UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 25049
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-27620
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Green Street Financial Corp
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(Exact name of registrant as specified in its charter)
North Carolina 56-1951478
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
241 Green Street
Fayetteville, North Carolina 28301-5051
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(Address of principal executive office) (Zip code)
(910)-483-3681
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(Registrant's telephone number)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check X whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of August 5, 1997 there were issued and outstanding 4,298,125 shares of the
Registrant's common stock, no par value.
<PAGE>
Green Street Financial Corp and Subsidiary
CONTENTS
PART I - FINANCIAL INFORMATION Pages
-----
Item 1. Condensed Consolidated Financial Statements
Statements of financial condition at September 30, 1996 and
June 30, 1997 (Unaudited) 1-2
Unaudited Statements of income for the three months ended
June 30, 1996 and 1997 3
Unaudited Statements of income for the nine months ended
June 30, 1996 and 1997 4
Unaudited Statements of cash flows for the nine months ended
June 30, 1996 and 1997 5-6
Notes to consolidated financial statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1996 and June 30, 1997
<TABLE>
<CAPTION>
September 30, June 30,
ASSETS 1996 1997
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and short-term cash investments:
Interest-earning $ 333,107,849 $ 21,747,685
Noninterest-earning 249,345 510,515
Federal funds sold 2,124,712 1,710,000
Investment securities:
Held to maturity , at amortized cost 14,999,179 21,000,000
Nonmarketable equity securities 1,170,889 1,170,889
Loans receivable, net 123,147,779 127,012,357
Accrued interest receivable, investments 255,566 453,252
Real estate acquired in settlement of loans 34,425 -
Property and equipment, net 330,260 311,798
Prepaid expenses and other assets 675,084 688,060
Deferred tax assets 122,000 -
----------------------------------
----------------------------------
Total Assets $ 176,217,088 $ 174,604,556
==================================
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities:
Deposits $ 111,385,386 $ 108,429,998
Advance payments by borrowers for taxes and insurance 179,444 1,035,039
Accrued expenses and other liabilities 174,607 701,832
Special SAIF assessment 792,868
Dividends payable 1,074,531 472,794
Deferred compensation 405,233 392,441
Deferred income taxes 213,000
Income taxes payable 25,000 60,650
----------------------------------
Total liabilities 114,037,069 111,305,754
----------------------------------
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares;
none issued
Common stock, no par value, authorized 10,000,000 shares;
issued 4,298,125 shares
Additional paid-in capital 41,767,226 41,897,031
Note receivable, ESOP (2,470,000) (2,275,000)
Retained earnings, substantially restricted 22,882,793 23,676,771
----------------------------------
Total stockholders' equity 62,180,019 63,298,802
----------------------------------
Total liabilities and stockholders' equity $ 176,217,088 $ 174,604,556
==================================
</TABLE>
2
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended June 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and dividend income:
Loans $ 2,467,129 $ 2,545,258
Short-term cash investments 776,239 393,648
Investment securities 88,791 308,928
----------------------------------
Total interest income 3,332,159 3,247,834
Interest on deposits 1,430,706 1,316,246
----------------------------------
Net interest income 1,901,453 1,931,588
Provision for loan losses 10,073
----------------------------------
Net interest income after provision for loan losses 1,891,380 1,931,588
----------------------------------
Noninterest income:
Service charges and fees 10,413 8,605
Other 12,743 11,994
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23,156 20,599
----------------------------------
Noninterest expense:
Compensation and employee benefits 421,497 562,990
Deposit insurance 84,209 29,899
Occupancy expenses 37,910 37,378
Advertising 26,647 46,453
Data processing expense 22,298 20,714
Other 79,224 84,659
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671,785 782,093
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Income before income taxes 1,242,751 1,170,094
----------------------------------
Income taxes:
Current 440,350 436,050
Deferred 10,000 6,000
----------------------------------
450,350 442,050
----------------------------------
Net income $ 792,401 $ 728,044
==================================
Earnings per share $ 0.19 $ 0.17
==================================
Weighted average shares outstanding 4,044,625 4,070,625
==================================
Dividends paid per share $ 0.10 $ 0.11
==================================
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended June 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and dividend income:
Loans $ 7,392,857 $ 7,593,549
Short-term cash investments 1,679,201 1,423,913
Investment securities 244,100 691,026
----------------------------------
Total interest income 9,316,158 9,708,488
Interest on deposits 4,866,682 3,995,915
----------------------------------
Net interest income 4,449,476 5,712,573
Provision for loan losses 10,073
----------------------------------
Net interest income after provision for loan losses 4,439,403 5,712,573
----------------------------------
Noninterest income:
Service charges and fees 46,377 21,525
Other 54,627 59,075
----------------------------------
101,004 80,600
----------------------------------
Noninterest expense:
Compensation and employee benefits 1,117,096 1,705,108
Deposit insurance 250,695 126,269
Occupancy expenses 121,269 121,141
Advertising 101,597 114,382
Data processing expense 75,408 69,855
Other 216,977 343,481
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1,883,042 2,480,236
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Income before income taxes 2,657,365 3,312,937
----------------------------------
Income taxes:
Current 901,703 924,015
Deferred 36,000 335,000
----------------------------------
937,703 1,259,015
----------------------------------
Net income $ 1,719,662 $ 2,053,922
==================================
Earnings per share N/A $ 0.50
==================================
Weighted average shares outstanding N/A 4,070,625
==================================
Dividends paid per share $ 0.10 $ 0.31
==================================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended June 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 1,719,662 $ 2,053,922
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 32,327 30,679
Net gain on disposal of real estate acquired
in settlement of loans (14,030) (12,354)
Increase in deferred income taxes 36,000 335,000
Decrease in deferred compensation (2,180) (12,792)
ESOP compensation charged to paid-in capital 17,160 129,805
Changes in assets and liabilities:
(Increase) decrease in:
Prepaid expenses and other assets 66,340 (49,701)
Refundable income taxes 12,000 35,650
Accrued interest receivable (76,583) (197,686)
Increase (decrease) in:
Accrued expenses and other liabilities 29,650 527,225
Accrued SAIF assessment (792,868)
Income taxes payable 14,250
--------------------------------
Net cash provided by operating activities 1,834,596 2,046,880
--------------------------------
Cash Flows From Investing Activities
Net increase in loans receivable (4,549,648) (3,864,578)
Proceeds from sale of real estate acquired in settlement of loans 148,622 46,779
Proceeds from maturities or calls of held to maturity
investment securities 12,000,000
Purchase of held to maturity investment securities (3,000,000) (18,000,000)
Purchase of property and equipment (16,767) (13,038)
--------------------------------
Net cash (used in) investing activities (7,417,793) (9,830,837)
--------------------------------
</TABLE>
5
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended June 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Financing Activities
Net decrease in deposits $ (13,360,994) $ (2,955,388)
Proceeds received from issuance of common stock
net of stock issuance costs incurred 39,126,861
Principal payment for ESOP debt 65,000 195,000
Cash dividends paid (1,824,956)
Increase in advance payments by borrowers
for taxes and insurance 307,812 855,595
--------------------------------
Net cash provided by (used in) financing activities 26,138,679 (3,729,749)
--------------------------------
Net increase (decrease) in cash and cash equivalents 20,555,482 (11,513,706)
Cash and cash equivalents:
Beginning 28,648,050 35,481,906
--------------------------------
Ending $ 49,203,532 $ 23,968,200
--------------------------------
Cash and cash equivalents:
Cash and short-term investments:
Interest-bearing $ 47,190,012 $ 21,747,685
Noninterest-bearing 612,714 510,515
Federal funds sold 1,400,806 1,710,000
--------------------------------
$ 49,203,532 $ 23,968,200
--------------------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 4,874,154 $ 3,994,136
--------------------------------
Income taxes $ 875,453 $ 863,543
--------------------------------
Dividends declared and accrued $ 404,463 $ 447,769
--------------------------------
Transfer from loans to real estate acquired in settlement of loans $ 175,459 $
--------------------------------
Stock issued in exchange for note receivable from ESOP $ 2,600,000 $
--------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Nature of Business
GreenStreet Financial Corp (the "Corporation") was incorporated under the laws
of the State of North Carolina for the purpose of becoming the savings and loan
holding company of Home Federal Savings and Loan Association (the "Association"
or "Home Federal") in connection with the Association's conversion from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association, pursuant to its Plan of Conversion (the
"Conversion"). The Corporation was organized in December 1995 to acquire all of
the common stock of Home Federal upon its conversion to stock form. A
subscription offering of the Corporation's shares closed on April 3, 1996, at
which time the Corporation acquired all of the shares of the Association and
commenced operations.
The Corporation has no operations and conducts no business of its own other than
owning Home Federal, investing its portion of the net proceeds received in the
Conversion, and lending funds to the Employee Stock Ownership Plan (the "ESOP")
which was formed in connection with the Conversion. The principal business of
the Association is accepting deposits from the general public and using those
deposits and other sources of funds to make loans secured by real estate and
other forms of collateral located in the Association's primary market area of
Cumberland and Robeson counties in North Carolina.
Home Federal's results of operations depend primarily on its net interest
income, which is the difference between interest income from interest-earning
assets and interest expense on interest-bearing liabilities. The Association's
operations are also affected by noninterest income, such as miscellaneous income
from loans, customer deposit account service charges, and other sources of
revenue. The Association's principal operating expenses, aside from interest
expense, consist of compensation and associated benefits, federal deposit
insurance premiums, occupancy costs, advertising, and other general and
administrative expenses.
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial statements (except for the
statement of financial condition at September 30, 1996, which is audited) have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with Regulation S-X. Accordingly, they do not
include all of the disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (none of which were other than normal recurring accruals) necessary
for a fair presentation of the financial position and results of operations for
the periods presented have been included. The financial statements of the
Corporation are presented on a consolidated basis with those of Home Federal,
although the Corporation did not own any shares of the Association and had no
assets, liabilities, equity or operations at any date prior to April 3, 1996.
Therefore, although certain financial statements presented in this Form 10-Q
include periods prior to April 3, 1996, such statements for all periods prior to
April 3, 1996 include only the accounts and operations of Home Federal. EARNINGS
PER SHARE ARE NOT PRESENTED FOR THE NINE MONTHS ENDED June 30, 1996 since the
shares issued under the Conversion and offering were not outstanding for the
entire period. The results of operations for the three and nine month periods
ended June 30, 1997 are not necessarily indicative of the results of operations
that may be expected for the year ended September 30, 1997.
7
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 2. Basis of Presentation (Continued)
The accounting policies followed are as set forth in Note 1 of the Notes to
Consolidated Financial Statements in the September 30, 1996 annual report of the
Corporation.
Note 3. Dividends Declared
On June 25, 1997, the Board of Directors of the Corporation declared a dividend
of $ .11 a share for stockholders of record as of July 11, 1997 and payable on
July 23, 1997. The dividends declared are accrued in the June 30, 1997
consolidated statement of financial condition. In addition, on June 25, 1997,
the Board of Directors of Home Federal declared an upstream dividend of $539,964
to Green Street Financial Corp, which was paid on July 23, 1997.
8
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Comparison of Financial Condition at June 30, 1997 and September 30, 1996:
Total assets decreased by $1.6 million to $174.6 million at June 30, 1997 from
$176.2 million at September 30, 1996. The decrease in assets during the nine
month period is principally attributable to a decrease in deposits of $3.0
million to $108.4 million at June 30, 1997, from $111.4 million at September 30,
1996. Since its mutual to stock conversion, the Corporation has elected to fund
its loan demand with liquidity, rather than seeking additional deposits.
Investments and other short term interest earning assets amounted to $45.6
million at June 30, 1997, a decrease of $5.8 million from $51.4 million at
September 30, 1996. Net loans receivable increased by $3.9 million during the
nine month period and amounted to $127.0 million at June 30, 1997. Approximately
99% of the Corporation's assets were interest earning at June 30, 1997, and
approximately 74% of such interest earning assets were held in the form of loans
receivable.
During the nine months ended June 30, 1997, the Association paid the special
Savings Association Insurance Fund ("SAIF") assessment of $793,000 which had
been accrued and expensed at September 30, 1996. The assessment was imposed by
the Federal Deposit Insurance Corporation on SAIF insurable deposits to
recapitalize the SAIF. The Association had no borrowings outstanding during or
at the end of the nine month period ended June 30, 1997, but has guaranteed the
repayment of the ESOP's note payable to the Corporation which was originated on
April 3, 1996 inorder for the ESOP to purchase 260,000 shares of common stock in
the Corporation. The Corporation's note receivable from the ESOP, which amounted
to $2.3 million at June 30, 1997 is reported as a reduction of stockholders'
equity. Retained earnings increased by $794,000 to $23.7 million at June 30,
1997, which is attributable to the Corporation's consolidated earnings during
the nine months ended June 30, 1997, less dividends accrued and paid during the
nine month period.
At June 30, 1997, the Corporation's stockholders' equity amounted to $63.3
million, which as a percentage of total assets was 36.3%. As a Federally
chartered savings and loan association, the Association is required to meet
three separate capital standards established by the Office of Thrift
Supervision. The Association's stand-alone equity was $44.7 million at June 30,
1997 and was substantially in excess of all such capital requirements.
The Association's level of nonperforming loans, defined as loans past due 90
days or more, as a percentage of loans outstanding, was .22% and .25% at June
30, 1997 and September 30, 1996, respectively. During the nine month period
ended June 30, 1997, the Association's level of nonperforming loans remained
consistently low in relation to prior periods and total loans outstanding, and
the Association did not incur any loan losses. Based on management's analysis of
the adequacy of its allowances at June 30, 1997, no additional provision for
loan losses was made during the nine month period.
9
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Comparison of Operating Results for the Three and Nine Months Ended June 30,
1997 and 1996:
General. Net income for the three and nine month periods ended June 30, 1997 was
$728,000 and $2.0 million, respectively, or $64,000 less than and $334,000 more
than the $792,000 and $1.7 million earned during the same periods in 1996. As
discussed below, the decrease in net income for the three months ended June 30,
1997 was primarily due to the adoption of the restricted stock plan, which was
established in the quarter ended December 31, 1996. As discussed below, the
increase in net income for the nine months ended June 30, 1997 was primarily
attributable to an increase in net interest income for the nine month period as
compared to the same period in 1996.
Interest income. Interest income decreased by $84,000 from $3.3 million for the
three months ended June 30, 1996 to $3.2 million for the three months ended June
30, 1997. This decrease was primarily the result of a decrease in the volume of
interest-earning assets outstanding during the three month period as compared to
the same period in 1996. This decrease was caused by management's decision to
fund its loan demand with liquidity, rather than seeking additional deposits.
That decision also significantly reduced interest expense paid on deposits as
discussed below. Interest income increased by $390,000 from $9.3 million for the
nine months ended June 30, 1996 to $9.7 million for the nine months ended June
30, 1997. This increase was primarily attributable to an overall increase in the
volume of interest-earning assets outstanding during the first nine months of
the fiscal year in comparison to the same period a year earlier, due principally
to an infusion of cash received in the Conversion.
Interest Expense. Interest expense decreased by $115,000 from $1.4 million for
the three months ended June 30, 1996 to $1.3 million for the three months ended
June 30, 1997. Interest expense decreased by $871,000 from $4.9 million for the
nine months ended June 30, 1996 to $4.0 million for the nine months ended June
30, 1997. At the time of the Conversion, approximately $9.5 million in existing
deposits were withdrawn by customers for the purchase of stock in the
Corporation, causing a corresponding reduction in interest-bearing liabilities
and interest expense for the comparative nine month periods. Also, during the
period since the Conversion, outstanding deposits have slowly declined as
mortgage loan demand has been funded with Conversion proceeds. In addition, the
Association's cost of funds, which approximated 5.00% for the quarter ended June
30, 1996, has fallen to approximately 4.85% for the quarter ended June 30, 1997,
a decline of 15 basis points.
Net interest income. Net interest income was approximately $1.9 million for the
three months ended June 30, 1997 and 1996. Net interest income increased by $1.3
million from $4.4 million for the nine months ended June 30, 1996 to $5.7
million for the nine months ended June 30, 1997. This increase resulted
primarily from the decrease in the volume of interest-bearing liabilities and a
lower cost of funds for the nine months ended June 30, 1997 as compared to the
nine months ended June 30, 1996.
10
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Provision for loan losses. Based on management's analysis of the adequacy of its
allowances at June 30, 1997, no provisions for loan losses were made during the
three and nine month periods ended June 30, 1997. Provisions, which are charged
to operations, and the resulting loan loss allowances are amounts the
Association's management believes will be adequate to absorb potential losses on
existing loans that may become uncollectible. Loans are charged off against the
allowance when management believes that collectibility is unlikely. The
evaluation to adjust the provision and resulting allowances is based both on
prior loan loss experience and other factors, such as changes in the nature and
volume of the loan portfolio, overall portfolio quality, and current economic
conditions. The Association's level of nonperforming loans has remained
consistently low in relation to prior periods and total loans outstanding, and
the Association has not charged off any loans during either of the three or nine
month periods ended June 30, 1996 and 1997. At June 30, 1997, the Association's
level of general valuation allowances for loan losses amounted to $235,000,
which management believes is adequate to absorb potential losses in its loan
portfolio.
Noninterest income. Noninterest income has historically been immaterial in
relation to the Association's overall operations. Noninterest income amounted to
$21,000 and $81,000 for the three and nine months ended June 30, 1997, and
$23,000 and $101,000 for the three and nine months ended June 30, 1996,
respectively.
Noninterest expense. Noninterest expense increased by $111,000 to $783,000 for
the three month period ended June 30, 1997 from $672,000 for the comparable
quarter in 1996. For the nine month period ended June 30, 1997, noninterest
expense amounted to $2.5 million, an increase of $597,000 over the $1.9 million
reported for the nine months ended June 30, 1996. The increase in noninterest
expense is principally due to an increase in benefits expense associated with
the establishment of an ESOP at Conversion; and the adoption of the restricted
stock plan, which was established in the quarter ended December 31, 1996. The
ESOP and restricted stock plan expense amounted to $114,000 and $128,000,
respectively, for the three months ended June 30, 1997, and $325,000 and
$394,000 for the nine months ended June 30, 1997, respectively. The restricted
stock plan was not in place during the three and nine month periods ended June
30, 1996. On an after tax basis, the expense for both plans during the three and
nine month periods amounted to $150,000 and $446,000, respectively. For the
three and nine month periods ended June 30, 1997, approximately $49,000 and
$130,000, respectively, of the ESOP expense was attributable to an adjustment
required under generally accepted accounting principles to report allocated ESOP
shares during the quarter at the current market value of the Corporation's
common stock. This portion of the ESOP expense does not represent funds actually
committed to fund the ESOP's purchase of the Corporation's stock and is reported
as an addition to paid in capital.
Deposit insurance expense decreased by $54,000 and $126,000 during the three and
nine month periods ended June 30, 1997, respectively, as compared to the same
quarters a year earlier as a result of reduced premium rates subsequent to the
recapitalization of the SAIF . Other noninterest expense increased by $6,000 and
$127,000 during the three and nine month periods ended June 30, 1997,
respectively, as compared to the same quarters a year earlier due primarily to
certain taxes and other expenses associated with operating as a public company.
11
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
As a part of the Conversion, the Corporation established an ESOP that acquired
260,000 shares of the stock offered in the Conversion with funds provided in the
form of a loan from the Company. The loan is expected to be repaid over a ten
year period with funds provided by the Association sufficient to amortize the
debt. The expense associated with the ESOP will be reported in accordance with
SOP 93-6 "Employers' Accounting for Employee Stock Ownership Plans." During the
quarter ended December 31, 1996, the Corporation's stockholders approved and the
Association adopted a restricted stock program which awarded 171,925 shares of
common stock to certain officers, employees and directors. The restricted stock
program shares are being expensed over the five year vesting period based upon
the fair value of the common stock at date of grant.
Capital Resources and Liquidity:
The term "liquidity" generally refers to an organization's ability to generate
adequate amounts of funds to meet its needs for cash. More specifically for
financial institutions, liquidity ensures that adequate funds are available to
meet deposit withdrawals, fund loan and capital expenditure commitments,
maintain reserve requirements, pay operating expenses, and provide funds for
debt service, dividends to stockholders, and other institutional commitments.
Funds are primarily provided through financial resources from operating
activities, expansion of the deposit base, borrowings, through the sale or
maturity of investments, the ability to raise equity capital, or maintenance of
shorter term interest-earning deposits.
During the nine month period ended June 30, 1997, cash and cash equivalents, a
significant source of liquidity, decreased by approximately $11.5 million,
primarily as a result of the purchase of held to maturity investment securities
which increased by $6.0 million . Cash flows resulting from internal operating
activities provided an increase of $2.0 million in cash during the nine month
period ended June 30, 1997. This cash was used to fund investing activities of
$9.8 million, including the purchase of held to maturity investment securities,
and to fund financing activities of $3.8 million, including a decrease in
deposits and the payment of dividends.
As a federally chartered savings association, Home Federal must maintain a daily
average balance of liquid assets equal to at least 5% of withdrawable deposits
and short-term borrowings. The Association's liquidity ratio at June 30, 1997,
as computed under OTS regulations, was considerable in excess of such
requirements. Given its excess liquidity and its ability to borrow from the
Federal Home Loan Bank, the Association believes that it will have sufficient
funds available to meet anticipated future loan commitments, unexpected deposit
withdrawals, and other cash requirements.
12
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation is not engaged in any legal proceedings at the
present time. From time to time, the Association is a party to
legal proceedings within the normal course of business wherein
it enforces its security interest in loans made by it, and
other matters of a like kind.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) 27. Financial Data Schedule
(b) No reports on Form 8-K were filed for the period
covered by this report.
13
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Green Street Financial Corp
Dated August 5, 1997 By: s/s H.D. Reaves, Jr.
---------------------- -----------------------------
H. D. Reaves, Jr.
President and CEO
Dated August 5, 1997 By: s/s John C. Pate
---------------------- ---------------------------
John C. Pate
Senior Vice President and CFO
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
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