(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

	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 million and $425.7 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. At September 30, 2019 and June 30, 2019, securities with an aggregate fair value of $4.5 million and $1.5 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. Greene County Bancorp, Inc. did not participate in any securities lending programs during the quarters ended September 30, 2019 or 2018.

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 million of loans which were less than 90 days past due at September 30, 2019, 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 $150,000 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 $3.6 million at June 30, 2019 of which $1.6 million were in the process of foreclosure. At June 30, 2019, there were 12 residential loans in the process of foreclosure totaling $1.5 million. Included in nonaccrual loans were $1.8 million of loans which were less than 90 days past due at June 30, 2019, but have a recent history of delinquency greater than 90 days past due.

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

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

	At 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		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	91	$	1,421	$	1,504	$	265,741
Residential construction and land		-		99		-		8,377
Multi-family		-		205		-		25,021
Commercial real estate		-		7,159		697		331,488
Commercial construction		2		1,289		102		48,649
Home equity		73		234		474		22,814
Consumer installment		-		319		-		5,677
Commercial loans		12		2,540		265		107,367
Unallocated		-		-		-		-
Total	$	178	$	13,266	$	3,042	$	815,134

	Activity for the three months ended September 30, 2018
(In thousands)	Balance at June 30, 2018		Charge-offs		Recoveries		Provision		Balance at September 30, 2018
Residential real estate	$	2,116	$	21	$	13	$	-	$	2,108
Residential construction and land		114		-		-		2		116
Multi-family		162		-		-		9		171
Commercial real estate		5,979		-		-		44		6,023
Commercial construction		950		-		-		7		957
Home equity		317		-		-		-		317
Consumer installment		224		99		37		67		229
Commercial loans		2,128		-		-		5		2,133
Unallocated		34		-		-		220		254
Total	$	12,024	$	120	$	50	$	354	$	12,308

	Allowance for Loan Losses				Loans Receivable
	Ending Balance June 30, 2019 Impairment Analysis				Ending Balance June 30, 2019 Impairment Analysis
(In thousands)	Individually Evaluated		Collectively Evaluated		Individually Evaluated		Collectively Evaluated
Residential real estate	$	188	$	1,838	$	2,147	$	265,655
Residential construction and land		-		87		-		7,462
Multi-family		-		180		-		24,592
Commercial real estate		-		7,110		717		328,951
Commercial construction		2		870		102		36,259
Home equity		59		255		657		22,528
Consumer installment		-		250		-		5,481
Commercial loans		13		2,348		271		103,283
Unallocated		-		-		-		-
Total	$	262	$	12,938	$	3,894	$	794,211

Foreclosed real estate (FRE)

FRE consists of properties acquired through mortgage loan foreclosure proceedings or in full or partial satisfaction of loans. The following table sets forth information regarding FRE at September 30, 2019 and June 30, 2019:

(in thousands)	September 30, 2019		June 30, 2019
Residential real estate	$	303	$	53
Total foreclosed real estate	$	303	$	53