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 March 31, 1997
---------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
For the transition period from to
---------------- -----------------
Commission File Number 0-27620
---------
Green Street Financial Corp
---------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1951478
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Idenitification No.)
241 Green Street
Fayetteville, North Carolina 28301-5051
---------------------------------------
(Address of principal executive office) (Zip code)
(910)-483-3681
--------------
(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 May 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
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Pages
<S> <C>
Item 1. Financial Statements
Consolidated statements of financial condition at September 30, 1996 and
March 31, 1997 1-2
Consolidated statements of income for the three months ended March 31,
1996 and March 31, 1997 3
Consolidated statements of income for the six months ended March 31, 1996
and March 31, 1997 4
Consolidated statements of cash flows for the six months ended March 31,
1996 and March 31, 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
</TABLE>
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1996 and March 31, 1997
<TABLE>
<CAPTION>
September 30, March 31,
ASSETS 1996 1997
- ------------------------------------------------------------------------------------------
(Unaudited)
Cash and short-term cash investments:
<S> <C> <C>
Interest-earning $ 33,107,849 $ 33,998,331
Noninterest-earning 249,345 311,138
Federal funds sold 2,124,712 1,388,586
Investment securities:
Held to maturity , at amortized cost 14,999,179 12,000,000
Nonmarketable equity securities 1,170,889 1,170,889
Loans receivable, net 123,147,779 124,289,412
Accrued interest receivable, investments 255,566 169,826
Real estate acquired in settlement of loans 34,425 -
Property and equipment, net 330,260 318,244
Prepaid expenses and other assets 675,084 718,923
Deferred tax assets 122,000 -
----------------------------------
Total Assets $176,217,088 $ 174,365,349
------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
September 30, March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1997
- --------------------------------------------------------------------------------------------------------------
(Unaudited)
Liabilities:
<S> <C> <C>
Deposits $ 111,385,386 $ 109,122,947
Advance payments by borrowers for taxes and insurance 179,444 789,035
Accrued expenses and other liabilities 174,607 455,466
Special SAIF assessment 792,868 -
Dividends payable 1,074,531 429,813
Deferred compensation 405,233 397,036
Deferred income taxes - 207,000
Income taxes payable 25,000 59,600
----------------------------------------
Total liabilities 114,037,069 111,460,897
----------------------------------------
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 41,847,956
Note receivable, ESOP (2,470,000) (2,340,000)
Retained earnings, substantially restricted 22,882,793 23,396,496
----------------------------------------
Total stockholders' equity 62,180,019 62,904,452
----------------------------------------
Total liabilities and stockholders' equity $ 176,217,088 $ 174,365,349
----------------------------------------
</TABLE>
2
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- -----------------------------------------------------------------------------------------------------------------
Interest and dividend income:
<S> <C> <C>
Loans $ 2,456,104 $ 2,519,575
Short-term cash investments 489,941 524,325
Investment securities 77,655 161,076
-------------------------------------
Total interest income 3,023,700 3,204,976
Interest on deposits 1,701,529 1,311,896
-------------------------------------
Net interest income 1,322,171 1,893,080
Provision for loan losses - -
-------------------------------------
Net interest income after provision for loan losses 1,322,171 1,893,080
-------------------------------------
Noninterest income:
Service charges and fees 35,248 8,499
Other 17,724 24,346
-------------------------------------
52,972 32,845
-------------------------------------
Noninterest expense:
Compensation and employee benefits 340,969 569,373
Deposit insurance 84,344 15,290
Occupancy expenses 43,979 41,608
Advertising 39,536 45,149
Data processing expense 29,813 27,610
Other 58,224 127,908
-------------------------------------
596,865 826,938
-------------------------------------
Income before income taxes 778,278 1,098,987
-------------------------------------
Income taxes:
Current 273,000 405,100
Deferred 6,000 8,000
-------------------------------------
279,000 413,100
-------------------------------------
Net income $ 499,278 $ 685,887
-------------------------------------
Primary earnings per share $ n/a $ 0.17
-------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Six Months Ended March 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ----------------------------------------------------------------------------------------------------------------
Interest and dividend income:
<S> <C> <C>
Loans $ 4,925,728 $ 5,048,291
Short-term cash investments 902,962 1,030,265
Investment securities 155,309 382,098
------------------------------------
Total interest income 5,983,999 6,460,654
Interest on deposits 3,435,976 2,680,669
------------------------------------
Net interest income 2,548,023 3,779,985
Provision for loan losses - -
------------------------------------
Net interest income after provision for loan losses 2,548,023 3,779,985
------------------------------------
Noninterest income:
Service charges and fees 35,964 12,920
Other 41,884 47,081
------------------------------------
77,848 60,001
------------------------------------
Noninterest expense:
Compensation and employee benefits 695,599 1,142,118
Deposit insurance 166,486 96,370
Occupancy expenses 83,359 83,763
Advertising 74,950 67,929
Data processing expense 53,110 49,141
Other 137,753 257,822
------------------------------------
1,211,257 1,697,143
------------------------------------
Income before income taxes 1,414,614 2,142,843
------------------------------------
Income taxes:
Current 461,353 487,965
Deferred 26,000 329,000
------------------------------------
487,353 816,965
------------------------------------
Net income $ 927,261 $ 1,325,878
------------------------------------
Primary earnings per share $ n/a $ 0.33
------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended March 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ----------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S> <C> <C>
Net income $ 927,261 $ 1,325,878
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,327 20,179
Net gain on disposal of real estate acquired
in settlement of loans - (12,354)
Increase in deferred income taxes 26,000 329,000
Decrease in deferred compensation (538) (8,197)
ESOP compensation charged to paid-in capital - 80,730
Changes in assets and liabilities:
(Increase) decrease in:
Prepaid expenses and other assets (1,214,854) (82,189)
Refundable income taxes 12,000 -
Accrued interest receivable (2,946) 85,740
Increase (decrease) in:
Accrued expenses and other liabilities 858,168 280,860
Accrued SAIF assessment - (792,868)
Income taxes payable 28,000 34,600
----------------------------------
Net cash provided by operating activities 654,418 1,261,379
----------------------------------
Cash Flows From Investing Activities
Net increase in loans receivable (878,765) (1,141,633)
Proceeds from sale of real estate acquired in settlement of loans - 46,779
Proceeds from maturities or calls of held to maturity
investment securities - 12,000,000
Purchase of held to maturity investment securities - (9,000,000)
Purchase of property and equipment (14,289) (8,984)
----------------------------------
Net cash provided by (used in) investing activities (893,054) 1,896,162
----------------------------------
</TABLE>
5
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended March 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
<S> <C> <C>
Net increase (decrease) in deposits $ 60,469,226 $ (2,262,439)
Principal payment for ESOP debt - 130,000
Cash dividends paid - (1,418,544)
Increase (decrease) in advance payments by borrowers
for taxes and insurance (51,426) 609,591
----------------------------------
Net cash provided by (used in) financing activities 60,417,800 (2,941,392)
----------------------------------
Net increase in cash and cash equivalents 60,179,164 216,149
Cash and cash equivalents:
Beginning 28,648,050 35,481,906
----------------------------------
Ending $ 88,827,214 $ 35,698,055
----------------------------------
Cash and cash equivalents:
Cash and short-term investments:
Interest-bearing $ 87,239,108 $ 33,998,331
Noninterest-bearing - 311,138
Federal funds sold 1,588,106 1,388,586
----------------------------------
$ 88,827,214 $ 35,698,055
----------------------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 3,423,714 $ 2,675,434
----------------------------------
Income taxes $ 421,353 $ 428,543
----------------------------------
Dividends declared and accrued $ - $ 406,412
----------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Nature of Business
Green Street 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
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 the instructions to Form 10-Q of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes 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. The results of
operations for the three and six month periods ended March 31, 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 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 1996 annual report of the Corporation.
Note 3. Earnings Per Share
The Corporation's earnings per share for the three and six month periods ended
March 31, 1997 is based on 4,064,125 shares assumed to be outstanding for the
period. Earnings per share has been calculated in accordance with Statement of
Position 93-6 "Employers' Accounting for Employee Stock Ownership Plans."
Earnings per share for the three and six month periods ended March 31, 1996 has
not been presented in the consolidated statements of income because the
Association had not converted to stock form and the Corporation had not
completed its stock offering at any time during that period. Stock options
granted on October 17, 1996 did not have a dilutive effect on earnings per share
for the three or six month periods ended March 31, 1997. In addition, although a
restricted stock plan was adopted on October 17, 1996, and stock awards have
been granted on such date, no shares have been issued or acquired pursuant to
the plan as of March 31, 1997.
Note 4. Dividends Declared
On March 26, 1997, the Board of Directors of the Corporation declared a dividend
of $ .10 a share for stockholders of record as of April 11, 1997 and payable on
April 23, 1997. The dividends declared are accrued in the March 31, 1997
consolidated statement of financial condition. In addition, on March 26, 1997,
the Board of Directors of Home Federal declared an upstream dividend of $533,188
to Green Street Financial Corp, which was paid on April 23, 1997.
Note 5. Adoption of Stock Option Plan and Restricted Stock Plan
At a special meeting of stockholders held on October 17, 1996, the stockholders
voted to approve the Corporation's proposed stock option plan and the
Association's restricted stock plan. The stock option plan authorizes and the
Corporation has granted as of such date 429,812 stock options to officers and
directors either in the form of incentive stock options or non-incentive stock
options. The exercise price of the stock options is equal to the fair market
value of the Corporation's common stock at the date of grant. The restricted
stock plan authorizes and the Association has granted 171,925 shares of common
stock to officers, directors and key employees. At the present time, the
Association intends to provide funds to the restricted stock plan trust fund in
order for the trust to acquire common stock in open market purchases. At March
31, 1997, none of the shares awarded pursuant to the restricted stock plan had
been acquired. The stock options and the restricted common stock vest at the
rate of 20% annually, beginning one year from October 17, 1996.
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 March 31, 1997 and September 30, 1996:
Total assets decreased by $1.8 million to $174.4 million at March 31, 1997 from
$176.2 million at September 30, 1996. The decrease in assets during the six
month period is principally attributable to a decrease in deposits of $2.3
million to $109.1 million at March 31, 1997, from $111.4 million at September
31, 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 $48.6
million at March 31, 1997, a decrease of $2.8 million from $51.4 million at
September 30, 1996. Net loans receivable increased by $1.1 million during the
six month period and amounted to $124.3 million at March 31, 1997. Approximately
99% of the Corporation's assets were interest earning at March 31, 1997, and
approximately 72% of such interest earning assets were held in the form of loans
receivable.
During the six months ended March 31, 1997, the Association paid the special
Savings Association Insurance Fund ("SAIF") assessment of $792,868 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 six month period ended March 31, 1997, but has guaranteed the
repayment of the ESOP's note payable to the Corporation which was originated on
April 3, 1996 in order 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 March 31, 1997 is reported as a reduction of
stockholders' equity. Retained earnings increased by $514,000 to $23.4 million
at March 31, 1997, which is attributable to the Corporation's consolidated
earnings during the six months ended March 31, 1997, less dividends accrued and
paid during the six month period.
At March 31, 1997, the Corporation's stockholders' equity amounted to $62.9
million, which as a percentage of total assets was 36.1%. 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 March 31,
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 .19% and .25% at March
31, 1997 and September 30, 1996, respectively. The Association's level of
nonperforming loans was .28% at March 31, 1996. During the six month period
ended March 31, 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 March 31, 1997, no additional provision for
loan losses was made during the six 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 Six Months Ended March 31,
1997 and 1996:
General. Net income for the three and six month periods ended March 31, 1997 was
$686,000 and $1,326,000, respectively, or $187,000 and $399,000 more than the
$499,000 and $927,000 earned during the same periods in 1996. As discussed
below, the increase in net income was primarily attributable to an increase in
net interest income for the three and six month periods ended March 31, 1997 as
compared to the same periods in 1996.
Interest income. Interest income increased by $181,000 from $3.0 million for the
three months ended March 31, 1996 to $3.2 million for the three months ended
March 31, 1997. Interest income increased by $477,000 from $6.0 million for the
six months ended March 31, 1996 to $6.5 million for the six months ended March
31, 1997. These increases were principally attributable to an overall increase
in the volume of interest-earning assets outstanding during the first six 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 $390,000 from $1.7 million for
the three months ended March 31, 1996 to $1.3 million for the three months ended
March 31, 1997. Interest expense decreased by $755,000 from $3.4 million for the
six months ended March 31, 1996 to $2.7 million for the six months ended March
31, 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.
Also, during the period since the Conversion, outstanding deposits have slowly
declined as mortgage loandemand has been funded with Conversion proceeds. In
addition, the Association's cost of funds which approximated 4.90% for the
quarter ended December 31, 1996, over 50 basis points lower than for the
corresponding quarter in 1995 has fallen to approximately 4.75% for the quarter
ended March 31, 1997.
Net interest income. Net interest income increased by $571,000 from $1.3 million
for the three months ended March 31, 1996 to $1.9 million for the three months
ended March 31, 1997. Net interest income increased by $1.2 million from $2.6
million for the six months ended March 31, 1996 to $3.8 million for the six
months ended March 31, 1997. This increase resulted from the combination of an
increase in the volume of interest-earning assets and a decrease in the volume
of interest-bearing liabilities between the quarters and a lower cost of funds
for the three and six months ended March 31, 1997 as compared to the three and
six months ended March 31, 1996.
Provision for loan losses. Based on management's analysis of the adequacy of its
allowances at March 31, 1997 and 1996, no provisions for loan losses were made
during the three and six month periods ended March 31, 1997 and 1996.
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 increase or decrease 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
10
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
prior periods and total loans outstanding, and the Association has not charged
off any loans during either of the three or six month periods ended March 31,
1996 and 1997. At March 31, 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
$33,000 and $60,000 for the three and six months ended March 31, 1997, and
$53,000 and $78,000 for the three and six months ended March 31, 1996,
respectively.
Noninterest expense. Noninterest expense increased by $230,000 to $827,000 for
the three month period ended March 31, 1997 from $597,000 for the comparable
quarter in 1996. For the six month period ended March 31, 1997, noninterest
expense amounted to $1.7 million, an increase of $486,000 over the $1.2 million
reported for the six months ended March 31, 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 program, which was established in the quarter ended December 31, 1996. The
ESOP and restricted stock program expense amounted to $111,000 and $135,000,
respectively, for the three months ended March 31, 1997, and $211,000 and
$266,000 for the six months ended March 31, 1997, respectively. The plans were
not in place during the three and six month periods ended March 31, 1996. On an
after tax basis, the expense for both plans during the three and six month
periods amounted to $156,000 and $326,000, respectively. For the three and six
month periods ended March 31, 1997, approximately $46,000 and $81,000,
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. Other noninterest expense increased by
$70,000 and $120,000 during the three and six month period ended March 31, 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.
As a part of the Conversion, the Company 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.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
Capital Resources and Liquidity:
Theterm "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 six month period ended March 31, 1997, cash and cash equivalents, a
significant source of liquidity, remained fairly constant, increasing by
approximately $216,000. Cash flows resulting from internal operating activities
provided an increase of $1.3 million in cash during the six month period ended
March 31, 1997. This cash was combined with net proceeds from investing
activities of $1.9 million, to fund financing activities of $2.9 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 March 31, 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 Company 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
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
On January 29, 1997, the annual meeting of stockholders was
held to consider and vote upon the election of three
directors of the Company, and to ratify the appointment of
McGladrey & Pullen, LLP as independent auditors for the
Company for the fiscal year ending September 30, 1997. All
items were approved by the stockholders as shown below:
Vote concerning the election of directors of the Company:
<TABLE>
<CAPTION>
For Against Abstain Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Bryan 3,855,797 31,352 0 3,887,149
Hollinshed 3,817,297 69,852 0 3,887,149
Holt 3,857,297 29,852 0 3,887,149
</TABLE>
Vote concerning ratification of McGladrey & Pullen, LLP as
independent auditors for the year ended September 30, 1997:
<TABLE>
<CAPTION>
For Against Abstain Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
3,840,104 21,123 25,922 3,887,149
</TABLE>
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable
(b) Not applicable
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.
<TABLE>
<CAPTION>
Green Street Financial Corp
<S> <C>
Dated May 5, 1997 By: s/s H. D. Reaves, Jr.
---------------------------- ---------------------
H. D. Reaves, Jr.
President and CEO
Dated May 5, 1997 By: s/s John C. Pate
---------------------------- ----------------
John C. Pate
Senior Vice President and CFO
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 311,138
<INT-BEARING-DEPOSITS> 33,998,331
<FED-FUNDS-SOLD> 1,388,586
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 12,000,000
<INVESTMENTS-MARKET> 11,929,691
<LOANS> 124,524,175
<ALLOWANCE> 234,763
<TOTAL-ASSETS> 174,365,349
<DEPOSITS> 109,122,947
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,337,950
<LONG-TERM> 0
0
0
<COMMON> 41,847,956
<OTHER-SE> 21,056,496
<TOTAL-LIABILITIES-AND-EQUITY> 174,365,349
<INTEREST-LOAN> 5,048,291
<INTEREST-INVEST> 382,098
<INTEREST-OTHER> 1,030,265
<INTEREST-TOTAL> 6,460,654
<INTEREST-DEPOSIT> 2,680,669
<INTEREST-EXPENSE> 2,680,689
<INTEREST-INCOME-NET> 3,779,985
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,697,143
<INCOME-PRETAX> 2,142,843
<INCOME-PRE-EXTRAORDINARY> 2,142,843
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,325,878
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.44
<LOANS-NON> 240,336
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 234,763
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 234,763
<ALLOWANCE-DOMESTIC> 234,763
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
