UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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, 1999
---------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Identification No.)
incorporation or organization)
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 August 10, 1999 there were issued and outstanding 3,879,269 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, 1998
and June 30, 1999 (unaudited) 1-2
Statements of income for the three months ended
June 30, 1998 (unaudited) and
June 30, 1999 (unaudited) 3
Statements of income for the nine months ended
June 30, 1998 (unaudited) and
June 30, 1999 (unaudited) 4
Statements of cash flows for the nine months ended
June 30, 1998 (unaudited) and
June 30, 1999 (unaudited) 5-6
Notes to condensed consolidated financial statements 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
Green Street Financial Corp and subsidiary
CONDENSED Consolidated Statements of Financial Condition
June 30, 1999 and September 30, 1998
June 30, September 30,
Assets 1999 1998
- --------------------------------------------------------------------------------
(Unaudited)
Cash and short-term cash investments:
Interest-earning $ 31,947,835 $ 27,817,856
Noninterest-earning 259,173 171,500
Federal funds sold 4,508,000 1,473,000
Investment securities:
Held to maturity, at amortized cost -- 9,000,000
Nonmarketable equity securities 1,147,500 1,144,700
Loans receivable, net 126,569,597 131,697,916
Accrued interest receivable, investments 35,700 180,301
Real estate acquired in settlement of loans 34,521 34,521
Property and equipment, net 452,308 349,190
Prepaid expenses and other assets 741,190 835,561
----------------------------------
Total Assets $ 165,695,824 $ 172,704,545
==================================
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
June 30, September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ----------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities:
Deposits $ 104,832,199 $ 110,459,780
Advance payments by borrowers for taxes and insurance 1,009,713 208,998
Income taxes payable 4,000 --
Accrued expenses and other liabilities 488,862 222,918
Dividends payable 504,305 1,102,469
Deferred compensation 370,833 377,804
---------------------------------
Total liabilities 107,209,912 112,371,969
---------------------------------
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 and outstanding 3,879,269 shares -- --
Additional paid-in capital 35,927,729 38,550,912
Unearned ESOP shares (1,755,000) (1,950,000)
Retained earnings, substantially restricted 24,313,183 23,731,664
---------------------------------
Total stockholders' equity 58,485,912 60,332,576
---------------------------------
Total liabilities and stockholders' equity $ 165,695,824 $ 172,704,545
=================================
</TABLE>
2
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and dividend income:
Loans $ 2,414,308 $ 2,631,266
Investment Securities 456,929 641,498
---------------------------------
Total interest income 2,871,237 3,272,764
Interest expense 1,178,019 1,367,282
---------------------------------
Net interest income 1,693,218 1,905,482
Provision for loan losses -- --
---------------------------------
Net interest income after provision for loan losses 1,693,218 1,905,482
---------------------------------
Noninterest income 19,060 25,117
---------------------------------
Noninterest expense:
Compensation and employee benefits 441,277 576,510
Other 216,864 227,314
---------------------------------
658,141 803,824
---------------------------------
Income before income taxes 1,054,137 1,126,775
Income taxes 393,500 425,900
---------------------------------
Net income $ 660,637 $ 700,875
=================================
Basic earnings per share $ 0.18 $ 0.17
=================================
Diluted earnings per share $ 0.18 $ 0.17
=================================
Dividends paid per share $ 0.13 $ 0.12
=================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and dividend income:
Loans $ 7,469,476 $ 7,859,248
Investment Securities 1,457,137 2,049,167
-------------------------------
Total interest income 8,926,613 9,908,415
Interest expense 3,750,305 4,220,873
-------------------------------
Net interest income 5,176,308 5,687,542
Provision for loan losses
-------------------------------
Net interest income after provision for loan losses 5,176,308 5,687,542
-------------------------------
Noninterest income 94,339 98,554
-------------------------------
Noninterest expense:
Compensation and employee benefits 1,430,650 1,746,040
Other 694,438 703,081
-------------------------------
2,125,088 2,449,121
-------------------------------
Income before income taxes 3,145,559 3,336,975
Income taxes 1,171,511 1,254,650
-------------------------------
Net income $ 1,974,048 $ 2,082,325
===============================
Basic earnings per share $ 0.52 $ 0.51
===============================
Diluted earnings per share $ 0.52 $ 0.50
===============================
Dividends paid per share $ 0.37 $ 0.34
===============================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 1,974,048 $ 2,082,325
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 27,000 27,000
Net loss (gain) on disposal of real estate acquired
in settlement of loans -- 2,308
Increase in deferred income taxes -- 17,000
Decrease in deferred compensation (6,971) (8,227)
ESOP compensation credited to paid-in capital 50,635 151,060
Changes in assets and liabilities:
(Increase) decrease in:
Prepaid expenses and other assets 94,371 115,394
Accrued interest receivable 144,601 (22,683)
Increase (decrease) in:
Accrued expenses and other liabilities 265,944 202,405
Income taxes payable 4,000 (196,400)
------------------------------
Net cash provided by operating activities 2,553,628 2,370,182
------------------------------
Cash Flows From Investing Activities
Net decrease (increase) in loans receivable 5,128,319 (2,174,396)
Proceeds from sale of real estate acquired in settlement of loans -- 14,920
Proceeds from maturities of held to maturity investment securities 9,000,000 18,000,000
Purchase of held to maturity investment securities -- (21,000,000)
Purchase of nonmarketable equity securities (2,800) (18,300)
Purchase of property and equipment (130,118) (67,902)
------------------------------
Net cash provided by (used in) investing activities 13,995,401 (5,245,678)
------------------------------
</TABLE>
5
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Financing Activities
Net decrease in deposits $ (5,627,581)$ (2,440,751)
Principal payment for ESOP debt 195,000 195,000
Cash dividends paid (1,990,693) (1,992,446)
Redemption of common stock (2,673,818) (3,545,957)
Increase in advance payments by borrowers
for taxes and insurance 800,715 839,094
-------------------------------
Net cash used in financing activities (9,296,377) (6,945,060)
-------------------------------
Net increase in cash and cash equivalents 7,252,652 (9,820,556)
Cash and cash equivalents:
Beginning 29,462,356 33,087,640
-------------------------------
Ending $ 36,715,008 $ 23,267,084
===============================
Cash and cash equivalents:
Cash and short-term investments:
Interest-bearing $ 31,947,835 $ 19,405,018
Noninterest-bearing 259,173 605,066
Federal funds sold 4,508,000 3,257,000
-------------------------------
$ 36,715,008 $ 23,267,084
===============================
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 3,753,694 $ 4,220,993
===============================
Income taxes $ 1,167,511 $ 1,451,050
===============================
Supplemental Disclosure of Noncash Investing and Financing
Activities:
Dividends declared and accrued $ 504,305 $ 489,986
===============================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Nature of Business
In December 1995, pursuant to a Plan of Conversion, Home Federal Savings and
Loan Association (the "Association" or "Home Federal") amended and restated its
charter to effect its conversion from a federally chartered mutual savings and
loan association to a federally chartered stock savings and loan association,
and became a wholly-owned subsidiary of Green Street Financial Corp (the
"Corporation") a holding company formed in connection with the Conversion. The
Corporation's principal business activities consist solely of the ownership of
Home Federal, a loan to the Employee Stock Ownership Plan (the "ESOP") for its
purchase of common stock and the investment of its portion of the net proceeds
received in the Conversion.
The Association accepts deposits and other sources of funds to enable it to
originate one-to-four family residential loans within its primary lending area
of Cumberland and Robeson counties in North Carolina. These loans are secured by
the underlying properties.
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and 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 results of operations for the nine month period ended June 30, 1999 are not
necessarily indicative of the results of operations that may be expected for the
year ended September 30, 1999 or any other interim period.
The accounting policies followed are as set forth in Note 1 of the Notes to
Consolidated Financial Statements in the 1998 annual report of the Corporation.
Note 3. Dividends Declared
On June 28, 1999, the Board of Directors of the Corporation declared a dividend
of $ .13 a share for stockholders of record as of July 12, 1999 and payable on
July 23, 1999. The dividends declared were accrued and reported as other
liabilities in the June 30, 1999 consolidated statement of financial condition.
Note 4. Earnings Per Share
As required, the Corporation adopted statement of Financial Accounting Standards
No. 128 during the quarter ended December 31, 1997. This statement requires dual
presentation of basic and diluted earnings per share (EPS) with a reconciliation
of the numerator and denominator of the EPS computations. Basic per share
amounts are based on the weighted average shares of common stock outstanding.
Diluted earnings per share assume the conversion, exercise or issuance of all
potential
7
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 4. Earnings Per Share (Continued)
common stock instruments such as options, warrants and convertible securities,
unless the effect is to reduce a loss or increase earnings per share.
Accordingly, this presentation has been adopted for all periods presented. The
basic and diluted weighted average shares outstanding are as follows:
<TABLE>
<CAPTION>
Three months ended June 30, :
1999 1998
---------------------------------
<S> <C> <C>
Weighted average shares outstanding 3,879,269 4,276,654
Less unallocated ESOP shares 178,750 204,750
---------------------------------
Weighted average outstanding shares used for basic EPS 3,700,519 4,071,904
Plus incremental shares from assumed issuance
of stock options -- 47,195
---------------------------------
Weighted average outstanding shares used for diluted EPS 3,700,519 4,119,099
=================================
Net income $ 660,637 $ 700,875
=================================
Basic earnings per share $ 0.18 $ 0.17
=================================
Diluted earnings per share $ 0.18 $ 0.17
=================================
</TABLE>
8
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 4. Earnings Per Share (Continued)
Nine months ended June 30, :
<TABLE>
<CAPTION>
1999 1998
---------------------------------
<S> <C> <C>
Weighted average shares outstanding 3,986,633 4,290,968
Less unallocated ESOP shares 185,250 211,250
---------------------------------
Weighted average outstanding shares used for basic EPS 3,801,383 4,079,718
Plus incremental shares from assumed issuance
of stock options -- 68,104
---------------------------------
Weighted average outstanding shares used for diluted EPS 3,801,383 4,147,822
=================================
Net income $ 1,974,048 $ 2,082,325
=================================
Basic earnings per share $ 0.52 $ 0.51
=================================
Diluted earnings per share $ 0.52 $ 0.50
=================================
</TABLE>
Note 5. Restricted Stock Plan
Under the Restricted Stock Plan ("RSP"), 171,925 shares of common stock were
authorized for grant to directors and key employees and vested over a 5 year
period, which began vesting in October, 1997. Effective March 31, 1999, all
awards previously granted to directors under the RSP that have not as of March
17, 1999, become 100% earned and nonforfeitable, shall thereafter become earned
and nonforfeitable at the rate of one-sixth of the March 17, 1999 unearned
awards until October 17, 2004. This will result in a reduction of the cost of
the plan from approximately $512,000 to $286,000 for the years 1999 through
2001, and to approximately $226,000 for the years 2002 through 2004. In the
event of a change of control of the Company, all shares allocated to the
participants in the RSP will become fully vested (see Note 6).
Note 6. Subsequent Event
On August 9, 1999, the Company entered into a definitive merger agreement with
NewSouth Bancorp, Inc. and its banking subsidiary, NewSouth Bank, a North
Carolina chartered commercial bank, headquartered in Washington, North Carolina
(collectively, the "Acquiror"). Under the terms of the Agreement, the Acquiror
will purchase each outstanding common share of the Company for $15.25.
Consummation of the merger is subject to approval by bank regulatory authorities
and the shareholders of the Company. The merger is expected to be completed in
the fourth calendar quarter of 1999.
9
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Overview
On August 9, 1999, the Company entered into a definitive merger agreement with
NewSouth Bancorp, Inc. and its banking subsidiary, NewSouth Bank, a North
Carolina chartered commercial bank, headquartered in Washington, North Carolina
(collectively, the "Acquiror"). Under the terms of the Agreement, the Acquiror
will purchase each outstanding common share of the Company for $15.25.
Consummation of the merger is subject to approval by bank regulatory authorities
and the shareholders of the Company. The merger is expected to be completed in
the fourth calendar quarter of 1999.
Comparison of Financial Condition at June 30, 1999 and September 30, 1998:
Total assets decreased by $7.0 million, or 4.0% to $165.7 million at June 30,
1999 from $172.7 million at September 30, 1998. Net loans receivable decreased
by $5.1 million during the nine month period and amounted to $126.6 million at
June 30, 1999. The Company received $9.0 million in proceeds from maturities of
investment securities held to maturity, the majority of the proceeds were
invested in interest-earning cash and federal funds sold.
At June 30, 1999, the Corporation's stockholders' equity amounted to $58.5
million, which as a percentage of total assets was 35.3%. 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 $45.4 million at June 30,
1999 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 .21% and .15% at June
30, 1999 and September 30, 1998, respectively. During the quarter ended June 30,
1999, the Association's level of nonperforming loans remained consistently low
in relation to 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, 1999, no additional provision for loan losses was made during the
quarter.
10
<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,
1999 and 1998:
General. Net income for the three and nine months period ended June 30, 1999 was
$661,000 and $1,974,000, respectively, or $40,000 and $108,000 less than the
$701,000 and $2,082,000 earned during the same periods in 1998. The decrease in
net income was primarily attributable to a decrease in net interest income for
the three months period and the nine months period ended June 30, 1999 as
compared to the same periods in 1998.
Interest Income. Interest income decreased by $402,000 from $3.3 million for the
three months ended June 30, 1998 to $2.9 million for the three months ended June
30, 1999. Interest income decreased by $1.0 million from $9.9 million for the
nine months ended June 30, 1998 to $8.9 million for the nine months ended June
30, 1999. These decreases were attributable to the overall decrease in net loans
receivable and cash and investments.
Interest Expense. Interest expense decreased by $189,000 from $1.4 million for
the three months ended June 30, 1998 to $1.2 million for the three months ended
June 30, 1999. Interest expense decreased by $471,000 from $4.2 million for the
nine months ended June 30, 1998 to $3.8 million for the nine months ended June
30, 1999. The Association's savings deposits decreased by $5.6 million during
the nine month period and the cost of funds for the same period decreased from
approximately 5.05% to approximately 4.65%. The Association's cost of funds
which approximated 4.92% for the quarter ended June 30, 1998 decreased to
approximately 4.70% for the quarter ended June 30, 1999.
Noninterest Income. Noninterest income has historically been immaterial in
relation to the Association's overall operations. Noninterest income amounted to
$19,000 and $94,000 for the three and nine months ended June 30, 1999, and
$25,000 and $99,000 for the three and nine months ended June 30, 1998,
respectively.
Noninterest Expense. Noninterest expense decreased by $146,000 to $658,000 for
the three months period ended June 30, 1999 from $804,000 for the comparable
quarter in 1998. For the nine months period ended June 30, 1999, noninterest
expense amounted to $2.1 million, a decrease of $324,000 from the $2.4 million
reported for the nine months ended June 30, 1998. The decrease in noninterest
expense for each period is principally due to a decrease in employee and
director benefits.
Year 2000 Issue. The "Year 2000 Problem" centers on the inability of computer
systems to recognize the Year 2000. Many existing computer programs and systems
were originally programmed with six digit dates that provided only two digits to
identify the calendar year in the date field, without considering the upcoming
change in the century. With the impending millennium, these programs and
computers will recognize "00" as the year 1900 rather than the year 2000. Like
most financial service providers, the Association and its operations may be
affected by the Year 2000 Problem due to the nature of financial information.
Software, hardware, and equipment both within and outside the Association's
direct control and with whom the Association electronically or operationally
interfaces (e.g. third party vendors providing data processing, information
system management, maintenance of computer systems,
11
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year 2000 Issue (Continued)
and credit bureau information) are likely to be affected. Furthermore, if
computer systems are not adequately changed to identify the Year 2000, many
computer applications could fail or create erroneous results. As a result, many
calculations which rely on the date field information, such as interest, payment
or due dates and other operating functions, will generate results which could be
significantly misstated, and the Association could experience a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
In addition, non-information technology systems, such as equipment like
telephones and copiers may also contain embedded technology which controls its
operation and which may be affected by the Year 2000 Problem. When the Year 2000
arrives, systems, including some of those with embedded chips, may not work
properly because of the way they store date information. They may not be able to
deal with the date 01/01/00. Thus, even non-information technology systems may
affect the normal operations of the Association upon the arrival of the Year
2000.
Under certain circumstances, failure to adequately address the Year 2000 Problem
could adversely affect the viability of the Association's suppliers and
creditors and the creditworthiness of its borrowers. Thus, if not adequately
addressed, the Year 2000 Problem could result in a significant adverse impact on
the Association's products, services and competitive condition.
In order to address the Year 2000 Issue and to minimize its potential adverse
impact, management has begun a process to identify areas that will be affected
by the Year 2000 Problem, assess its potential impact on the operations of the
Association, monitor the progress of third party software vendors in addressing
the matter, test changes provided by these vendors, and develop contingency
plans for any critical systems which are not effectively reprogrammed. A
committee of senior officers of the Association has been formed to evaluate the
effects that the upcoming Year 2000 could have on computer programs utilized by
the Association. The Association's plan is divided into the five phases:
(1) Awareness. Define the problem, obtain executive level support and
develop an overall strategy. This phase was completed in April 1998.
(2) Assessment. Identify all systems and the criticality of the systems.
This phase was completed June 1998.
(3) Renovation. Program enhancements, hardware and software upgrades,
system replacements, and vendor certifications. This phase was
completed in February 1999.
(4) Validation. Test and verify system changes and coordinate with outside
parties. This phase was completed in April 1999.
12
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year 2000 Issue (Continued)
(5) Implementation. Components certified as Year 2000 compliant and moved
to production. This phase was completed in July 1999.
Third party vendors provide the majority of software used by the Association.
All of the Association's vendors are aware of the Year 2000 situation, and each
has assured the Association that it is currently has software that is compliant,
and testing for the critical applications began in April 1998. This will enable
the Association to devote substantial time to the testing to the upgraded
systems prior to the arrival of the millennium. The Association utilizes the
service of a third party vendor to provide the software which is used to process
and maintain most mortgage and deposit customer-related accounts. This vendor
has provided the Company with a software version which has been certified to be
Year 2000 compliant. Testing by the Association has been completed to verify
compliance for its application and usage. The Association presently believes
that with modifications to existing software and conversions to new software
that it is currently undertaking, the Year 2000 Problem will be mitigated
without causing an adverse impact on the operations of the Association. However,
a contingency plan has been developed and approved by the Board of Directors. As
part of that plan, the Association has contracted with its third party vendor,
so that if their usual operational center is not functioning, an individual from
the Association will be able to post transactions in the Orlando center. In the
event this center is also not operational, the Association has obtained the
necessary equipment and supplies to operate by posting transactions manually.
In addition, monitoring and managing the Year 2000 project will result in
additional direct and indirect costs to the Association. Direct costs include
potential charges by third party software vendors for product enhancements,
costs involved in testing software products for Year 2000 compliance, and any
resulting costs for developing and implementing contingency plans for critical
software products which are not enhances. Indirect costs will principally
consist of the time devoted by existing employees in monitoring software vendor
progress, testing enhanced software products and implementing any necessary
contingency plans. The Association has spent approximately $25,000 on Year 2000
related costs to date and estimates that it will spend an additional $2,500 for
Year 2000 compliance. Both direct and indirect costs of addressing the Year 2000
Problem will be charged to earnings as incurred. The Association does not
believe that such costs will have a material effect on results of operations.
However, there can be no guarantee that the systems of other companies on which
the Association's systems rely will be timely converted, or that a failure to
convert by another company or a conversion that is incompatible with the
Association's systems, would not have material adverse effect on the
Association.
The costs of the project and the date on which the Association plans to complete
the Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ from those plans. Specific factors that
might cause such
13
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year 2000 Issue (Continued)
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
Special Note Regarding Forward-Looking Statements
Statements herein regarding estimated future expense levels and other matters
may constitute forward-looking statements under the federal securities laws.
Such statements are subject to certain risks and uncertainties. Undue reliance
should not be placed on this information. These estimates are based on the
current expectations of management, which may change in the future due to a
large number of potential events, including unanticipated developments.
14
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
There were no significant changes for the nine months ended June 30, 1999 from
the information presented in the annual report on Form 10-K for the year ended
September 30, 1998, concerning quantitative and qualitative disclosures about
market risk.
15
<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 similar nature.
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 8-K were filed for the period covered by
this report.
16
<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 13, 1999 By: s/s H. D. Reaves, Jr.
---------------------------------
H. D. Reaves, Jr.
President and CEO
Dated August 13, 1999 By: s/s John C. Pate
---------------------------------
John C. Pate
Senior Vice President and CFO
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 259
<INT-BEARING-DEPOSITS> 31,948
<FED-FUNDS-SOLD> 4,508
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,148
<INVESTMENTS-MARKET> 1,148
<LOANS> 126,824
<ALLOWANCE> 255
<TOTAL-ASSETS> 165,696
<DEPOSITS> 104,832
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,378
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 58,486
<TOTAL-LIABILITIES-AND-EQUITY> 165,696
<INTEREST-LOAN> 7,469
<INTEREST-INVEST> 1,457
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 8,926
<INTEREST-DEPOSIT> 3,750
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 5,176
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,125
<INCOME-PRETAX> 3,146
<INCOME-PRE-EXTRAORDINARY> 3,146
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,974
<EPS-BASIC> .52
<EPS-DILUTED> .52
<YIELD-ACTUAL> 4.20
<LOANS-NON> 303
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 255
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 255
<ALLOWANCE-DOMESTIC> 255
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
