<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-QSB
[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.
<PAGE>
GREENE COUNTY BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
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
</TABLE>
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1998(UNAUDITED) and June 30, 1998(AUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $ 11,555,702 $ 2,476,032
Federal funds sold 6,254,922 5,796,051
------------ ----------
Total cash and cash equivalents 17,810,624 8,272,083
Investment securities, at fair value 33,214,140 36,265,592
Mortgage-backed securities 4,075,797 5,189,060
Asset-backed securities 6,625,128 6,323,683
Loans receivable, net of allowance for
loan losses of $701,534 and $728,478
at December 31, 1998 and June 30, 1998,
respectively 84,739,843 80,259,962
Premises and equipment 2,748,277 2,584,281
Accrued interest receivable 1,056,828 1,091,120
Prepaid expenses and other assets 256,760 143,600
Other real estate owned 123,547 123,547
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Total assets $ 150,650,944 $ 140,252,928
----------- ---------
----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to Depositors $ 125,922,587 $ 124,011,289
Other liabilities 451,182 511,415
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Total liabilities 126,373,769 124,522,704
----------- -----------
Shareholders' Equity:
Common stock, par value $.10 per share;
authorized 4,000,000;
issued 1,957,057 at December 31, 1998 195,706 -
Additional paid in capital 8,372,373 -
Retained earnings 15,642,896 15,487,824
Accumulated Comprehensive Income 430,000 242,400
Less: Unallocated ESOP shares-
36,380 shares at $10.00 per share (363,800) -
----------- ----------
Total Shareholders' Equity 24,277,175 15,730,224
----------- ----------
Total liabilities and shareholders' equity $ 150,650,944 $ 140,252,928
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
(1)
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
December 31, December 31,
1998 1997 1998 1997
---------------------- ----------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $1,652,020 $1,588,527 $3,292,444 $3,169,516
Mortgage-backed
securities 63,856 86,592 137,252 169,327
Investment securities 652,335 598,605 1,335,244 1,232,995
Interest-bearing deposits
and federal funds sold 79,561 88,018 168,082 206,226
---------- ---------- ---------- ----------
Total interest income 2,447,772 2,361,742 4,933,022 4,778,064
---------- ---------- ---------- ----------
Interest expense:
Savings and checking deposits 1,270,415 1,230,470 2,572,296 2,466,387
---------- ---------- ---------- ----------
Net interest income 1,177,357 1,131,272 2,360,726 2,311,677
---------- ---------- ---------- ----------
Provision for loan losses 45,000 15,000 90,000 30,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,132,357 1,116,272 2,270,726 2,281,677
---------- ---------- ---------- ----------
Noninterest income:
Service charges 81,092 61,072 152,136 119,931
Other 58,324 41,179 93,572 87,393
---------- ---------- ---------- ----------
Total other income 139,416 102,251 245,708 207,324
---------- ---------- ---------- ----------
Noninterest expenses:
Compensation and employee
benefits 480,849 360,434 902,024 737,349
Occupancy and equipment 111,898 85,803 237,612 167,860
Contribution expense 484,150 - 484,150 -
Other 356,703 297,253 666,128 581,826
---------- ---------- ----------- ----------
Total noninterest expense 1,433,600 743,490 2,289,914 1,487,035
---------- ---------- ---------- ----------
Income (loss) before income (161,827) 475,033 226,520 1,001,966
taxes
Income taxes (benefit) ( 67,893) 132,108 71,546 317,767
----------- ---------- ----------- ----------
Net income (loss) $ (93,934) $ 342,925 $ 154,974 $ 684,199
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
(2)
<PAGE>
GREENE COUNTY BANCORP, INC.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31,1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net income (loss) $ (93,934) $ 342,925
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Other comprehensive income (loss),
net of taxes:
Unrealized holding gains (losses)
arising during the period,
net of income tax expense (82,800) 28,200
--------- -------
Total other comprehensive income
(loss) (82,800) 28,200
--------- -------
Comprehensive income (loss) $(176,734) $ 371,125
--------- -------
--------- -------
</TABLE>
GREENE COUNTY BANCORP, INC.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net income $ 154,974 $ 684,199
------- -------
Other comprehensive income,
net of taxes:
Unrealized holding gains
arising during the period,
net of income tax expense 187,600 187,000
------- -------
Total other comprehensive income 187,600 187,000
------- -------
Comprehensive income $ 342,574 $ 871,199
------- -------
------- ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
(3)
<PAGE>
GREENE COUNTY BANCORP, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Accumulated Common Stock
Common Paid-In Retained Other Comp. Acquired by Total
1997 STOCK CAPITAL EARNINGS INCOME ESOP EQUITY
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $14,193,763 $68,000 $14,261,763
Net Income for the six
months ended December 31,
1997 684,199 684,199
Change in unrealized gain
on available-for-sale,
net of applicable deferred
income taxes 187,000 187,000
----------------------------------------------------------------------------------
Balance at
December 31, 1997 14,877,962 255,000 15,132,962
1998
Balance at June 30, 1998 15,487,922 242,400 15,730,322
Net Income for the six
months ended December 31,
1998 154,974 154,974
Change in unrealized gain
on available-for-sale,
net of applicable deferred
income taxes 187,600 187,600
Net proceeds of stock
offering and issuance of
common stock $195,706 $8,372,373 8,568,079
Common stock acquired by
the ESOP (36,380) shares $(363,800) (363,800)
----------------------------------------------------------------------------------
Balance at
December 31, 1998 $195,706 $8,372,373 $15,642,896 $430,000 $(363,800) $24,277,175
</TABLE>
The accompanying notes are an integral part of the financial statements.
(4)
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED CASH FLOW STATEMENT
FOR SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------ -----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 154,974 $ 684,199
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 103,500 95,928
Net accretion of security premiums and
discounts (46,233) (93,715)
Provision for loans losses 90,000 30,000
Contributions expense 384,150 -
Loss on sale of investments 34,298 -
Provision (credit) for deferred income taxes (167,000) 159,865
Net change in unearned loan fees and costs 40,953 25,451
Net decrease in accrued interest receivable 34,292 42,665
Net (increase) decrease in prepaids and other assets (113,160) 32,702
Net decrease in other liabilities (60,332) (110,246)
------------ -----------
Net cash provided by operating activities 455,442 866,849
------------ -----------
Cash flows from investing activities:
Proceeds from maturities of available-for-sale
securities 8,167,026 5,399,859
Purchases of securities available-for-sale (6,107,546) (1,892,137)
Principal payments on securities available-for-sale 1,041,714 154,607
Principal payments on mortgage-backed securities
available-for-sale 1,128,736 1,143,971
Purchases of mortgage-backed securities
available-for-sale - (1,842,975)
Net increase in loans (4,610,834) (2,793,813)
Proceeds from sale of other real estate - 53,037
Purchases of premises and equipment (267,495) (950,936)
------------ -----------
Net cash used by investing activities (648,399) (728,387)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 8,184,000 -
Purchase of unallocated ESOP shares (363,800) -
Net increase (decrease) in deposits 2,023,745 (246,786)
Net (decrease) in escrow accounts (112,447) (166,698)
------------ -----------
Net cash provided by (used in) financing activities 9,731,498 (413,484)
------------ -----------
Net increase (decrease) in cash and cash
equivalents 9,538,541 (275,022)
Cash and cash equivalents at beginning of
period 8,272,083 10,888,070
------------ -----------
Cash and cash equivalents at end of period $ 17,810,624 $10,613,048
------------ -----------
------------ -----------
Cash paid during period for:
Interest $ 2,577,000 $ 1,878,775
Income taxes 172,000 438,781
Non-cash investing activity:
Foreclosed loans transferred to other real estate - 131,251
Net change in unrealized gain on available-for-sale $ 312,952 $ 311,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
(5)
<PAGE>
Greene County Bancorp, Inc.
Notes to Consolidated Financial Statements
Three and Six Months Ended December 31, 1998 and 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
("GAAP") for interim financial information and with the instructions
to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by GAAP for
complete financial statements. These consolidated financial statements
should be read in conjunction with the SB-2 filing dated September 18,
1998. In the opinion of management, all adjustments (consisting of
only normal recurring items) necessary for a fair presentation of the
financial position and results of operations and cash flows for the
periods presented have been included. The results of operations and
other data for the three and six months ended December 31, 1998 are
not necessarily indicative of results that may be expected for the
entire fiscal year ending June 30, 1999.
The financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the financial
statements, management is required to make extensive use of estimates
and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet, and revenues and
expenses for the period. Actual results could differ significantly
from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and the valuation of
real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the
allowance for loan losses and valuation of real estate, management
obtains independent appraisals for significant properties.
(2) REORGANIZATION AND STOCK OFFERING
Greene County Bancorp, Inc. (the "Company") is a Delaware corporation
that was organized in December 1998 at the direction of the Board of
Trustees of Greene County Savings Bank (the "Bank") for the purpose of
acquiring all of the capital stock of the Bank upon completion of the
Bank's reorganization from a mutual savings bank into a twin-tier
mutual holding company structure. As part of the reorganization, the
Company offered for sale 44.5% of the shares of the Bank's common
stock in an offering fully subscribed for by eligible depositors of
the Bank (the "Offering"). The Company provided 2% of the shares of
its common stock in a contribution to the Bank of Greene County
Charitable Foundation (the "Charitable Foundation"). The remaining
53.5% of the Company's shares of common stock were issued to Greene
County Bancorp, MHC (the "MHC"), a New York state-chartered mutual
holding company. The reorganization and Offering were completed on
December 30, 1998. Prior to that date, the Company had no assets or
liabilities.
Completion of the Offering resulted in the issuance of 1,957,057
shares of common stock. Of this total, 1,047,560 shares (53.5%) were
issued to the MHC, 871,082 shares (44.5%) were sold to eligible
depositors of the Bank and 38,415 shares (2%) were contributed to the
Charitable Foundation at $10 per share, along with $100,000 in cash.
Costs related to the Offering (primarily marketing fees paid to an
underwriting firm, professional fees, registration fees, and printing
and mailing costs) approximated $526,000 and have been deducted to
arrive at net proceeds from the Offering.
(3) EMPLOYEE STOCK OWNERSHIP PLAN
The Bank established for eligible employees an Employee Stock
Ownership Plan ("ESOP") in connection with its reorganization. As of
December 31, 1998, the ESOP purchased 36,380 common shares issued in
the Conversion. No allocation of shares to employees has been made as
of December 31, 1998. Accordingly, there was no ESOP expense for the
three and six months ended December 31, 1998. The Bank is expected to
make repayments from its discretionary contributions to the ESOP over
a period of up to ten years. At December 31, 1998, the outstanding
borrowing of the ESOP from the Company was $363,800. The balance of
unallocated ESOP shares is shown as a deduction to stockholders'
equity.
(4) EARNINGS PER SHARE
Earnings per share is not presented in the accompaying statements of
income since the Company completed its offering in December 1998, and,
accordingly, such information would not be meaningful.
(5) COMPREHENSIVE INCOME
The Company was required to adopt Financial Accounting Standards Board
Statement No.130, "Reporting Comprehensive Income", during the six
months ended December 31, 1998. This Statement establishes standards
for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statments.
(6)
<PAGE>
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
7
<PAGE>
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:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 AT JUNE 30, 1998
-------------------- ----------------
(Dollars in Thousands)
<S> <C> <C>
Nonaccruing loans:
One- to four-family............................. $ 410 $ 666
Commercial real estate.......................... 20 91
Consumer........................................ 25 20
Commercial business............................. -- 107
------ ------
Total......................................... 455 884
------ ------
Foreclosed assets:
One- to four-family............................. -- --
Multi-family.................................... -- --
Nonfarm, nonresidential properties.............. 124 124
------ ------
Total......................................... $ 124 $ 124
------ ------
------ ------
Total non-performing assets........................ $ 579 $1,008
------ ------
------ ------
Total as a percentage of total assets.............. 0.38% 0.72%
</TABLE>
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
8
<PAGE>
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 $19,000 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 $298,000, a decrease of $45,000, or 13.1%, 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
9
<PAGE>
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-
10
<PAGE>
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.
11
<PAGE>
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.
12
<PAGE>
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
13
<PAGE>
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.
14
<PAGE>
GREENE COUNTY BANCORP, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not engaged in any material legal proceedings
at the present time other than those proceedings within the
normal course of business.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
15
<PAGE>
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 12, 1999 By: /S/ J. BRUCE WHITTAKER
----------------------
J. Bruce Whittaker
President and Chief Executive Officer
Date: February 12, 1999 By: /S/ BRUCE P. EGGER
------------------
Bruce P. Egger
Vice-President/Secretary
16
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