans. Loan balances by internal credit quality indicator at September 30, 2019 are shown below. ( In thousands Performing Watch Special Mention Substandard Total Residential real estate $ 264,257 $ 496 $ 209 $ 2,283 $ 267,245 Residential construction and land 8,377 - - - 8,377 Multi-family 23,127 - 1,759 135 25,021 Commercial real estate 321,306 161 7,569 3,149 332,185 Commercial construction 43,957 - 4,692 102 48,751 Home equity 22,624 75 - 589 23,288 Consumer installment 5,659 18 - - 5,677 Commercial loans 105,389 - 1,936 307 107,632 Total gross loans $ 794,697 $ 750 $ 16,165 $ 6,564 $ 818,176 Loan balances by internal credit quality indicator at June 30, 2019 are shown below. (In thousands Performing Watch Special Mention Substandard Total Residential real estate $ 264,138 $ 874 $ 86 $ 2,704 $ 267,802 Residential construction and land 7,462 - - - 7,462 Multi-family 22,544 137 1,835 76 24,592 Commercial real estate 318,703 616 7,435 2,914 329,668 Commercial construction 36,259 - - 102 36,361 Home equity 22,392 20 - 773 23,185 Consumer installment 5,461 14 - 6 5,481 Commercial loans 102,103 261 1,082 108 103,554 Total gross loans $ 779,062 $ 1,922 $ 10,438 $ 6,683 $ 798,105 The Company had no loans classified doubtful or loss at September 30, 2019 or June 30, 2019. During the three months ended September 30, 2019 the Company downgraded a construction loan to special mention as a result of project cost overruns and several delinquent payments. At September 30, 2019, this loan was performing. Management continues to monitor this loan relationship closely. 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 September 30, 2019 and June 30, 2019. Loans on nonaccrual status totaled $3.5 million at September 30, 2019 of which $1.1 million were in the process of foreclosure. At September 30, 2019, there were 9 residential loans in the process of foreclosure totaling $938,000. Included in nonaccrual loans were $1.8 The following table sets forth information regarding delinquent and/or nonaccrual loans at September 30, 2019: (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 $ 1,906 $ 212 $ 986 $ 3,104 $ 264,141 $ 267,245 $ 2,026 Residential construction and land - - - - 8,377 8,377 - Multi-family - - 134 134 24,887 25,021 134 Commercial real estate 1,083 474 114 1,671 330,514 332,185 847 Commercial construction - - - - 48,751 48,751 - Home equity 124 75 243 442 22,846 23,288 268 Consumer installment 66 18 - 84 5,593 5,677 - Commercial loans 174 - 237 411 107,221 107,632 247 Total gross loans $ 3,353 $ 779 $ 1,714 $ 5,846 $ 812,330 $ 818,176 $ 3,522 The following table sets forth information regarding delinquent and/or nonaccrual loans at June 30, 2019: (In thousands) 30-59 days past due 60-89 days past due 90 days or more past due Total past due Current Total Loans Loans on Non- accrual Residential real estate $ 2,144 $ 870 $ 1,385 $ 4,399 $ 263,403 $ 267,802 $ 2,474 Residential construction and land - - - - 7,462 7,462 - Multi-family 1 137 - 138 24,454 24,592 - Commercial real estate 280 1,108 102 1,490 328,178 329,668 598 Commercial construction - - - - 36,361 36,361 - Home equity 16 136 309 461 22,724 23,185 452 Consumer installment 32 14 6 52 5,429 5,481 6 Commercial loans 430 342 28 800 102,754 103,554 108 Total gross loans $ 2,903 $ 2,607 $ 1,830 $ 7,340 $ 790,765 $ 798,105 $ 3,638 The Bank of Greene County had no accruing loans delinquent more than 90 days at September 30, 2019 or June 30, 2019, respectively. The loans delinquent more than 90 days and accruing consist of loans that are well collateralized and the borrowers have demonstrated the ability and willingness to pay. The borrower has made arrangements with the Bank to bring the loan current within a specified time period and has made a series of payments as agreed. The table below details additional information related to nonaccrual loans for the three months ended September 30: (In thousands) 2019 2018 Interest income that would have been recorded if loans had been performing in accordance with original terms $ 101 $ 71 Interest income that was recorded on nonaccrual loans 50 32 Impaired Loan Analysis The Company identifies impaired loans and measures the impairment in accordance with FASB ASC subtopic “ Receivables – Loan Impairment.” The tables below detail additional information on impaired loans at the date or periods indicated: At September 30, 2019 For the three months ended September 30, 2019 (In thousands) Recorded Investment Unpaid Principal Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Residential real estate $ 674 $ 674 $ - $ 692 $ 30 Commercial real estate 697 697 - 704 7 Home equity 153 153 - 266 - Commercial loans 135 135 - 137 - Total impaired loans with no allowance 1,659 1,659 - 1,799 37 With an allowance recorded: Residential real estate 830 830 91 1,087 24 Commercial construction 102 102 2 102 - Home equity 321 321 73 330 5 Commercial loans 130 130 12 130 1 Total impaired loans with allowance 1,383 1,383 178 1,649 30 Total impaired: Residential real estate 1,504 1,504 91 1,779 54 Commercial real estate 697 697 - 704 7 Commercial construction 102 102 2 102 - Home equity 474 474 73 596 5 Commercial loans 265 265 12 267 1 Total impaired loans $ 3,042 $ 3,042 $ 178 $ 3,448 $ 67 At June 30, 2019 For the three months ended September 30, 2018 (In thousands) Recorded Investment Unpaid Principal Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Residential real estate $ 727 $ 727 $ - $ 7 $ 3 Commercial real estate 717 717 - 796 8 Home equity 309 309 - 224 - Commercial loans 141 141 - 157 - Impaired loans with no allowance 1,894 1,894 - 1,184 11 With an allowance recorded: Residential real estate 1,420 1,420 188 1,855 23 Commercial real estate - - - 365 - Commercial construction 102 102 2 176 - Home equity 348 348 59 322 4 Commercial Loans 130 130 13 - - Impaired loans with allowance 2,000 2,000 262 2,718 27 Total impaired: Residential real estate 2,147 2,147 188 1,862 26 Commercial real estate 717 717 - 1,161 8 Commercial construction 102 102 2 176 - Home equity 657 657 59 546 4 Commercial loans 271 271 13 157 - Total impaired loans $ 3,894 $ 3,894 $ 262 $ 3,902 $ 38 There were no loans that have been modified as a troubled debt restructuring during the three months ended September 30, 2019 or 2018. There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to June 30, 2019 or 2018 which have subsequently defaulted during the three months ended September 30, 2019 or 2018, respectively. Allowance for Loan Losses The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions. Such evaluation, which includes a review of certain identified loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, payment status of the loan, historical loan loss experience and other factors that warrant recognition in providing for the loan loss allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review The Bank of Greene County’s allowance for loan losses. Such agencies may require The Bank of Greene County to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The Bank of Greene County considers smaller balance residential mortgages, home equity loans, commercial loans and installment loans to customers as small, homogeneous loans, which are evaluated for impairment collectively based on historical loss experience. Larger balance residential, commercial mortgage and business loans are viewed individually and considered impaired if it is probable that The Bank of Greene County will not be able to collect scheduled payments of principal and interest when due, according to the contractual terms of the loan agreements. The measurement of impaired loans is generally based on the fair value of the underlying collateral. The Bank of Greene County charges loans off against the allowance for credit losses when it becomes evident that a loan cannot be collected within a reasonable amount of time or that it will cost the Bank more than it will receive, and all possible avenues of repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers. Generally, consumer loans and smaller commercial loans (not secured by real estate) in excess of 90 days are charged-off against the allowance for loan losses, unless equitable arrangements are made. Included within consumer installment loan charge-offs and recoveries are deposit accounts that have been overdrawn in excess of 60 days. With continued growth in the number of deposit accounts, charge-off activity within this category has also grown, as can be seen from the tables below. For loans secured by real estate, a charge-off is recorded when it is determined that the collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and recoveries of loans previously charged off and is reduced by charge-offs. The following tables set forth the activity and allocation of the allowance for loan losses by loan category during and at the periods indicated. The allowance is allocated to each loan category based on historical loss experience and economic conditions. Activity for the three months ended September 30, 2019 (In thousands) Balance at June 30, 2019 Charge-offs Recoveries Provision Balance at September 30, 2019 Residential real estate $ 2,026 $ 53 $ - $ (461 ) $ 1,512 Residential construction and land 87 - - 12 99 Multi-family 180 - - 25 205 Commercial real estate 7,110 - - 49 7,159 Commercial construction 872 - - 419 1,291 Home equity 314 - - (7 ) 307 Consumer installment 250 109 24 154 319 Commercial loans 2,361 199 30 360 2,552 Total $ 13,200 $ 361 $ 54 $ 551 $ 13,444 Allowance for Loan Losses Loans Receivable Ending Balance At September 30, 2019 Impairment Analysis Ending Balance At September 30, 2019 Impairment Analysis (In thousands) Individually Evaluated |
