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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
GREENE COUNTY BANCORP, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 0-25165
DELAWARE
State or other jurisdiction of 14-1809721
incorporation or organization) (I.R.S. Employer
Identification Number)
425 Main St
Catskill, New York
(Address of principal 12414
executive office) (Zip Code)
Registrant's telephone number, including area code: (518)943-3700
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 NO___X___
As of February 9, 1999, the latest practible date, 1,920,677 shares of the
registrant's common stock, $ .10 par value, were issued and outstanding.
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GREENE COUNTY BANCORP, INC.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
*Consolidated Balance Sheet 1
*Consolidated Statement of Income 2
*Consolidated Statement of Comprehensive Income 3
*Statement of Changes in Shareholders' Equity 4
*Consolidated Statement of Cash Flows 5
*Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
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Item 2. Managements' Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
This quarterly report on Form 10-QSB contains forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those contemplated by such
forward-looking statements. These important factors include, without limitation,
the Bank's continued ability to originate quality loans, fluctuations in
interest rates, real estate conditions in the Bank's lending area, general and
local economic conditions, the Bank's continued ability to attract and retain
deposits, the Company's ability to control costs, new accounting pronouncements,
and changing regulatory requirements. The Company undertakes no obligation to
publicly release the results of any revisions to those forwardlooking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1998 AND JUNE 30, 1998
Total assets increased to $150.7 million at December 31, 1998 from
$140.3 million at June 30, 1998, an increase of $10.4 million, or 7.4%. This
growth in total assets reflected primarily the completion of the Company's
initial public offering on December 30, 1998, in which net proceeds (after
conversion expenses) of $8.6 million were raised. Loans receivable, net
increased to $84.7 million at December 31, 1998 from $80.3 million at June 30,
1998, reflecting strong demand for the Bank's loan products during the period.
One-to-four family residential mortgage loans increased $4.4 million, or 6.8%,
home equity loans increased $59,000, or 1.3%, consumer installment loans
increased $540,000, or 13.0%, commercial business loans decreased $89,000, or
6.6% and commercial real-estate loans decreased $140,000, or 3.1%. Management
believes much of the demand in its lending area for the Bank's lending products
reflected the Bank's primarily fixed-rate mortgage loan products in the current
low market interest rate environment.
The Company's portfolio of investment securities and mortgage-backed
securities decreased to $33.2 million and $4.0 million, respectively, at
December 31, 1998 from $36.2 million and $5.2 million, respectively, at June 30,
1998, reflecting the prepayment and repayment of such securities over the period
and the deployment of the proceeds into higher-yielding loans.
The Company's cash and cash equivalents (including federal funds sold)
increased to $17.8 million at December 31, 1998 from $8.3 million at June 30,
1998, reflecting the net proceeds raised in the Company's offering. Management
expects to deploy these net proceeds into higher-yielding investments over time.
Total deposits increased to $125.9 million at December 31, 1998 from
$124.0 million at June 30, 1998. This growth in deposits reflected continued
deposit inflows from the expansion of the Bank's branch network as the Bank
opened a new full-service branch office in December 1997. At
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December 31, 1998, the Company's certificate accounts were $55.1 million, a
decrease of 0.9% from June 30, 1998, and non-certificate accounts increased to
$71.0 million, an increase of 6.1% from June 30, 1998. At December 31, 1998,
there were no FHLB borrowings outstanding.
Stockholders' equity increased to $24.3 million (or 16.1% of total
assets) at December 31, 1998 compared to $15.7 million (or 11.2% of total
assets) at June 30, 1998, reflecting the net proceeds raised from the offering
and, to a lesser extent, an increase to $430,000 at December 31, 1998 from
$242,000 at June 30, 1998 in unrealized appreciation in securities available for
sale, net of deferred income taxes.
NON-ACCRUAL LOANS AND NON-PERFORMING ASSETS
The following table sets forth information regarding non-accrual loans
and non-performing assets:
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AT DECEMBER 31, 1998 AT JUNE 30, 1998
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(Dollars in Thousands)
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Nonaccruing loans:
One- to four-family............................. $ 410 $ 666
Commercial real estate.......................... 20 91
Consumer........................................ 25 20
Commercial business............................. -- 107
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Total......................................... 455 884
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Foreclosed assets:
One- to four-family............................. -- --
Multi-family.................................... -- --
Nonfarm, nonresidential properties.............. 124 124
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Total......................................... $ 124 $ 124
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Total non-performing assets........................ $ 579 $1,008
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Total as a percentage of total assets.............. 0.38% 0.72%
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During the six months ended December 31, 1998, there was $123,000 in
charge-offs and $7,000 in recoveries of loans previously charged-off. As a
result of these charge-offs and recoveries, the balance of the allowance for
loan losses at December 31, 1998 decreased to $702,000 from $728,000 at June 30,
1998. The ratio of the net charge-offs to average loans outstanding during the
six months ended December 31, 1998 was 0.14%.
While management believes, based on information currently available,
that the allowance for loan losses is sufficient to cover losses inherent in the
Company's loan portfolio at this time, no assurances can be given that the level
of allowances will be sufficient to cover future loan losses or that future
adjustments to the allowance will not be necessary if economic and/or other
conditions
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differ substantially from the economic and other conditions considered by
management in evaluating the adequacy of the current level of the allowance.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND
1997
GENERAL. The earnings of the Company depend primarily on its level of
net interest income, which is the difference between interest earned on the
Company's interest-earning assets, consisting primarily of residential and
commercial real estate loans, consumer loans and securities available for sale,
and the interest paid on interest-bearing liabilities, consisting primarily of
deposits. Net interest income is a function of the Company's interest rate
spread, which is the difference between the average yield earned on
interest-earning assets and the average rate paid on interest-bearing
liabilities, as well as a function of the average balance of interest-earning
assets as compared to interest-bearing liabilities. The Company's earnings also
are affected by its fees and service charges and gains on sales of loans and
securities, as well as its level of operating and other expenses, including
salaries and employee benefits, occupancy and equipment costs, data processing
expense, marketing and advertising costs, and federal deposit insurance
premiums.
The Company reported a net loss of $94,000 for the three months ended
December 31, 1998 compared to net income of $343,000 for the three months ended
December 31, 1997. The results for the three months ended December 31, 1998
included a $484,000 pre-tax charge related to the contribution of $100,000 in
cash and 36,380 shares of the Company's recently issued common stock at $10.00
per share to the newly created Bank of Greene County Charitable Foundation (the
"Foundation").
Excluding the contribution to the Foundation and the tax benefits
associated with the contribution, net income for the three months ended December
31, 1998 was $223,000, a decrease of $120,000, or 35.0%, from the three months
ended December 31, 1997. This decrease was due primarily to non-interest
expense, which (excluding the Foundation expense) increased by $206, 000, or
27.7%, to $949,000 for the three months ended December 31, 1998 from $743,000
for the three months ended December 31, 1997. The decrease in net income was
partially offset by improved net interest income, which increased to $1,177,357
for the three months ended December 31, 1998, as compared to $1,131,272 for the
three months ended December 31, 1997.
INTEREST INCOME. Total interest income increased to $2,448,000 for the
three months ended December 31, 1998 from $2,362,000 for the three months ended
December 31, 1997. The increase was due primarily to an increase of $12.2
million, or 9.7%, in the average balance of interest earning assets for the
three months ended December 31, 1998, notwithstanding a decrease in the average
yield on such assets to 7.09% for the period from 7.50% for the earlier-year
period. The increase in the average balance of interest-earning assets reflected
primarily the deployment of the net proceeds of the offering, while the reduced
yields on such assets reflected the declining market interest rate environment
over the past year, with the result that the proceeds of loan payoffs, called
investment securities and the offering were redeployed into lower-yielding
investments. In particular, the average balance of federal funds increased by
$2.5 million, or 35.2%, to an average
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balance of $8.1 million for the three months ended December 31, 1998, as the
average yield on such federal funds declined from 5.84% for the three months
ended December 31, 1997 to 3.93% for the three months ended December 31, 1998.
The Company's interest rate spread (the difference between yields earned on
interest-earning assets and rates paid on deposits and borrowings) decreased to
3.16% for the three months ended December 31, 1998 from 3.29% for the three
months ended December 31, 1997. Management anticipates that this compression of
interest rate spread may continue in future periods should the declining market
interest rate environment continue.
INTEREST EXPENSE. Total interest expense increased to $1,270,000 for
the three months ended December 31, 1998 from $1,230,000 for the three months
ended December 31, 1997. The increase reflected primarily an increase of $12.5
million, or 10.7%, in the average balance of interest-bearing liabilities, which
more than offset a decrease of 29 basis points in the rates paid on such
liabilities in the declining market interest rate environment. In particular,
the average balance of certificate accounts increased by $4.3 million, or 8.3%,
but the rate paid on such accounts only decreased by three basis points to 5.53%
for the three months ended December 31, 1998, as rate competition prevented the
Company from lowering rates further in the generally lower market interest rate
environment. The Company did not make use of any borrowings from the Federal
Home Loan Bank of New York during the three months ended December 31, 1998 and
has no balances outstanding.
PROVISION FOR LOAN LOSSES. The Company establishes provisions for loan
losses, which are charged to operations, in order to maintain the allowance for
loan losses at a level that is deemed appropriate to absorb future charge-offs
and loans deemed uncollectible. In determining the appropriate level of the
allowance for loan losses, management considers past and anticipated loss
experience, collateral values, current and anticipated economic conditions,
volume and type of lending activities and the level of non-performing and other
classified loans. The allowance is based on estimates and the ultimate losses
may vary from such estimates. Management of the Company assesses the allowance
for loan losses on a quarterly basis and makes provisions for loan losses in
order to maintain the adequacy of the allowance.
The Company's provision for loan losses increased to $45,000 for the
three months ended December 31, 1998 compared to $15,000 for the three months
ended December 31, 1997. The higher provision for the period in 1998 was due
primarily to higher balances of loans in the portfolio, which increased to $84.7
million at December 31, 1998 compared to $77.8 million at December 31, 1997.
NON-INTEREST INCOME. Non-interest income consists primarily of fee
income for bank services. Non-interest income increased to $139,000 for the
three months ended December 31, 1998 from $102,000 for the three months ended
December 31, 1997, reflecting particularly increased service charges on deposits
as the balance of such deposits increased.
NON-INTEREST EXPENSE. Excluding the contribution expense for the
Foundation, total non-interest expense increased by $206,000, or 27.7%, to
$949,000 for the three months ended December 31, 1998 from $743,000 for the
three months ended December 31, 1997. The increase in non-
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interest expense reflected an increase of $120,000, or 33.4%, in increased
compensation and employee benefits. Much of this increase was attributed to the
Company's increased staffing for its new branch office. In addition, the new
branch office resulted in an increase in occupancy and equipment expense to
$112,000 for the three months ended December 31, 1998 from $86,000 for the three
months ended December 31, 1997.
INCOME TAXES. The Company reported a tax benefit of $68,000 for federal
and franchise taxes for the three months ended December 31, 1998, compared to an
expense of $132,000 for such taxes for the three months ended December 31, 1997.
The credit was due to the contribution by the Company of cash and stock to the
Foundation during the three months ended December 31, 1998. In part as a result
of the Foundation contribution, the Company's effective income tax rate was
42.0% for the three months ended December 31, 1998 as compared to 27.8% for the
three months ended December 31, 1997.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND
1997
GENERAL. Net income for the six months ended December 31, 1998 was
$154,000, compared to $684,000 for the six months ended December 31, 1997. The
decrease was primarily attributable to the contribution expense of $484,000
reflecting the Company's contribution to the Foundation during the six months
ended December 31, 1998. Excluding the contribution expense and the associated
tax benefits, net income decreased $212,000, or 31.0%, to $472,000 for the six
months ended December 31, 1998 from $684,000 for the six months ended December
31, 1997. The decrease in net income was attributable primarily to non-interest
expense, which (excluding the Foundation expense) increased $319,000, or 21.4%,
to $1.8 million for the six months ended December 31, 1998 from $1.5 million for
the six months ended December 31, 1997. To a lesser extent, the decrease in net
income was due to an increased provision for loan losses, which was $90,000 for
the six months ended December 31, 1998 from $30,000 for the six months ended
December 31, 1997, reflecting growth in the Company's loan portfolio. The
decrease in net income was partially offset by improved net interest income,
which increased to $2,361,000 for the six months ended December 31, 1998 as
compared to $2,312,000 for the six months ended December 31, 1997.
INTEREST INCOME. Total interest income increased to $4.9 million for
the six months ended December 31, 1998 from $4.8 million for the six months
ended December 31, 1997, due primarily to an increase of $11.6 million, or 9.2%,
in the average balance of interest-earning assets for the six months ended
December 31, 1998, notwithstanding a decrease of 42 basis points in the average
yield on such assets to 7.21% for the period. The increase in the average
balance of interest-earning assets reflected primarily the deployment of the net
proceeds of the Company's offering. The reduction of yields on interest-earning
assets reflected the declining market interest rate environment over the past
year as the proceeds of loan payoffs, called investments and the Company's
offering were redeployed into lower-yielding investments. The Company's interest
rate spread for the six months ended December 31, 1998 decreased to 3.16% from
3.42% for the six months ended December 31, 1997.
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INTEREST EXPENSE. Total interest expense increased to $2.6 million for
the six months ended December 31, 1998 from $2.5 million for the six months
ended December 31, 1997, reflecting primarily an increase of $9.8 million, or
8.4%, in the average balance of interest-bearing liabilities, which more than
offset a decrease of 16 basis points in the rates paid on such liabilities to
4.05% for the six months ended December 31, 1998.
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses
increased to $90,000 for the six months ended December 31, 1998 compared to
$30,000 for the six months ended December 31, 1997, reflecting the higher
balance of portfolio loans in the later period.
NON-INTEREST INCOME. Non-interest income increased to $246,000 for the
six months ended December 31, 1998 from $207,000 for the six months ended
December 31, 1997, reflecting primarily an increase in service charges on
deposits as the average balance of such deposits increased during the period.
NON-INTEREST EXPENSE. Non-interest expense increased to $2.3 million
for the six months ended December 31, 1998 from $1.5 million for the six months
ended December 31, 1997. The increase was largely attributable to a contribution
expense of $484,000 reflecting the pre-tax contribution by the Company to the
Foundation during the six months ended December 31, 1998. Excluding this
contribution, non-interest expense increased by $319,000, or 21.4%. The increase
in non-interest expense was also attributable to increased compensation and
employee benefits of $165,000, or 22.3% necessitated by the hiring of additional
full-time employees, as well as the depreciation of building, furniture and
equipment attributable to the new full-service branch office opened in December
1997. Occupancy and equipment expense increased by $70,000, or 41.6%, for the
six months ended December 31, 1998 as compared to the earlier year period,
reflecting upgrading of technology, communications and information systems.
Other non-interest expense increased by $84,000, or 14.5%, for the six months
ended December 31, 1998 as compared to the earlier year period, reflecting
increased advertising expenses, servicing costs and related items.
INCOME TAXES. The Company reported a tax expense of $72,000 in federal
and franchise taxes for the six months ended December 31, 1998 as compared to an
expense of $318,000 for the six months ended December 31, 1997. The reduction in
federal and franchise taxes was attributable to the Company's contribution to
the Foundation of $484,000 for the six months ended December 31, 1998. The
Company's effective income tax rate was 31.6% for the six months ended December
31, 1998 compared to 31.7% for the same period in 1997.
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LIQUIDITY
The Company's primary sources of funds are deposits, principal and
interest payments on loans, mortgage-backed securities and debt securities and
two lines of credit available as needed. In December 1998, $8.6 million of net
proceeds from the offering added significantly to the funds available to the
Company for use in conducting its business. While maturities and scheduled
amortization of loans and investments are predictable sources of funds, deposit
flows and mortgage loan prepayments are greatly influenced by interest rate
trends, economic conditions and competition.
During the past few years, the combination of generally low interest
rates on deposit products and the attraction of alternative investments such as
mutual funds and annuities has resulted in little growth or a net decline in
deposits in certain time periods. Based on its monitoring of historic deposit
trends and its current pricing strategy for deposits, management believes the
Company will retain a large portion of its existing deposit base. The Company
experienced a net increase in total deposits of $1.9 million, or 1.5%, for the
six months ended December 31, 1998.
Loan commitments totaled $5.7 million at December 31, 1998. The Company
anticipates that it will have sufficient funds available to meet current loan
commitments.
The Company's most liquid assets are cash and due from banks and
federal funds sold. At December 31, 1998, such assets amounted to $17.8 million,
or 11.8% of total assets.
At December 31, 1998, the Company and the Bank exceeded all regulatory
capital requirements.
The Company's ability to pay dividends is dependent on the Bank's
ability to pay dividends to the Company. There are certain restrictions on the
payment of dividends and other payments by the Bank to the Company. Under New
York law, the Bank is prohibited from declaring a cash dividend on its common
stock except from its net earnings for the current year and retained net profits
for the preceding two years.
CAPABILITY OF THE BANK'S DATA PROCESSING TO ACCOMMODATE THE YEAR 2000
Like many financial institutions, the Bank relies upon computers for
the daily conduct of its business and for data processing. There is concern that
on January 1, 2000, computers will be unable to "read" the new year and as a
consequence, there may be widespread computer malfunctions. The Bank uses an
outside data processing servicer. Management has developed a formal written plan
to resolve any concern about the year 2000 issue and the Bank is in the process
of testing its computer applications and hardware to ensure that they will be
able to read the year 2000. Testing of mission-critical systems has been
substantially completed, and overall testing is expected to be completed by the
end of the first calendar quarter in 1999. While the Bank's year 2000 committee
has discussed contingency plans, such plans have not yet been formalized,
pending
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the completion of testing. It is expected that contingency plans will also be
completed by the end of the first calendar quarter in 1999.
The Bank has contacted each of its data processing vendors to ensure
that they will be able to provide service in light of the year 2000 issue.
Substantially all of such vendors have represented to management that they
expect to be able to provide the services for which the Bank has contracted.
Management will continue to monitor this issue and report to the Board of
Trustees on a quarterly basis until full compliance is obtained from all
vendors. In considering the year 2000 readiness of the Bank's major borrowers,
management first determined that no borrower currently has been extended credit
exceeding 10% of the Bank's capital. Management has also informally contacted
the Bank's larger borrowers, and has been assured that date sensitivity is not
an issue with such borrowers.
Finally, management has evaluated the date sensitivity of the Bank's
non-information technology, such as utilities and its components (including
elevators, heating/air conditioning systems, alarms and video equipment). These
utilities and components are either not computer-driven or are expected to
function normally after year 2000.
The Company expensed $2,000 during the six months ended December 31,
1998 and expects to incur additional costs through the end of 1999 to become
year 2000 compliant. Management has budgeted an additional $120,000 for updating
its hardware and software systems to ensure compliance. Other than this budgeted
expenditure, management does not expect additional material costs to be incurred
in connection with the year 2000 issue.
The costs of the project are based on management's best estimates,
which were derived using 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 materially from those plans. Specific
factors that might cause such material 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. In
addition, there can be no guarantee that the systems of other companies on which
the Bank's systems rely will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with the Bank's
systems, would not have a material adverse effect on the Bank.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Greene County Bancorp, Inc.
Date: February 22, 1999 By: /S/ J. BRUCE WHITTAKER
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J. Bruce Whittaker
President and Chief Executive Officer
Date: February 22, 1999 By: /S/ BRUCE P. EGGER
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Bruce P. Egger
Vice-President/Secretary
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