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, 2013, 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 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.

Securities at June 30, 2013 consisted of the following:


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

Securities at June 30, 2012 consisted of the following:


				Gross		Gross		Estimated
		Amortized		Unrealized		Unrealized		Fair
(In thousands)		Cost		Gains		Losses		Value
Securities available for sale:
U.S. government sponsored enterprises	$	16,816	$	582	$	-	$	17,398
State and political subdivisions		4,783		116		-		4,899
Mortgage-backed securities-residential		18,625		482		1		19,106
Mortgage-backed securities-multi-family		40,077		604		18		40,663
Asset-backed securities		20		-		1		19
Corporate debt securities		5,053		263		-		5,316
Total debt securities		85,374		2,047		20		87,401
Equity securities		67		60		-		127
Total securities available for sale		85,441		2,107		20		87,528
Securities held to maturity:
U.S. treasury securities		11,029		61		-		11,090
U.S. government sponsored enterprises		998		31		-		1,029
State and political subdivisions		62,212		556		99		62,669
Mortgage-backed securities-residential		48,101		2,282		4		50,379
Mortgage-backed securities-multi-family		23,673		952		6		24,619
Other securities		376		-		-		376
Total securities held to maturity		146,389		3,882		109		150,162
Total securities	$	231,830	$	5,989	$	129	$	237,690

Greene County Bancorp, Inc.’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations and certain mutual funds. In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations. The Company’s investments in mortgage-backed securities include pass-through securities and collateralized mortgage obligations issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA. As of June 30, 2013 and 2012, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio. The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured. The obligations issued by school districts are supported by state aid. Primarily, these investments are issued by municipalities within New York State.

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2013.


		Less Than 12 Months				More Than 12 Months				Total
(In thousands)		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
State and political subdivisions	$	791	$	20	$	-	$	-	$	791	$	20
Mortgage-backed securities-multi-family		33,298		466		-		-		33,298		466
Asset-backed securities		-		-		16		1		16		1
Corporate debt securities		758		31		-		-		758		31
Total securities available for sale		34,847		517		16		1		34,863		518
Securities held to maturity:
U.S. government sponsored enterprises		1,887		113		-		-		1,887		113
State and political subdivisions		28,597		745		1,597		10		30,194		755
Mortgage-backed securities-residential		1,228		9		-		-		1,228		9
Mortgage-backed securities-multi-family		33,044		1,093		-		-		33,044		1,093
Other securities		753		35		-		-		753		35
Total securities held to maturity		65,509		1,995		1,597		10		67,106		2,005
Total securities	$	100,356	$	2,512	$	1,613	$	11	$	101,969	$	2,523


		Less Than 12 Months				More Than 12 Months				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)		Value		Losses		Value		Losses		Value		Losses
Securities available for sale:
Mortgage-backed securities-residential	$	340	$	1	$	-	$	-	$	340	$	1
Mortgage-backed securities-multi-family		8,837		18		-		-		8,837		18
Asset-backed securities		-		-		19		1		19		1
Total securities available for sale		9,177		19		19		1		9,196		20
Securities held to maturity:
State and political subdivisions		10,696		99		-		-		10,696		99
Mortgage-backed securities-residential		527		4		-		-		527		4
Mortgage-backed securities-multi-family		4,189		6		-		-		4,189		6
Total securities held to maturity		15,412		109		-		-		15,412		109
Total securities	$	24,589	$	128	$	19	$	1	$	24,608	$	129

At June 30, 2013, there were 32 securities which have been in a continuous unrealized loss position for less than 12 months and 10 securities with a continuous unrealized loss position of more than 12 months. 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, 2013. 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.

The following table presents realized gains and losses on securities for the years ended June 30, 2013 and 2012:


(In thousands)		2013		2012
Gross realized gains on sale of available-for-sale securities	$	10	$	11
Other-than-temporary impairment losses		-		(25)
Net realized gains (losses)	$	10	$	(14)

The estimated fair values of debt securities at June 30, 2013, by contractual maturity are shown below. Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)


Available for sale debt securities		Amortized Cost		Fair Value
Within one year	$	2,535	$	2,563
After one year through five years		11,936		12,417
After five years through ten years		4,934		5,043
After ten years		-		-
Total available for sale debt securities		19,405		20,023
Mortgage-backed and asset-backed securities		49,453		49,468
Equity securities		68		153
Total available for sale securities		68,926		69,644

Held to maturity debt securities
Within one year		24,418		24,476
After one year through five years		28,306		28,356
After five years through ten years		26,490		26,143
After ten years		13,142		12,873
Total held to maturity debt securities		92,356		91,848
Mortgage-backed		84,163		85,812
Total held to maturity securities		176,519		177,660
Total securities	$	245,445	$	247,304

As of June 30, 2013 and 2012, respectively, securities with an aggregate fair value of $200.9 million and $181.6 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, 2013 and 2012, respectively, securities with an aggregate fair value of $5.2 million and $5.3 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, 2013 or 2012.