FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GREENE COUNTY BANCORP, INC.
STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, NOT FED
IRS NUMBER:
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-QSB
SEC ACT:
SEC FILE NUMBER: 0-25165
FILM NUMBER: 98768511
BUSINESS ADDRESS:
STREET: 302 MAIN ST
CITY: CATSKILL
STATE: NY
ZIP: 12414
BUSINESS PHONE: 5189432600
MAIL ADDRESS:
STREET: 302 MAIN ST
CITY: CATSKILL
STATE: NY
ZIP: 12414
<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 MARCH 31, 1999
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 14-1809721
______________________________ _______________________________________
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
302 Main St, Catskill, New York 12414
_______________________________ ___________________________
(Address of principal (Zip Code)
executive office)
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 March 31, 1999, the latest practible date, 1,884,297 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 Balance Sheet 1
*Consolidated Statement of Income 2
*Consolidated Statement of Comprehensive Income 3
*Consolidated 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 7-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security
Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1999(UNAUDITED) and June 30, 1998(AUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
(UNAUDITED) (AUDITED)
Assets
<S> <C> <C>
Cash and due from banks $ 2,942,188 $ 2,476,032
Federal funds sold 7,027,485 5,796,051
----------- ----------
Total cash and cash equivalents 9,969,673 8,272,083
----------- ----------
Investment securities, at fair value 34,840,832 36,265,592
Mortgage-backed securities, at fair value 4,631,536 5,189,060
Asset-backed securities, at fair value 8,539,972 6,323,683
Loans receivable, net of allowance for
loan losses of $746,747 and $728,478
at March 31, 1999 and June 30, 1998,
respectively 88,270,909 80,259,962
Premises and equipment 3,251,969 2,584,281
Accrued interest receivable 1,079,858 1,091,120
Prepaid expenses and other assets 251,724 143,600
Other real estate owned 222,729 123,548
----------- ---------
Total assets $ 151,059,202 $ 140,252,929
=========== ===========
Liabilities and Shareholders' Equity
Due to depositors $ 126,027,088 $ 124,011,289
Other liabilities 920,103 511,415
----------- -----------
Total liabilities 126,947,191 124,522,704
----------- -----------
Shareholders' equity:
Common stock, par value $.10 per share;
authorized 4,000,000;
issued 1,957,057 at March 31, 1999 195,706 -
Additional paid in capital 8,401,670 -
Retained earnings 15,958,725 15,487,825
Accumulated comprehensive income 301,700 242,400
Less: Unallocated ESOP shares-72,760 shares
at cost (745,790) -
----------- ----------
Total shareholders' equity 24,112,011 15,730,225
----------- ----------
Total liabilities and shareholders' equity $ 151,059,202 $ 140,252,929
============= ===========
</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 NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
--------- --------- ---------- ----------
Interest income:
<S> <C> <C> <C> <C>
Loans $1,655,388 $1,597,136 $4,947,832 $4,766,652
Mortgage-backed
securities 57,458 82,302 189,067 251,629
Investment securities 661,968 590,389 2,002,855 1,823,384
Interest-bearing deposits
and federal funds sold 118,763 110,163 286,845 316,388
---------- ---------- ---------- ----------
Total interest income 2,493,577 2,379,990 7,426,599 7,158,053
---------- ---------- ---------- ----------
Interest expense:
Savings and checking deposits 1,156,523 1,225,559 3,728,719 3,691,946
---------- ---------- ---------- ----------
Net interest income 1,337,054 1,154,431 3,697,880 3,466,107
---------- ---------- ---------- ----------
Provision for loan losses 45,000 45,000 135,000 75,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,292,054 1,109,431 3,562,880 3,391,107
----------- ---------- ---------- ----------
Noninterest income:
Service charges 71,754 59,311 223,890 179,242
Other 63,080 50,575 156,652 137,968
----------- ---------- ---------- ----------
Total other income 134,834 109,886 380,542 317,210
----------- ---------- ---------- ----------
Noninterest expenses:
Compensation and employee
benefits 445,074 405,383 1,347,098 1,142,732
Occupancy and equipment 130,485 90,881 368,097 258,741
Contribution expense - - 484,150 -
Other 372,574 348,202 1,038,804 930,027
----------- ---------- ---------- ----------
Total noninterest expense 948,133 844,466 3,238,149 2,331,500
----------- ---------- ---------- ----------
Income before income taxes 478,755 374,851 705,273 1,376,817
Income taxes 162,828 117,703 234,373 435,470
----------- ---------- ---------- ----------
Net income $ 315,927 $ 257,148 $ 470,900 $ 941,347
=========== ========== ========== ==========
</TABLE>
Basic income per common
share $ 0.17
Weighted average number
of common shares
outstanding 1,896,424
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Net income $ 315,927 $ 257,148
-------- --------
Other comprehensive income net of taxes:
Unrealized holding losses
arising during the period,
net of income tax (128,300) (33,000)
---------- ---------
Total other comprehensive
income (128,300) (33,000)
---------- ---------
Comprehensive income $ 187,627 $ 224,148
========== ========
</TABLE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Net income $ 470,900 $ 941,347
-------- --------
Other comprehensive income, net of taxes:
Realized loss on sale of
investments (34,298) ---
Unrealized holding gains
arising during the period,
net of income tax 93,598 153,902
-------- --------
Total other comprehensive income 59,300 153,902
-------- ---------
Comprehensive income $ 530,200 $ 1,095,249
======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Accumulated Unallocated
Common Paid-In Retained Other Comp. ESOP Total
1998 Stock Capital Earnings Income Shares 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 nine
months ended March 31,
1998 941,347 941,347
Change in unrealized gain
on available-for-sale,
net of applicable deferred
income taxes 153,902 153,902
-----------------------------------------------------------------------------
Balance at
March 31, 1998 $ - $ - $15,135,110 $221,902 $ - $15,357,012
======== ========= ========== ======= ======== ==========
1999
Balance at June 30, 1998 $ - $ - $15,487,825 $242,400 $ - $15,730,225
Net Income for the nine
months ended March 31,
1999 470,900 470,900
Change in unrealized gain
on available-for-sale,
net of applicable
deferred income taxes 59,300 59,300
Net issuance of common
stock 195,706 8,401,670 8,597,376
Common stock acquired by
the ESOP, 72,760 shares (745,790) (745,790)
Balance at
March 31, 1999 $195,706 $8,401,670 $15,958,725 $301,700 $(745,790) $24,112,011
======== ========== =========== ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
GREENE COUNTY BANCORP, INC.
CONSOLIDATED CASH FLOW STATEMENT
FOR NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 470,900 $ 941,347
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 148,500 143,892
Net accretion of security premiums and
discounts (52,513) (109,456)
Provision for loan losses 135,000 75,000
Contributions expense 384,150 -
Loss on sale of investments 34,298 -
Provision (benefit) for deferred income taxes (322,733) 185,886
Net change in unearned loan fees and costs (11,317) (17,381)
Net decrease (increase)in accrued interest receivable 11,262 (181,683)
Net (increase) decreasein prepaids and other assets (108,124) 4,551
Net increase (decrease)in other liabilities 428,159 (120,414)
---------- ----------
Net cash provided by operating activities 1.117,582 921,742
---------- ----------
Cash flows from investing activities:
Proceeds from maturities of available-for-sale
securities 12,167,026 6,599,859
Purchases of securities available-for-sale (12,628,001) (7,558,087)
Principal payments on securities available-for sale 2,312,638 1,070,178
Principal payments on mortgage-backed securities
available-for-sale 1,062,075 927,675
Purchases of mortgage-backed securities
available-for-sale (2,991,230) (2,915,279)
Net increase in loans (8,311,568) (3,434,728)
Proceeds from sale of other real estate 27,788 53,037
Purchases of premises and equipment (512,926) (1,094,192)
----------- -----------
Net cash used by investing activities (8,874,198) (6,351,537)
------------ ----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 8,184,100 -
Purchase of unallocated ESOP shares (745,790) -
Net increase in deposits 2,015,896 2,646,108
----------- ----------
Net cash provided by financing activities 9,454,206 2,646,108
----------- ----------
Net increase (decrease) in cash and cash
equivalents 1,697,590 (2,783,687)
Cash and cash equivalents at beginning of
period 8,272,083 10,888,070
----------- -----------
Cash and cash equivalents at end of period $ 9,969,673 $ 8,104,383
============= =============
Cash paid during period for:
Interest $ 3,759,852 $ 3,725,046
Income taxes 149,064 471,311
Non-cash investing activity:
Foreclosed loans transferred to other real estate 126,969 131,251
Net change in unrealized gain on available-for-sale $ 104,000 $ 256,000
</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 Nine Months Ended March 31, 1999 and 1998
(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 consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiary, the Bank of Greene County (the "Bank").
All material inter-company accounts and transactions have been
eliminated in the consolidation. The results of operations and
other data for the three and nine months ended March 31, 1999 are
not necessarily indicative of results that may be expected for
the entire fiscal year ending June 30, 1999.
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 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 two-tier mutual holding company structure. As part of
the reorganization, the Company offered for sale 44.5% of its
shares of 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 the Bank & Employee Stock
Ownership Plan, 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 March 31, 1999, the ESOP owned 72,760 common shares. No
allocation of shares to employees has been made as of March 31,
1999. Accordingly, there was no ESOP expense for the three and
nine months ended March 31, 1999. The balance of unallocated ESOP
shares is shown as a deduction to stockholders' equity.
(4) 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 March 31, 1999. Earnings per
share is not presented in the accompaying statements of income
for the periods ended prior to March 31, 1999 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 nine months ended March 31, 1999. 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. Management's Discussion and Analysis
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 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 March 31, 1999 and June 30, 1998
Total assets increased to $151.1 million at March 31, 1999 from $140.3
million at June 30, 1998, an increase of $10.8 million, or 7.7%. 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 $88.3 million at
March 31, 1999 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 $7.9 million, or 12.2%, home equity loans increased
$76,000, or 1.6%, consumer installment loans increased $667,000, or 16.0%,
commercial business loans decreased $143,000, or 10.7% and commercial
real-estate loans decreased $419,000, or 9.3%. Management believes much of the
demand 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 $34.8 million and $4.6 million, respectively, at March
31, 1999 from $36.3 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 asset-backed securities, which increased to
$8.5 million at March 31, 1999 from $6.3 million at June 30, 1998.
Total deposits increased to $126.0 million at March 31, 1999 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. Deposit growth
was offset by withdrawals of $3.2 million used to purchase Company stock at the
initial public offering in December, 1998.
7
<PAGE>
At March 31, 1999, the Company's certificate accounts were $54.5 million, a
decrease of 2.8% from June 30, 1998, and non-certificate accounts increased to
$71.5 million, an increase of 7.9% from June 30, 1998. At March 31, 1999, there
were no FHLB borrowings outstanding.
Stockholders' equity increased to $24.1 million (or 16.0% of total
assets) at March 31, 1999 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 $301,700 at March 31, 1999 from $242,400 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 March 31, 1999 At June 30, 1998
----------------- ----------------
(Dollars in Thousands)
<S> ..................................... <C> <C>
Nonaccruing loans:
One- to four- family .................. $ 320 $ 666
Commercial real estate ................ 136 91
Consumer .............................. 22 20
Commercial business ................... -- 107
------ ------
Total .......................... 478 884
------ ------
Foreclosed assets:
One- to four-family ................... 99 --
Multi-family .......................... -- --
Nonfarm, nonresidential properties .... 124 124
------ ------
Total .......................... $ 223 $ 124
====== ======
Total non-performing assets ............. $ 701 $1,008
====== ======
Total as a percentage of total assets ... 0.46% 0.72%
</TABLE>
During the nine months ended March 31, 1999, there were $124,000 in
charge-offs and $7,000 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
March 31, 1999 increased to $746,747 from $728,478 at June 30, 1998. The ratio
of the net charge-offs to average loans outstanding during the nine months ended
March 31, 1999 was 0.13%.
8
<PAGE>
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.
Comparison of Operating Results for the Three Months Ended March 31, 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 $316,000 for the three months ended
March 31, 1999 compared to net income of $257,000 for the three months ended
March 31, 1998.
Interest Income. Total interest income increased to $2,494,000 for the
three months ended March 31, 1999 from $2,380,000 for the three months ended
March 31, 1998. The increase was due primarily to an increase of $17.9 million,
or 13.8%, in the average balance of interest earning assets for the three months
ended March 31, 1999, notwithstanding a decrease in the average yield on such
assets to 6.76% for the period from 7.34% 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, as 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 $2.8 million, or 38.5%, to an
average balance of $10.1 million for the three months ended March 31, 1999, as
the average yield on such federal funds declined from 5.61% for the three months
ended March 31, 1998 to 4.28% for the three months ended March 31, 1999. The
Company's interest rate spread (the difference between yields earned on
interest-earning assets and rates paid on deposits and borrowings) decreased to
3.06% for the three months ended March 31, 1999 from 3.22% for the three months
ended March 31, 1998. Management anticipates that this compression of interest
rate spread may continue in future periods should the declining market interest
rate environment continue.
9
<PAGE>
Interest Expense. Total interest expense decreased to $1,157,000 for
the three months ended March 31, 1999 from $1,226,000 for the three months ended
March 31, 1998. The decrease reflected primarily an increase of $6.2 million, or
5.2%, in the average balance of interest-bearing liabilities, which more than
offset a decrease of 43 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 $1.9 million, or 3.5%, but the rate
paid on such accounts only decreased by 33 basis points to 5.17% for the three
months ended March 31, 1999.
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 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 the three
months ended March 31, 1999 consistent with $45,000 for the three months ended
March 31, 1998.
Non-Interest Income. Non-interest income consists primarily of fee
income for Bank services. Non-interest income increased to $135,000 for the
three months ended March 31, 1999 from $110,000 for the three months ended March
31, 1998, reflecting particularly increased service charges on deposits as the
balance of such deposits increased.
Non-Interest Expense. Total non-interest expense increased by $104,000,
or 12.3%, to $948,000 for the three months ended March 31, 1999 from $844,000
for the three months ended March 31, 1998. The increase in the non-interest
expense was due in part to the costs associated with the operation of the
Greenville branch, as well as an increase in compensation from merit raises.
Income Taxes. The Company reported a tax expense of $163,000 for federal
and franchise taxes for the three months ended March 31, 1999, compared to an
expense of $118,000 for such taxes for the three months ended March 31, 1998.
10
<PAGE>
Comparison of Operating Results for the Nine Months Ended March 31, 1999 and
1998
General. Net income for the nine months ended March 31, 1999 was
$471,000, compared to $941,000 for the nine months ended March 31, 1998. The
decrease was primarily attributable to the contribution expense of $484,000
reflecting the Company's contribution to the Foundation during the nine months
ended March 31, 1999. Excluding the contribution expense and the associated tax
benefits, net income decreased $153,000, or 16.3%, to $788,000 for the nine
months ended March 31, 1999 from $941,000 for the nine months ended March 31,
1998. The decrease in net income was due to an increased provision for loan
losses, which was $135,000 for the nine months ended March 31, 1999 from $75,000
for the nine months ended March 31, 1998, resulting from the growth in the
Company's loan portfolio. Net income for the nine-months ended December 31, 1998
was also affected by the additional operating costs associated with the
Greenville branch, which opened in December, 1997.
Interest Income. Total interest income increased to $7.4 million for
the nine months ended March 31, 1999 from $7.2 million for the nine months ended
March 31, 1998, due primarily to an increase of $12.6 million, or 9.8%, in the
average balance of interest-earning assets for the nine months ended March 31,
1999, notwithstanding a decrease of 41 basis points in the average yield on such
assets to 7.0% 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
re-deployed into lower-yielding investments. The Company's interest rate spread
for the nine months ended March 31, 1999 decreased to 3.04% from 3.25% for the
nine months ended March 31, 1998.
Interest Expense. Total interest expense of $3.7 million remained
consistent for the nine months ended March 31, 1999, as compared to the nine
months ended March 31, 1998. This reflects an increase of $7.4 million, or 6.3%,
in the average balance of interest-bearing liabilities, which more than offset a
decrease of 21 basis points in the rates paid on such liabilities to 3.97% for
the nine months ended March 31, 1999.
Provision for Loan Losses. The Company's provision for loan losses
increased to $135,000 for the nine months ended March 31, 1999 compared to
$75,000 for the nine months ended March 31, 1998, reflecting the growth in the
loan portfolio in the later period.
Non-Interest Income. Non-interest income increased to $381,000 for the
nine months ended March 31, 1999 from $317,000 for the nine months ended March
31, 1998, reflecting primarily an increase in service charges on deposits as the
average balance of such deposits increased during the period.
11
<PAGE>
Non-Interest Expense. Non-interest expense increased to $3.2 million
for the nine months ended March 31, 1999 from $2.3 million for the nine months
ended March 31, 1998. The increase was primarily attributable to the
contribution expense of $484,000 reflecting the Company's contribution to the
Foundation during the nine months ended March 31, 1999. Additionally, occupancy
and equipment costs, and the cost of staffing the branch, associated with the
new Greenville branch, added to the non-interest expense for the nine months
ended March 31, 1999.
Income Taxes. The Company reported a tax expense of $234,000 in federal
and franchise taxes for the nine months ended March 31, 1999 as compared to an
expense of $435,000 for the nine months ended March 31, 1998. The reduction in
federal and franchise taxes was attributable to the Company's contribution to
the Foundation of $484,000 for the nine months ended March 31, 1999. The
Company's effective income tax rate was 33.2% for the nine months ended March
31, 1999 compared to 31.6% for the same period in 1998.
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, $8.2 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 $2.0 million, or 1.6%, for the
nine months ended March 31, 1999.
Loan commitments totaled $3.9 million at March 31, 1999. 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 March 31, 1999, such assets amounted to $10.0 million, or
6.6% of total assets.
At March 31, 1999, 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.
13
<PAGE>
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 has used an
outside data processing servicer for 24 years. That servicer was pro-active and
maintained a pace that kept it consistently ahead of Federal Financial
Institutions Examination Council target dates and requirements. The Bank's Year
2000 Committee has developed a formal written plan to resolve any concerns about
the Year 2000 issue and has completed assessment and testing of its computer
applications, hardware and ATM machines to ensure that they will be able to read
the Year 2000. All hardware that was not compliant and could not be upgraded is
being replaced. Mission-critical systems have been tested and contingency plans
have been completed. The Bank' s Year 2000 program and progress have been
examined twice by the New York State Banking Department and by the FDIC.
The Bank contacted each of its data processing vendors to ensure that they
will be able to provide continuous service in 2000. All such vendors have
provided documentation of their testing, remediation and compliance and,
therefore, they expect to provide the services for which the Bank has
contracted. Management receives updates from these vendors and continues to
monitor this issue, reporting to the Board of Directors on a quarterly basis. 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.
The Year 2000 Committee 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 computerized or are expected to function
normally after Year 2000. Contingency plans were developed to address potential
utility failures, and to provide methods to open offices and conduct business.
The Company expensed $2,000 during the nine months ended March 31, 1999
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
14
<PAGE>
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.
15
<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
16
<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: May 13, 1999 By: /s/ J. Bruce Whittaker
----------------------
J. Bruce Whittaker
President and Chief Executive Officer
Date: May 13, 1999 By: /s/ Bruce P. Egger
------------------
Bruce P. Egger
Vice-President/Secretary
17
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
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