SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT
GREENE COUNTY BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number 0-25165
Delaware 14-1809721
- ------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
302 Main Street, Catskill, New York 12414
- ----------------------------------- -----
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (518)943-2600
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 |X| NO |_|
As of September 30, 1999 the latest practible date, 2,152,835 shares of the
registrant's common stock, $ .10 par value, were issued and outstanding.
<PAGE>
GREENE COUNTY BANCORP, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
*Consolidated Statements of Financial Condition 1
*Consolidated Statements of Income 2
*Consolidated Statements of Comprehensive Income 3
*Consolidated Statements of Changes in Shareholders' Equity 4
*Consolidated Statements of Cash Flows 5
*Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of September 30, 1999 and June 30, 1999
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
Unaudited
ASSETS
<S> <C> <C>
Cash and due from banks $ 1,688,322 $ 2,784,524
Federal funds sold 2,347,070 3,351,222
------------- -------------
Total cash and cash equivalents 4,035,392 6,135,746
Investment securities, at fair value 49,816,599 49,662,206
Federal Home Loan Bank stock, at cost 765,600 765,600
Loans 95,459,167 91,829,423
Less:allowance for possible loan losses (827,148) (791,897)
Unearned origination fees and costs, net (245,236) (239,717)
------------- -------------
Net loans receivable 94,386,784 90,797,809
Premises and equipment 3,673,781 3,513,906
Accrued interest receivable 1,178,474 1,130,744
Prepaid expenses and other assets 524,699 461,162
Other real estate owned 123,548 176,850
------------- -------------
Total assets $ 154,504,877 $ 152,644,023
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $ 10,594,269 $ 9,468,291
Interest bearing deposits 117,298,459 118,531,180
------------- -------------
Total deposits 127,892,728 127,999,471
Borrowings FHLB 2,500,000 $ --
Accrued interest and other liabilities 420,011 436,874
Accrued income taxes 372,629 285,812
------------- -------------
Total liabilities 131,185,368 128,722,157
Shareholders' Equity
Common stock, par value $.10 per share; authorized 4,000,000;
issued and outstanding: 2,152,835 at September 30, 1999, 215,284 195,706
and 1,957,057 at June 30, 2000
Additional Paid-In Capital 9,968,300 8,202,655
Retained Earnings 14,791,090 16,354,339
Accumulated Other Comprehensive Income (319,779) (118,394)
Less: Treasury Stock - shares at costs (639,626) 0
Less: Unearned ESOP shares - shares at cost (695,760) (712,440)
------------- -------------
Total shareholders' equity 23,319,509 23,921,866
------------- -------------
------------- -------------
Total liabilities and shareholders' equity $ 154,504,877 $ 152,644,023
============= =============
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
Interest income:
Loans $1,747,258 $1,640,423
Investment securities 613,260 585,227
Mortgage-backed securities 74,480 73,396
Tax free securities 85,610 97,681
Interest bearing deposits and federal funds sold 60,426 88,521
---------- ----------
2,581,034 2,485,248
---------- ----------
Interest expense:
Interest on deposits 1,136,848 1,301,881
Interest on borrowings 13,547 0
---------- ----------
1,150,395 1,301,881
Net interest income 1,430,639 1,183,367
---------- ----------
Less: provision for loan losses 45,000 45,000
---------- ----------
Net interest income after provision for loan losses 1,385,639 1,138,367
Noninterest income:
Service charges on deposit accounts 82,920 71,044
Other operating income 76,270 35,248
---------- ----------
Total other income 159,190 106,292
---------- ----------
Noninterest expense:
Salaries and employee benefits 563,891 421,174
Occupancy expense 74,249 71,534
Equipment and furniture expense 70,240 54,181
Service fees 142,016 94,979
Office Supplies 28,769 22,674
Other 303,532 191,772
---------- ----------
Total other expenses 1,182,697 856,314
---------- ----------
Income before provision for income taxes 362,132 388,345
Provision for income taxes
Current 129,423 129,817
Deferred 9,484 9,621
---------- ----------
Total provision for income taxes 138,907 139,438
---------- ----------
Net income $ 223,225 $ 248,907
========== ==========
EPS Basic $ 0.11
Weighted Average number of shares outstanding 2,058,454
See notes to consolidated financial statements
2
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
Net Income $ 223,225 $ 248,907
--------- ---------
Unrealized holding gain / (losses) arising
during the three-months ended September 30,
1999 and 1998 net of tax benefit (expense)
of $139,691 and ($231,000), respectively (201,385) 346,000
--------- ---------
Total other comprehensive income (loss) (201,385) 346,000
Comprehensive Income $ 21,840 $ 594,907
========= =========
See notes to consolidated financial statements
3
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
As of September 30, 1999 and June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive Treasury
Shares Amount Capital Earnings Income Stock
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999 1,957,057 $ 195,706 $8,202,655 $ 16,354,339 ($118,394)
Allocation of 10% stock dividend 195,778 19,578 1,766,896 (1,786,474)
Net Income 223,225
Change in unrealized gain
on securities available for
sale, net of applicable deferred
income taxes (201,385)
(639,626)
Treasury Stock Repurchased
ESOP Shares earned (1,251)
--------------------------------------------------------------------------------------
Balance at September 30, 1999 2,152,835 $ 215,284 $9,968,300 $ 14,791,090 ($319,779) ($639,626)
======================================================================================
<CAPTION>
Unearned Total
ESOP Shareholders'
Shares Equity
<S> <C> <C>
Balance at June 30, 1999 ($712,440) $23,921,866
Allocation of 10% stock dividend 0
Net Income 223,225
Change in unrealized gain
on securities available for
sale, net of applicable deferred
income taxes (201,385)
Treasury Stock Repurchased (639,626)
ESOP Shares earned 16,680 15,429
--------------------------
Balance at September 30, 1999 ($695,760) $23,319,509
==========================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Three-Month Period Ended September 30, 1999 and 1998
1999 1998
Net Income $ 223,225 $ 248,907
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 33,000 24,500
Net (accretion) amortization of security
premiums and discounts 12,612 (5,381)
Provisions for loan losses 45,000 45,000
ESOP compensation expense 16,680 --
Loss on sale of investments -- --
Loss on sale of other real estate 7,107 898
Provision (credit) for deferred income taxes 9,484 9,621
Net change in unearned loan fees and costs 5,619 (27,852)
Net change in accrued income taxes 86,813 182,893
Net (increase) decrease in accrued
interest receivable (47,730) (85,731)
Net (increase) decrease in prepaids
and other assets (63,537) (11,985)
Net (decrease) increase in other liabilities (26,344) 17,263
----------- -----------
Net cash provided by operating
activities 301,829 363,607
----------- -----------
Cash flows from investing activities:
Proceeds from maturities securities 500,000 3,100,000
Proceeds from sale of securities -- --
Purchases of securities (2,294,897) (5,018,624)
Principal payments on securities 1,105,736 1,037,863
Principal payments on mortgage-backed
securities 309,771 89,112
Purchases of mortgage-backed securities -- --
Proceeds from maturities of mortgage-backed
securities -- --
Purchase of FHLB stock -- --
Proceeds from sale of other real estate 46,195 --
Net increase in loans receivable (3,629,744) (2,214,542)
Purchases of premises and equipment (192,875) 1,798
----------- -----------
Net cash used by investing activities (4,155,814) (3,004,393)
----------- -----------
Cash flows from financing activities
Borrowings from FHLB 2,500,000 --
Purchase of common stock for treasury (639,626) --
Net increase in deposits (106,743) 504,449
----------- -----------
Net cash provided by financing
activities 1,753,631 504,449
----------- -----------
Net decrease in cash and cash equivalents (2,100,354) (2,136,337)
Cash and cash equivalents at beginning
of period 6,135,746 8,272,083
----------- -----------
Cash and cash equivalents at end of period $ 4,035,392 $ 6,135,746
=========== ===========
The accompanying notes are an integral part of the financial statements
5
<PAGE>
Green County Bancorp, Inc.
Notes to Consolidated Financial Statements
As of and for the Three Months Ended September 30, 1999 and 1998
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Greene County Bancorp, Inc. (the "Company") and its
wholly-owned subsidiary, The Bank of Greene County (the "Bank"). The
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. To the extent that
information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or
areconsistent with the audited financial statements incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year ended
June 30, 1999, such information and footnotes have not been duplicated
herein. 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. All material inter-company accounts and
transactions have been eliminated in the consolidation. The results of
operations and other data for the three months ended September 30, 1999
are not necessarily indicative of results that may be expected for the
entire fiscal year ending June 30, 2000.
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. is a Delaware corporation organized in
December 1998 by The Bank of Greene County in connection with the
conversion of the Bank from a New York chartered mutual savings bank to a
New York chartered stock savings bank and reorganization to a two-tiered
mutual holding company. The Company was formed for the purpose of
acquiring all of the capital stock of the Bank upon completion of the
reorganization. As part of the reorganization, the Company issued
approximately 44.5% of the shares of its common stock to eligible
depositors of the Bank and the Bank's Employee Stock Option Plan (the
"ESOP") and issued approximately 53.5% of the Company's shares of common
stock to Greene County Bancorp, MHC (the "MHC"), a New York
state-chartered mutual holding company. Concurrent with the close of the
offering, the remaining 2% of the Company's shares of common stock were
issued to The Bank of Greene County Charitable Founding (the
"Foundation"). The reorganization and offering were completed on December
30, 1998. Prior to that date, the Company had no assets and no
liabilities. The financial statements presented for periods prior to the
reorganization are for the Bank as the predecessor entity to the Company.
Completion of the offering resulted in the issuance of 1,957,057 shares of
common stock, 1,047,560 shares (53.5%) of which were issued to the MHC,
871,082 shares (44.5%) of which were sold to eligible depositors of the
Bank and issued to the Bank's ESOP, and 38,415 shares (2%) of which were
issued to the Foundation, at $10.00 per share. Costs related to the
offering, primarily marketing fees paid to investment banking firms,
professional fees, registration fees, and printing and mailing costs, were
$694,211; the net proceeds of the offering excluding these costs amounted
to $8,016,709. The Bank's ESOP acquired 36,380 shares at issuance and
purchased an additional 36,380 shares in the open market after the initial
public offering.
6
<PAGE>
(3) EARNINGS PER SHARE
Earnings per share on common stock are computed using the weighted average
number of shares of common stock outstanding for the period. The Company
adopted Financial Accounting Standard No. 128 for the three months ended
September 30, 1999.
In calculating the weighted average number of shares outstanding, the
result of the stock dividend and stock repurchase programs were taken into
account. The Board of Directors approved a 10% stock dividend on July 6,
1999, for shareholders of record July 26, 1999, effective August 9, 1999.
As a result of the stock dividend, 195,778 new shares were issued bringing
the total number of shares issued and outstanding to 2,152,835.
Shareholders that would have received a fractional share as a result of
the dividend were rounded up to the next whole number. The Board of
Directors also approved on July 6, 1999, a stock repurchase program
whereby the Company may repurchase up to 107,638 shares, or approximately
5% of the Company's outstanding shares. As of September 30, 1999 the
Company had repurchased 65,400 shares for $639,626 for an average cost of
$9.78. The weighted average number of shares outstanding during the period
was 2,051,329. The earnings per share amounted to $0.11 for the three
month period ending September 30, 1999.
(4) IMPACT OF NEW ACCOUNTING STANDARDS
FASB Statement on Derivatives and Hedging Activities. In June 1998, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133 which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
condition at fair value. If certain conditions are met, a derivative may
be specifically designated as a fair value hedge, a cash flow hedge, or a
foreign currency hedge. A specific accounting treatment applies to each
type of hedge. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000 and, accordingly, will be adopted by
the Company in the fiscal year beginning on July 1, 2000. The Company has
not engaged in derivatives and hedging activities covered by the new
standard, and does not expect to begin such activities. Accordingly, SFAS
No. 133 is not expected to have a material impact on the Company's
consolidated financial statements.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
General
This quarterly report on Form 10-QSB contains forward-looking
statements. The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform of 1995 and is
including this statement for the express purpose of availing itself of the
protections of the safe harbor with respect to all such 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 forward-looking
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 September 30, 1999 and June 30, 1999
Total assets increased to $154.5 million at September 30, 1999 from
$152.6 at June 30, 1999, an increase of $1.9 million, or 1.3%. The growth
in assets was primarily due to the growth in the net loan portfolio, which
grew to $94.3 million at September 30, 1999, as compared to $90.8 million
at June 30, 1999, an increase of $3.5 million or 3.9%. The conventional
fixed rate mortgage loan portfolio increased from $57.0 million at June
30, 1999, to $60.5 million at September 30, 1999, representing an increase
of $3.5 million or 6.1%. The bi-weekly fixed rate mortgages and
construction mortgages also increased approximately $500,000 and $400,000
to $3.5 million and $2.0 million, respectively. The installment loan
portfolio also showed a net increase for the three months of $105,000 or
2%. These increases in the loan portfolio were offset primarily by a
decrease of $500,000 or 3.7% between June 30 and September 30, 1999, in
adjustable rate loans. The demand for the Bank's primarily fixed-rate
mortgage loan products in the relatively low interest rate environment
during the time period was the primary factor contributing to the increase
in the net loan portfolio. The increasing rate environment experienced at
the end of the quarter is expected to cause a slow down for loan demand in
the near future.
Total cash and cash equivalents including federal funds sold
decreased by $2.1 million, or 34.2% to $4.0 million, between June 30, 1999
and September 30, 1999. The reason for the decrease in cash was funding
required to meet the increased loan demand.
The overall investment portfolio increased to $49.8 million from
$49.7 million between September 30 and June 30, 1999. The increase was the
net result of purchases of US Agency Bonds totaling $1.9 million,
principal pay downs of $1.3 million and the maturity of a US Agency Bond
for $500,000. Consequently, the portfolio mix remained relatively
consistent during the three-month time frame. Corporate bonds at September
30, 1999, amounted to $11.9 million or 23.9%, US agency bonds were $11.2
million or 22.5%, tax free municipal bonds totaled $10.5 million or 21.1%,
and asset-backed securities represent $7.6 million or 15.3% of the
investment portfolio. The remaining 17.2% of the portfolio is composed of
US Government bonds and other investment securities.
Premises and equipment increased from $3.5 million at June 30, 1999,
to $3.7 million at September 30, 1999, an increase of $0.2 million, or
5.7%. The most significant item contributing to this increase was initial
expenses incurred in the construction of the new Tannersville office that
is expected to open for business in the spring of 2000.
8
<PAGE>
Total deposits amounted to $127.9 million as June 30 and September
30, 1999. It should be noted that there was a shift in the deposit base of
$1.2 million to non-interest bearing accounts from interest bearing
accounts. Management believes that this shift was the result of customers
preparing to pay property taxes due in early October. There was little
change in the level of certificate accounts between June 30 and September
30, 1999. For the quarter ended June 30, 1999 and September 30, 1999,
certificate accounts represented $52.1 million and $53.0 million,
respectively, or approximately 41.0% of the deposit base.
In September 1999, the Bank of Greene County borrowed $2.5 million
at a rate of 6.82%, maturing in September 2004, from the Federal Home Loan
Bank. These funds were used to meet continuing loan demand and in an
attempt to lock in a rate of return on a portion of the loan portfolio.
Stockholders' equity decreased from $23.9 million at June 30, 1999
to $23.3 million at September 30, 1999 representing a decrease of $0.6
million or 2.5%. The decrease was primarily the result of the repurchase
of 65,400 shares of treasury stock costing $639,626. Net income of
$223,225 was offset by unrealized losses on the investment portfolio. The
unrealized losses amounted to $319,779 at September 30, 1999, compared to
the unrealized losses of $118,394 at June 30, 1999. Management believes
these losses will continue to remain unrealized and do not believe they
reflect impairment in the investment portfolio.
Non-Accrual Loans and Non-Performing Assets
The following table sets forth information regarding non-accrual
loans and non-performing assets:
At September 30, 1999 At June 30, 1999
(Dollars in Thousands)
Nonaccruing loans:
One- to four- family $ 361 $ 487
Commercial real estate 133 166
Consumer 11 15
Commercial business -- --
Total 505 668
Foreclosed assets:
One- to four-family -- 53
Multi-family -- --
Nonfarm, nonresidential properties 124 124
Total $ 124 $ 177
Total non-performing assets $ 629 $ 845
Total as a percentage of total assets 0.41% 0.56%
During the three months ended September 30, 1999, there were $13,000
in charge-offs and $3,000 in recoveries of loans previously charged-off.
As a result of these charge-offs and recoveries, and the allocation of
additional funds to the loan loss reserve, the balance of the allowance
for loan losses at September 30, 1999 increased to $827,000 from $792,000
at June 30, 1999. The ratio of the net charge-offs to average loans
outstanding during the three months ended September 30, 1999, was less
than one percent.
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 differ substantially from the economic
and other conditions considered by management in evaluating the adequacy
of the current level of the allowance.
9
<PAGE>
Comparison of Operating Results for the Three Months Ended September 30,
1999 and 1998
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 net income of $223,225 for the three months
ended September 30, 1999 compared to net income of $248,907 for the three
months ended September 30, 1998. Earnings per share as of September 30,
1999 amounted to $0.11 based on the weighted average number of shares
outstanding for the period between July 1, 1999 and September 30, 1999 of
2,058,454. The calculation of the weighted number of shares considers the
stock dividend as effective retroactive to the beginning of the period and
any prior EPS amounts are recalculated based on the calculated level
outstanding. However, EPS data is not provided for the period ended
September 30, 1998 since the Company was not publicly traded until
December 30, 1998.
Interest Income. Total interest income increased to $2,581,034 for
the three months ended September 30, 1999 from $2,485,248 for the three
months ended September 30, 1998, an increases of $95,786 or 3.9%. The
increase was due primarily to an increase of $11.4 million, or 8.3%, in
the average balance of interest earning assets for the three months ended
September 30, 1999, notwithstanding a decrease in the average yield on
such assets to 6.96% for the period from 7.26% 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 initial
public offering that raised approximately $8.0 million of new capital in
December 1998. The reduced yields on such assets reflected the declining
market interest rate environment over the past year, as the proceeds of
loan payoffs, called investment securities and the offering were deployed
into lower-yielding investments. The Company's interest rate spread (the
difference between yields earned on interest-earning assets and rates paid
on deposits and borrowings) increased to 3.45% for the three months ended
September 30, 1999 from 3.12% for the three months ended September 30,
1998. The net yield on average interest earning assets also improved from
3.46% for the three-month period ended September 30, 1998, 3.86% for the
same time frame in 1999. Management successfully lowered the cost of funds
on all categories of deposits for the three month period ended September
30, 1999, compared to the same period in 1998. The average savings and
escrow rate decreased from 3.49% to 3.08%, the average demand or NOW rate
decreased from 1.01% to 0.85% and the average certificate account rate
decreased from 5.62% to 4.87%. However, management has incurred a new cost
of funds in the borrowing from the FHLB and believes that a compression of
the net interest rate spread could occur in the future.
Interest Expense. Total interest expense decreased to $1,150,000 for
the three months ended September 30, 1999 from $1,302,000 for the three
months ended September 30, 1998. The decrease reflected primarily a
decrease of 63 basis points in the rate paid on interest bearing
liabilities despite an increase of $5.0 million or 3.9% in the average
balance of such interest bearing liabilities for the period ended
September 30, 1999 as compared to September 30, 1998. One component of the
increase in the average balance of interest bearing liabilities was the
borrowing of $2.5 million from FHLB. The average balance of savings and
escrow accounts increased from $55.1 million to $58.9 million despite a
decrease in the rate paid of 41 basis points. Demand and NOW accounts
average balances increased from $14.9 million for the three-month period
ended September 30, 1998 to $18.2 million for the three-month period ended
September 30, 1999 despite a decrease in rate of 16 basis points paid on
such liabilities.
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
10
<PAGE>
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 evaluates
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 remained $45,000 for both
the three-month periods ended September 30, 1998 and 1999.
Non-Interest Income. Non-interest income consists primarily of fee
income for Bank services. Non-interest income increased to $159,000 for
the three months ended September 30, 1999 from $106,000 for the three
months ended September 30, 1998. Contributing to the increase were service
charges on deposits as the average balance of such deposits increased. The
Bank has also initiated efforts to generate more fee income, for example
charging a foreign account holder for use of the ATM machines.
Non-Interest Expense. Total non-interest expense increased by
$326,000, or 38.1%, to $1,183,000 for the three months ended September 30,
1999 from $856,000 for the three months ended September 30, 1998. The
increase in the non-interest expense was due to the costs associated with
several new staff positions including the position of Chief Financial
Officer, and new expenses associated with ESOP. Legal, audit and
accounting fees have also increased as a result of the enhanced filing
requirements for a publicly traded company.
Income Taxes. The Company reported a tax expense of $138,907 for
federal and franchise taxes for the three months ended September 30, 1999,
compared to an expense of $139,438 for such taxes for the three months
ended September 30, 1998.
Liquidity
The Company's primary sources of funds are deposits, principal and
interest payments on loans, mortgage-backed securities and debt securities
and a line of credit available as needed. In December 1998, $8.0 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 no change in the overall
level of deposits when comparing September 30, 1998 to September 30, 1999.
Loan commitments totaled $3.5 million at September 30, 1999. The
Company anticipates that it will have sufficient funds available to meet
current loan commitments, but is considering further borrowings from the
FHLB.
The Company's most liquid assets are cash and due from banks and
federal funds sold. At September 30, 1999, such assets amounted to $4.0
million, or 2.6% of total assets. Management also holds all investment
securities as available for sale and could consider the sale of securities
as an option if liquidity was needed.
In efforts to accommodate potential demand for cash as a result of
the Year 2000 management has begun increasing levels of vault cash
available at each of the branches.
Stockholders' equity decreased from $23.9 million at June 30, 1999
to $23.3 million at September 30, 1999 representing a decrease of $0.6
million or 2.5%. The Company is required to meet various minimum amounts
and ratios of total and Tier I Capital ( as defined in the regulations) to
risk-weighted assets (as defined), and
11
<PAGE>
Tier I Capital (as defined) to average assets (as defined). As of
September 30, 1999, the Company had total capital of $24.5 million or
27.0% of risk-weighted assets, Tier I Capital of $23.7 million or 26.0% of
risk-weighted assets, and Tier I Capital of $23.7 million or 15.0% of
average assets. At September 30, 1999, the Company 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 Company 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 Company uses an outside data processing servicer. Management developed
a formal written plan to resolve any concern about the year 2000 issue and
focused on the computer applications and hardware to ensure that they will
be able to read the year 2000. Testing of mission-critical systems was
completed, as well as overall testing, and all applications which were not
expected to be "Y2K Ready" have been upgraded to compliant versions, and
re-tested. The Company, in its assessment phase, recognized that a large
percentage of the hardware was not upgradable and had to be replaced. All
hardware replacement and contingency plans were completed during the
second calendar quarter of 1999.
The Company 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.
Direct testing with those vendors was performed whenever participation was
available. Such vendors have represented to management that they are
addressing the year 2000 issue and they expect to be able to provide the
services for which the Company has contracted. Management receives regular
reports and documentation of the efforts of the vendors and will continue
to monitor this issue, reporting to the Board of Directors on a quarterly
basis. In considering the year 2000 readiness of the Company's major
borrowers, management first determined that no borrower currently has been
extended credit exceeding 10% of the Company's capital. Management has
also contacted the Company's larger borrowers, and has received assurance
that date sensitivity is not an issue with such borrowers.
Finally, management has evaluated the date sensitivity of the Company'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.
Costs related to the year 2000 issue have been expensed as they have been
incurred, except for the costs, if any, for new hardware purchased, which
has been capitalized. Management budgeted $200,000 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 Company?s
systems rely will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with the Company?s
systems, would not have a material adverse effect on the Company.
12
<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.
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
13
<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: November 15, 1999
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: November 15, 1999
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer
14
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<PERIOD-END> SEP-30-1999
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