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, 2014, 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.

Securities at June 30, 2014 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	$	10,648	$	250	$	-	$	10,898
State and political subdivisions		1,324		23		-		1,347
Mortgage-backed securities-residential		9,345		213		13		9,545
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		62		98		-		160
Total securities available for sale		55,473		1,048		370		56,151
Securities held to maturity:
U.S. government sponsored enterprises		2,000		-		102		1,898
State and political subdivisions		91,634		787		204		92,217
Mortgage-backed securities-residential		22,785		1,150		-		23,935
Mortgage-backed securities-multi-family		64,605		759		2,381		62,983
Other securities		922		1		24		899
Total securities held to maturity		181,946		2,697		2,711		181,932
Total securities	$	237,419	$	3,745	$	3,081	$	238,083

Securities at June 30, 2013 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	$	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

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.

	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:
Mortgage-backed securities-residential	$	4,302	$	13	$	-	$	-	$	4,302	$	13
Mortgage-backed securities-multi-family		4,448		5		19,404		334		23,852		339
Asset-backed securities		-		-		13		2		13		2
Corporate debt securities		767		16		-		-		767		16
Total securities available for sale		9,517		34		19,417		336		28,934		370
Securities held to maturity:
U.S. government sponsored enterprises		1,898		102		-		-		1,898		102
State and political subdivisions		6,693		175		1,815		29		8,508		204
Mortgage-backed securities-multi-family		26,522		1,617		15,440		764		41,962		2,381
Other securities		130		2		401		22		531		24
Total securities held to maturity		35,243		1,896		17,656		815		52,899		2,711
Total securities	$	44,760	$	1,930	$	37,073	$	1,151	$	81,833	$	3,081

	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

At June 30, 2014, there were 51 securities which have been in a continuous unrealized loss position for less than 12 months, consisting of 15 mortgage-backed securities, 33 state and political subdivisions, one corporate debt security, one U.S. government sponsored enterprise, and one other security. Also at June 30, 2014, there were 27 securities with a continuous unrealized loss position of more than 12 months, consisting of 13 mortgage-backed securities, 11 state and political subdivisions, one asset-backed security, and two other securities. 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, 2014. 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.

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.

The following table presents realized gains and losses on securities for the years ended June 30, 2014 and 2013:

(In thousands)	2014		2013
Gross realized gains on sale of available-for-sale securities	$	-	$	10
Other-than-temporary impairment losses		-		-
Net realized gains (losses)	$	-	$	10

The estimated fair values of debt securities at June 30, 2014, 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	$	3,265	$	3,280
After one year through five years		8,891		9,312
After five years through ten years		4,627		4,823
After ten years		-		-
Total available for sale debt securities		16,783		17,415
Mortgage-backed and asset-backed securities		38,628		38,576
Equity securities		62		160
Total available for sale securities		55,473		56,151

Held to maturity debt securities
Within one year		29,835		29,879
After one year through five years		38,047		38,564
After five years through ten years		19,286		19,254
After ten years		7,388		7,317
Total held to maturity debt securities		94,556		95,014
Mortgage-backed		87,390		86,918
Total held to maturity securities		181,946		181,932
Total securities	$	237,419	$	238,083

As of June 30, 2014 and 2013, respectively, securities with an aggregate fair value of $210.0 million and $200.9 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, 2014 and 2013, securities with an aggregate fair value of $5.2 million 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, 2014 or 2013.