SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended June 30, 2000
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transaction period from _________________ to _____________________
Commission File Number: 0-25165
GREENE COUNTY BANCORP, INC.
----------------------------------------------------
(Name of Small Business Issuer in its Charter)
Delaware 14-1809721
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
302 Main Street, Catskill, New York 12414
--------------------------------------- ------------
(Address of Principal Executive Office) (Zip Code)
(518) 943-2600
--------------------------------------------------
(Issuer's Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
----
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
-----------------------------------------
(Title of Class)
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 past
twelve 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 |_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. |X|
The Issuer's revenues for the fiscal year ended June 30, 2000 were
$11,397,709.
As of June 30, 2000, there were issued 2,152,835 and outstanding 2,045,235
shares of the Registrant's Common Stock. The aggregate value of the voting stock
held by non-affiliates of the Registrant, computed by reference to the closing
price of the Common Stock as of August 30, 2000 was $8,036,271.
DOCUMENTS INCORPORATED BY REFERENCE
1. Sections of Annual Report to Stockholders for the fiscal year ended June
30, 2000 (Parts II and IV).
2. Proxy Statement for the 2000 Annual Meeting of Stockholders (Part III)
<PAGE>
PART I
ITEM 1. Business
Greene County Bancorp, Inc.
Greene County Bancorp, Inc. (the "Company") was organized at the direction
of the Board of Trustees of The Bank of Greene County (formerly Greene County
Savings Bank) (the "Bank") for the purpose of acting as the holding company of
the Bank. The Company's assets consist primarily of the outstanding capital
stock of the Bank and cash and investments of $3.1 million, representing a
portion of the net proceeds from the Company's stock offering completed December
30, 1998. At June 30, 2000, 892,919 shares of the Company's common stock, par
value $0.10 per share, were held by the public, 107,600 shares were held as
Treasury stock and 1,152,316 shares were held by Greene County Bancorp, MHC, the
Company's mutual holding company (the "Mutual Company"). The Company's principal
business is overseeing and directing the business of the Bank and investing the
net stock offering proceeds retained by it.
At June 30, 2000, the Company had consolidated total assets of $167.7
million, consolidated total deposits of $133.5 million and consolidated total
equity of $23.6 million.
The Company's administrative office is located at 302 Main Street,
Catskill, New York 12414-1317. Its telephone number is (518) 943-2600.
The Bank of Greene County
The Bank was organized in 1889 as The Building and Loan Association of
Catskill, a New York-chartered savings and loan association. In 1974, the Bank
converted to a New York mutual savings bank under the name Greene County Savings
Bank. In conjunction with the reorganization and the offering completed in
December 1998, the Bank changed its name to The Bank of Greene County. The
Bank's deposits are insured by the Bank Insurance Fund, as administered by the
Federal Deposit Insurance Corporation ("FDIC"), up to the maximum amount
permitted by law. The Bank's principal business consists of attracting retail
deposits from the general public in the areas surrounding its branches and
investing those deposits, together with funds generated from operations and
borrowings, primarily in one- to four-family residential mortgage loans,
commercial real estate loans, consumer loans and commercial business loans. In
addition, the Bank invests a significant portion of its assets in investment
securities and mortgage- and asset-backed securities. The Bank's revenues are
derived principally from the interest on its mortgage, consumer and commercial
loans and securities, and servicing fees and service charges and fees collected
on its deposit accounts. The Bank's primary sources of funds are deposits, and
principal and interest payments on loans and investment and mortgage- and
asset-backed securities. During fiscal year 2000, the Bank borrowed $10.0
million from the Federal Home Loan Bank.
The Bank's administrative office is located at 302 Main Street, Catskill,
New York 12414-1317. Its telephone number is (518) 943-2600.
Greene County Bancorp, MHC
The Mutual Company was formed in December 1998 as part of the Bank's
mutual holding company reorganization. The Mutual Company is a New
York-chartered mutual holding company. The Mutual Company owns 53.5% of the
common stock of the Company. The Mutual Company is subject to regulation and
supervision by the FRB, FDIC and the New York State Banking Department (the
"Department"). The Mutual Company does not engage in any business activity other
than to hold the Company's common stock and to invest any liquid assets of the
Mutual Company.
The Mutual Company's administrative office is located at 302 Main Street,
Catskill, New York 12414-1317, and its telephone number at that address is (518)
943-2600.
Forward Looking Statements
This Annual Report on Form 10-KSB may contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1993, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that involve substantial risks and uncertainties.
When used in this
<PAGE>
report, or in the documents incorporated by reference herein, the words
"anticipate", "believe", "estimate", "expect", "intend", "may", and similar
expressions identify such forward-looking statements. Actual results,
performance or achievements could differ materially from those contemplated,
expressed or implied by the forward-looking statements contained herein. These
forward-looking statements are based largely on the expectations of the Company
or the Company's management and are subject to a number of risks and
uncertainties, including but not limited to economic, competitive, regulatory,
and other factors affecting the Company's operations, markets, limited to
economic, competitive, regulatory, and other factors affecting the Company's
operations, markets, products and services, as well as expansion strategies and
other factors discussed elsewhere in this report filed by the company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control.
Market Area
The Bank has been, and intends to continue to be, a community-oriented
bank offering a variety of financial services to meet the needs of the
communities it serves. The Bank currently operates five full-service banking
offices in Greene County, New York. The Bank's primary deposit gathering area is
currently concentrated around the areas within Greene County where its
full-service banking offices are located, namely the towns of Catskill,
Greenville, Cairo, Coxsackie and Tannersville. The Bank received approval from
the FDIC and New York State Banking Department to open a branch in Westerlo, New
York. The branch is expected to open in January 2001. The Bank's primary lending
area also has historically been concentrated in Greene County, New York and to a
lesser extent the contiguous counties. The Westerlo branch will be located in
southern Albany County, which is contiguous to Greene County, New York.
As of the 2000 census estimates, the County population was 48,300 persons,
indicating an overall increase in the population level of 1.3% since the last
census conducted in 1990. Greene County is primarily rural and the major
industry consists of tourism associated with the several ski facilities and
festivals located in the Catskill Mountains. The County has no concentrations of
manufacturing industry. Greene County is contiguous to the
Albany-Schenectady-Troy metropolitan statistical area. The close proximity of
Greene County to the city of Albany has made it a "bedroom" community for
persons working in the Albany capital area. Greene County and the Coxsackie
Correctional Facilities are the largest employers in the County. Other large
employers include the Hunter Mountain and Ski Windham resort areas, the
Catskill, Cairo-Durham, Greenville and Coxsackie-Athens Central School Districts
and Stiefel Labs, Inc.
Competition
The Bank faces significant competition both in making loans and in
attracting deposits. The Bank's market area has a high density of financial
institutions, many of which are branches of significantly larger institutions
that have greater financial resources than the Bank, and all of which are
competitors of the Bank to varying degrees. The Bank's competition for loans
comes principally from commercial banks, savings banks, savings and loan
associations, mortgage-banking companies, credit unions, insurance companies and
other financial service companies. Its most direct competition for deposits has
historically come from commercial banks, savings banks, savings and loan
associations and credit unions. The Bank faces additional competition for
deposits from non-depository competitors such as the mutual fund industry,
securities and brokerage firms and insurance companies. Competition may also
increase as a result of the lifting of restrictions on the interstate operations
of financial institutions.
Competition is likely to increase as a result of the recent enactment of
the Gramm-Leach-Bliley Act of 1999, which eases restrictions on entry into the
financial services market by insurance companies and securities firms. Moreover,
to the extent that these changes permit banks, securities firms and insurance
companies to affiliate, the financial services industry could experience further
consolidation. This could result in a growing number of larger financial
institutions competing in the Bank's primary market area that offer a wider
variety of financial services than the Bank currently offers. Competition for
deposits, for the origination of loans and the provision of other financial
services may limit the Bank's growth and adversely impact its profitability in
the future.
Recent Developments
On August 15, 2000, the Board of Directors of the Company unanimously
approved a Plan of Charter Conversion by which the Company will convert its
charter from a Delaware bank holding company to a federal mid-tier holding
company. This action was taken by the Board of Directors after evaluating the
advantage and disadvantages of
2
<PAGE>
the federal mid-tier holding company charter as compared to its current Delaware
bank holding company charter. However, the Bank itself will retain its New York
state savings bank charter.
The charter conversion will have no impact on the operations of the
Company or the Bank. However, following the charter conversion, the Office of
Thrift Supervision will regulate the Company as a savings and loan holding
company instead as a bank holding company of the Federal Reserve Board. A
detailed description of the reasons for the charter conversion as well as other
matters related to the charter conversion are contained in the proxy statement
distributed in connection with the 2000 Annual Meeting of Shareholders. The
proxy statement is incorporated by reference into this Annual Report on Form
10-KSB.
Lending Activities
General. The principal lending activity of the Bank is the origination,
for retention in its portfolio, of fixed-rate and adjustable-rate mortgage loans
collateralized by one- to four-family residential real estate located within its
primary market area. To a lesser extent, the Bank also originates commercial
real estate loans, home equity loans, consumer loans and commercial business
loans.
In an effort to manage the interest rate risk associated with its
predominantly fixed-rate loan portfolio, the Bank maintains high levels of
liquidity, and, where possible, matches the funding of fixed-rate residential
mortgages with lower-costing core savings accounts. In addition, in originating
residential fixed-rate loans, the Bank has been successful in marketing and
originating such loans with 15-year terms. Currently, the substantial majority
of residential fixed-rate loans are being originated with 15-year terms.
3
<PAGE>
Loan Portfolio Composition. Set forth below is selected information
concerning the composition of the Bank's loan portfolio in dollar amounts and in
percentages (before deductions for deferred fees and costs, unearned discounts
and allowances for losses) as of the dates indicated.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------
2000 1999 1998
------------------ ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family .......... $ 80,696 81.54% $ 74,145 80.74% $ 64,705 79.69%
Commercial ................... 4,702 4.75 3,985 4.33 4,521 5.57
Construction and land ........ 616 0.62 1,654 1.80 798 0.98
Multi-family ................. 1,253 1.27 841 0.92 388 0.48
-------- ----- -------- ----- -------- -----
Total real estate loans ..... 87,267 88.18 80,625 87.79 70,412 86.72
Consumer Loans:
Installment (1) .............. 4,865 4.92 4,761 5.18 4,172 5.14
Home equity .................. 4,631 4.68 4,689 5.11 4,727 5.82
Passbook ..................... 490 0.50 525 0.57 544 0.67
-------- ----- -------- ----- -------- -----
Total consumer loans ........ 9,986 10.10 9,975 10.86 9,443 11.63
Commercial Business Loans ....... 1,707 1.72 1,230 1.35 1,336 1.65
-------- ----- -------- ----- -------- -----
Total consumer and commercial
business loans .............. 11,693 11.82 11,205 12.21 10,779 13.28
-------- ----- -------- ----- -------- -----
Total gross loans ........... 98,960 100.00% 91,830 100.00% 81,191 100.00%
====== ====== ======
Less:
Deferred fees and discounts .. (275) (240) (203)
Allowance for losses ......... (866) (792) (728)
-------- -------- --------
Total loans receivable, net . $ 97,819 $ 90,798 $ 80,260
======== ======== ========
</TABLE>
----------
(1) Includes direct automobile loans (on both new and used automobiles) and
personal loans.
4
<PAGE>
The following table shows the composition of the Bank's loan portfolio by
fixed-rate and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------
2000 1999 1998
------------------- ---------------------- -------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate Loans:
Real Estate Loans:
One- to four-family ....... $ 69,360 70.08% $ 60,137 65.49% $ 46,028 56.69%
Commercial ................ 2,840 2.87 1,542 1.68 1,436 1.77
Construction and land ..... 616 0.62 1,654 1.80 760 0.94
Multi-family .............. 1,124 1.14 699 0.76 157 0.19
-------- ------ -------- ------ -------- ------
Total real estate loans . 73,940 74.71 64,032 69.73 48,381 59.59
-------- ------ -------- ------ -------- ------
Consumer Loans:
Installment (1) ........... 4,865 4.92 4,761 5.18 4,172 5.14
Home equity ............... 4,631 4.68 4,689 5.11 4,727 5.82
Passbook .................. 490 0.50 525 0.57 544 0.67
Commercial Business Loans ... 1,707 1.72 1,230 1.35 1,336 1.65
-------- ------ -------- ------ -------- ------
Total fixed-rate loans .... 85,633 86.53 75,237 81.94 59,160 72.87
-------- ------ -------- ------ -------- ------
Adjustable-Rate Loans:
Real estate loans:
One- to four-family ....... 11,336 11.46 14,008 15.25 18,677 23.00
Multi-family .............. 129 0.13 142 0.15 231 0.28
Commercial real estate .... 1,862 1.88 2,443 2.66 3,085 3.80
Construction and land ..... -- -- -- -- 38 0.05
-------- ------ -------- ------ -------- ------
Total adjustable rate loans .... 13,327 13.47 16,593 18.06 22,031 27.13
-------- ------ -------- ------ -------- ------
Total loans ............. 98,960 100.00% 91,830 100.00% 81,191 100.00%
-------- ====== -------- ====== -------- ======
Less:
Deferred fees and discounts . (275) (240) (203)
Allowance for loan losses ... (866) (792) (728)
-------- -------- --------
Total loans receivable, net $ 97,819 $ 90,798 $ 80,260
======== ======== ========
</TABLE>
----------
(1) Includes direct automobile loans (on both new and used automobiles) and
personal loans.
One- to Four-Family Residential Loans. The Bank's primary lending activity
is the origination, for retention in the Bank's portfolio, of one- to
four-family residential mortgage loans collateralized by property located in the
Bank's primary lending area. Generally, one- to four-family residential mortgage
loans are made in amounts up to 80% of the lesser of the appraised value or
purchase price of the property. However, the Bank will originate one- to
four-family residential mortgage loans with loan-to-value ratios of up to 95%,
with private mortgage insurance required (except for qualifying first-time home
buyers, for whom the Bank will originate loans with 90% loan-to-value ratios
without private mortgage insurance). Generally, residential mortgage loans are
originated for terms of up to 30 years, though in recent years the Bank has been
successful in marketing and originating the substantial majority of such loans
with 15-year terms. One- to four-family fixed-rate loans are offered with both a
monthly and bi-weekly payment feature. The Bank generally requires fire and
casualty insurance, the establishment of a mortgage escrow account for the
payment of real estate taxes, hazard and flood insurance, as well as title
insurance on all properties collateralizing real estate loans made by the Bank.
5
<PAGE>
The Bank currently offers one- to four-family residential mortgage loans
with fixed and adjustable interest rates. Originations of fixed-rate loans
versus adjustable-rate loans are monitored on an ongoing basis and are affected
significantly by the level of market interest rates, customer preference, the
Bank's interest rate gap position, and loan products offered by the Bank's
competitors. Particularly, in a relatively low interest rate environment,
borrowers may prefer fixed-rate loans to adjustable-rate loans. Single-family
residential real estate loans often remain outstanding for significantly shorter
periods than their contractual terms because borrowers may refinance or prepay
loans at their option. The average length of time that the Bank's single-family
residential mortgage loans remain outstanding varies significantly depending
upon trends in market interest rates and other factors.
The Bank's adjustable-rate mortgage ("ARM") loans currently provide for
maximum rate adjustments of 150 basis points per year and 600 basis points over
the term of the loan. The Bank offers ARM loans with initial interest rates that
are below market, referred to as "teaser rates." However, in underwriting such
loans, borrowers are qualified at the full index rate. The Bank's ARM loans
adjust every year. After origination, the interest rate on such ARM loans is
reset based upon a contractual spread or margin above the average yield on
one-year United States Treasury securities, adjusted to a constant maturity (the
"U.S. Treasury Constant Maturity Index"), as published weekly by the Federal
Reserve Board.
ARM loans decrease the risk associated with changes in market interest
rates by periodically re-pricing, but involve other risks because as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. At the same time, the
marketability of the underlying collateral may be adversely affected by higher
interest rates. Upward adjustment of the contractual interest rate is also
limited by the maximum periodic and lifetime interest rate adjustment permitted
by the terms of the ARM loans, and, therefore, is potentially limited in
effectiveness during periods of rapidly rising interest rates. At June 30, 2000,
11.46% of the Bank's loan portfolio consisted of one- to four-family residential
loans with adjustable interest rates.
The Bank originates construction/permanent loans to homeowners for the
purpose of construction of primary and secondary residences. The Bank issues a
commitment and has one closing which encompasses both the construction phase and
permanent financing. The construction phase is a maximum term of six months and
the interest charged is the rate as stated in the commitment, with loan-to-value
ratios of up to 89% (or up to 95% with private mortgage insurance), of the
completed project. The Bank generally does not originate loans collateralized by
undeveloped land.
Construction lending generally involves a greater degree of risk than
other one- to four-family mortgage lending. The repayment of the construction
loan is, to a great degree, dependent upon the successful and timely completion
of the construction of the subject property. Construction delays may further
impair the borrower's ability to repay the loan.
The Bank's residential mortgage loan originations are generally obtained
from the Bank's loan representatives operating in its branch offices through
their contacts with existing or past loan customers, depositors of the Bank,
referrals from attorneys and accountants who refer loan applications from the
general public, and local realtors.
All one- to four-family residential mortgage loans originated by the Bank
include "due-on-sale" clauses, which give the Bank the right to declare a loan
immediately due and payable in the event that, among other things, the borrower
sells or otherwise disposes of the real property subject to the mortgage and the
loan is not repaid.
At June 30, 2000, $80.7 million, or 81.5% of the Bank's loan portfolio,
consisted of one- to four-family residential mortgage loans. Approximately
$538,000 of such loans (representing 11 loans) were included in nonperforming
loans as of that date.
Commercial Real Estate and Multifamily Loans. At June 30, 2000, $4.7
million, or 4.75%, of the total loan portfolio consisted of commercial real
estate loans. Office buildings, mixed-use properties and other commercial
properties collateralize commercial real estate loans. The Bank originates
fixed- and adjustable-rate commercial mortgage loans with maximum terms of up to
20 years. The maximum loan-to-value ratio of commercial real estate loans is
generally 75%. At June 30, 2000, the largest commercial mortgage loan had a
principal balance of $455,250 and was collateralized by a furniture
warehouse/showroom.
In underwriting commercial real estate loans, the Bank reviews the
expected net operating income generated by the real estate to ensure that it is
generally at least 110% of the amount of the monthly debt service; the age and
condition of the
6
<PAGE>
collateral; the financial resources and income level of the borrower; and the
borrower's business experience. The Bank's policy is to require personal
guarantees from all commercial real estate borrowers.
Loans collateralized by commercial real estate generally are larger than
one- to four-family residential loans and involve a greater degree of risk.
Commercial mortgage loans often involve large loan balances to single borrowers
or groups of related borrowers. Payments on these loans depend to a large degree
on the results of operations and management of the properties or underlying
businesses, and may be affected to a greater extent by adverse conditions in the
real estate market or the economy in general. Accordingly, the nature of
commercial real estate loans makes them more difficult for Bank management to
monitor and evaluate.
The Bank originates a limited number of multi-family loans, which totaled
$1.3 million, or 1.27% of the Bank's total loans at June 30, 2000. Multi-family
loans are generally collateralized by apartment buildings and condominiums
located in the Bank's primary market area. The Bank's underwriting practices and
the risks associated with multi-family loans do not differ substantially from
that of commercial real estate loans.
Consumer Loans. The Bank's consumer loans consist of direct loans on new
and used automobiles, personal loans (either secured or unsecured), home equity
loans, and other consumer loans (consisting of passbook loans, unsecured home
improvement loans and recreational vehicle loans). At June 30, 2000, consumer
loans totaled $10.0 million, or 10.10% of the total loan portfolio. Consumer
loans (other than home equity loans) are originated at fixed rates with terms to
maturity of one to five years.
Consumer loans generally have shorter terms and higher interest rates than
one- to four-family mortgage loans. In addition, consumer loans expand the
products and services offered by the Bank to better meet the financial services
needs of its customers. Consumer loans generally involve greater credit risk
than residential mortgage loans because of the difference in the underlying
collateral. Repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance because of the
greater likelihood of damage, loss or depreciation in the underlying collateral.
The remaining deficiency often does not warrant further substantial collection
efforts against the borrower beyond obtaining a deficiency judgment. In
addition, consumer loan collections depend on the borrower's personal financial
stability. Furthermore, the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount
that can be recovered on such loans.
The Bank's underwriting procedures for consumer loans includes an
assessment of the applicant's credit history and an assessment of the
applicant's ability to meet existing and proposed debt obligations. Although the
applicant's creditworthiness is the primary consideration, the underwriting
process also includes a comparison of the value of the security to the proposed
loan amount. The Bank underwrites its consumer loans internally, which the Bank
believes limits its exposure to credit risks associated with loans underwritten
or purchased from brokers and other external sources.
The Bank offers fixed-rate home equity loans that are collateralized by
the borrower's residence. Home equity loans are generally underwritten with
terms not to exceed 15 years and under the same criteria that the Bank uses to
underwrite one- to four-family fixed rate loans. Home equity loans may be
underwritten with terms not to exceed 15 years and with a loan to value ratio of
80% when combined with the principal balance of the existing mortgage loan. The
maximum amount of a home equity loan may not exceed $50,000 unless approved by
the Board of Directors. The Bank appraises the property collateralizing the loan
at the time of the loan application (but not thereafter) in order to determine
the value of the property collateralizing the home equity loans. At June 30,
2000, the outstanding balance of home equity loans totaled $4.6 million, or
4.68% of the Bank's total loan portfolio.
Commercial Business Loans. The Bank also originates commercial business
loans up to 10 years at fixed rates. The Bank attributes growth in this
portfolio to its ability to offer borrowers senior management attention as well
as timely and local decision-making on commercial loan applications. The
decision to grant a commercial business loan depends primarily on the
creditworthiness and cash flow of the borrower (and any guarantors) and
secondarily on the value of and ability to liquidate the collateral that
consists of receivables, inventory and equipment. The Bank generally requires
annual financial statements, tax returns and personal guarantees from the
commercial business borrowers. The Bank also generally requires an appraisal of
any real estate that collateralizes the loan. At June 30, 2000, the Bank had
$1.7 million of commercial business loans representing 1.72% of the total loan
portfolio. On such date, the average balance of the Bank's commercial business
loans was approximately $27,100. The largest commercial business loan had a
balance of $295,000 and represented
7
<PAGE>
a line of credit to support cash flow requirements for a local business and
consulting group. At June 30, 2000, the Bank's commercial loan portfolio
included 63 loans collateralized by real estate, fire trucks, or other
equipment.
Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential and commercial real estate lending. Real estate
lending is generally considered to be collateral based, with loan amounts based
on predetermined loan to collateral values, and liquidation of the underlying
real estate collateral is viewed as the primary source of repayment in the event
of borrower default. Although commercial business loans may be collateralized by
equipment or other business assets, the liquidation of collateral in the event
of a borrower default is often an insufficient source of repayment because
equipment and other business assets may be obsolete or of limited use, among
other things. Accordingly, the repayment of a commercial business loan depends
primarily on the creditworthiness of the borrower (and any guarantors), while
liquidation of collateral is a secondary and often insufficient source of
repayment.
Loan Maturity Schedule. The following table sets forth certain information
as of June 30, 2000 regarding the amount of loans maturing or re-pricing in the
Bank's portfolio. Adjustable-rate loans are included in the period in which
interest rates are next scheduled to adjust rather than the period in which they
contractually mature, and fixed-rate loans are included in the period in which
the final contractual repayment is due.
The following table illustrates the future maturities of such loans at
June 30, 2000.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
Within Through Through Through Through Beyond
1 Year 3 Years 5 Years 10 Years 20 Years 20 Years Total
------ ------- ------- -------- -------- -------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One-to-four family $ 9,696 $ 2,470 $ 544 $ 9,843 $39,643 $18,500 $80,696
Home equity 54 536 975 1,667 1,399 -- 4,631
Multi-family 203 42 -- 75 758 175 1,253
Commercial 1,663 245 235 625 1,842 92 4,702
Construction and land loans -- -- 18 -- 176 422 616
------- ------- ------- ------- ------- ------- -------
Total real estate loans $11,616 $ 3,293 $ 1,772 $12,210 $43,818 $19,189 $91,898
------- ------- ------- ------- ------- ------- -------
Consumer loans 932 2,393 1,786 165 79 -- 5,355
Commercial business loans 170 599 595 343 -- -- 1,707
------- ------- ------- ------- ------- ------- -------
Total loan portfolio $12,718 $ 6,285 $ 4,153 $12,718 $43,897 $19,189 $98,960
======= ======= ======= ======= ======= ======= =======
</TABLE>
The total amount of the above loans due after June 30, 2001 which have
predetermined interest rates is $83.8 million while the total amount of loans
due after such date which have adjustable interest rates is $2.4 million.
8
<PAGE>
The following table sets forth the loan origination and repayment
activities of the Bank for the periods indicated. The Bank did not purchase or
sell any loans during the periods presented.
Years Ended June 30,
-----------------------------------
2000 1999 1998
------- ------- -------
(In Thousands)
Originations by Type:
Adjustable rate:
One- to four-family ............... $ 541 $ 1,214 $ 742
Commercial real estate ............ 51 131 45
Multi-family ...................... 17 -- --
------- ------- -------
Total adjustable rate ......... 609 1,345 787
------- ------- -------
Fixed rate:
One- to four-family ............... 15,910 28,455 15,030
Commercial real estate ............ 1,682 90 150
Construction and land ............. 4,512 3,347 2,930
Home equity ....................... 1,610 2,227 2,064
Installment ....................... 4,317 4,782 3,194
Commercial business ............... 2,235 388 350
Passbook .......................... 450 540 492
Multi-family ...................... 483 -- --
------- ------- -------
Total fixed-rate .............. 31,199 39,829 24,210
------- ------- -------
Total loans originated ........ $31,808 $41,174 $24,997
------- ------- -------
Repayments:
One- to four-family ............... 9,900 19,777 12,075
Commercial real estate ............ 1,016 757 1,017
Construction and land ............. 5,550 2,491 2,629
Home equity ....................... 1,668 2,265 1,390
Installment ....................... 4,213 4,193 2,780
Commercial business ............... 1,758 494 46
Passbook .......................... 485 559 455
Multi-family ...................... 88 -- --
------- ------- -------
Total principal repayments ...... 24,678 30,536 20,392
------- ------- -------
Net increase (decrease) ........... $ 7,130 $10,638 $ 4,605
======= ======= =======
Loan Approval Procedures and Authority. The Board of Directors establishes
the lending policies and loan approval limits of the Bank. Loan officers
generally have the authority to originate mortgage loans, consumer loans and
commercial business loans up to amounts established for each lending officer.
The Executive Committee or the full Board of Directors must approve all
residential loans over $200,000.
The Board annually approves independent appraisers used by the Bank. For
larger loans, the Bank may require an environmental site assessment to be
performed by an independent professional for all non-residential mortgage loans.
It is the Bank's policy to require hazard insurance on all mortgage loans.
9
<PAGE>
Loan Origination Fees and Other Income. In addition to interest earned on
loans, the Bank receives loan origination fees. Such fees and costs vary with
the volume and type of loans and commitments made and purchased, principal
repayments, and competitive conditions in the mortgage markets, which in turn
respond to the demand and availability of money.
In addition to loan origination fees, the Bank also receives other income
that consists primarily of deposit transaction account service charges and late
charges. The Bank also collects fees for originating savings bank life insurance
on an agency basis. Finally, the Bank installs, maintains and services merchant
bankcard equipment for local retailers and is paid a percentage of the
transactions processed using such equipment.
Loans-to-One Borrower. Savings banks are subject to the same loans-to-one
borrower limits as those applicable to national banks, which under current
regulations restrict loans to one borrower to an amount equal to 15% of
unimpaired capital and unimpaired surplus on an unsecured basis, and an
additional amount equal to 10% of unimpaired capital and unimpaired surplus if
the loan is secured by readily marketable collateral (generally, financial
instruments and bullion, but not real estate). The Bank's policy provides that
loans to one borrower (or related borrowers) should not exceed 10% of the Bank's
capital and reserves.
At June 30, 2000, the largest aggregate amount loaned by the Bank to one
borrower consisted of $457,000, which consisted of a commercial real estate loan
of $423,000 and a commercial business loan of $34,000. The loans comprising the
lending relationship were performing in accordance with their terms.
Delinquencies and Classified Assets
Collection Procedures. A computer generated late notice is sent and a 2%
late charge is assessed when a payment is 15 days late. A second notice will be
incorporated in the next month's billing notice, approximately 21 days after the
due date of the first late payment. Accounts thirty days or more past due will
be reviewed by the collection manager and receive individual attention as
required, including collection letters and telephone calls. The collection
manager in order to avoid further deterioration will closely monitor accounts
that have a history of consistent late or delinquent payments. Accounts two or
more payments past due are reported to the Board of Directors for consideration
of foreclosure action. With respect to consumer loans, a late notice is sent and
a late charge is assessed 10 days (or, in the case of home equity loans, 15
days) after payment is due. A second notice is sent 15 days (in the case of home
equity loans, 25 days) thereafter. The collection manager reviews loans 30 days
or more past due individually, following up with collection letters and
telephone calls. Accounts three or more payments past due are reported to the
Board of Directors and are subject to legal action and repossession of
collateral.
Loans Past Due and Non-performing Assets. Loans are reviewed on a regular
basis. Management determines that a loan is impaired or non-performing when it
is probable that at least a portion of the loan will not be collected due to an
irreversible deterioration in the financial condition of the borrower or the
value of the underlying collateral. When a loan is determined to be impaired,
the measurement of the loan is based on present value of estimated future cash
flows, except that all collateral-dependent loans are measured for impairment
based on the fair value of the collateral. Management places loans on nonaccrual
status once the loans have become over 90 days delinquent. Nonaccrual is defined
as a loan in which collectibility is questionable and therefore interest on the
loan will no longer be recognized on an accrual basis. Instead, such interest is
recognized on a cash basis until such time as the borrower has brought the loan
to performing status. A loan does not have to be 90 days delinquent in order to
be classified as non-performing. Other real estate owned is also considered
non-performing. At June 30, 2000, the Bank had non-performing loans of $823,000
and a ratio of non-performing loans to total loans of 0.68%.
Real estate acquired as a result of foreclosure or by deed in lieu of
foreclosure is classified as real estate owned ("REO") until such time as it is
sold. When real estate is acquired through foreclosure or by deed in lieu of
foreclosure, it is recorded at its fair value, less estimated costs of disposal.
If the value of the property is less than the loan, less any related specific
loan loss provisions, the difference is charged against the allowance for loan
losses. Any subsequent write-down of REO is charged against earnings. At June
30, 2000, the Bank's REO totaled $151,000 and its ratio of non-performing assets
to total assets was 0.49%.
10
<PAGE>
The following table sets forth delinquencies in the Bank's loan portfolio
at June 30, 2000. When a loan is delinquent 90 days or more, the Bank fully
reverses all accrued interest thereon and ceases to accrue interest thereafter.
For all the dates indicated, the Bank did not have any material restructured
loans.
<TABLE>
<CAPTION>
Percent of
Dollar Loan
Number Amount Category
------ ------ --------
<S> <C> <C> <C>
60 to 89 Days Delinquent
Real estate:
One to four family 7 $ 486,668 99.8%
Commercial -- -- --
Construction and land loans -- -- --
Multi-family -- -- --
Consumer 1 1,059 0.2%
Commercial business -- -- --
--- ---------- -----
Total loan delinquency 60 to 89 days .. 8 487,727 100.0%
90 Days and Over Delinquent
Real estate:
One to four family 9 471,909 72.9%
Commercial 3 155,002 23.9%
Construction and land loans -- -- --
Multi-family -- -- --
Consumer 6 20,801 3.2%
Commercial business -- -- --
--- ---------- -----
Total loan delinquency 90 days and over 18 647,712 100.0%
--- ---------- -----
Total Loans Delinquent Over 60 Days
Real estate
One to four family 16 958,577 84.4%
Commercial 3 155,002 13.7%
Construction and land loans -- -- --
Multi-family --- -- --
Consumer 7 21,860 1.9%
Commercial business -- -- --
--- ---------- -----
Total Loans Delinquent over 60 Days 26 $1,135,439 100.0%
=== ========== =====
</TABLE>
11
<PAGE>
Nonaccrual Loans and Nonperforming Assets. The following table sets forth
information regarding nonaccrual loans and other non-performing assets. The Bank
had no accruing loans delinquent more than 90 days at June 30, 2000, 1999, or
1998.
June 30,
----------------------------
2000 1999 1998
---- ---- ------
(Dollars in Thousands)
Nonaccruing loans:
One- to four-family ..................... $496 $487 $ 666
Commercial real estate .................. 155 166 91
Consumer ................................ 21 15 20
Commercial business ..................... -- -- 107
---- ---- ------
Total ................................. 672 668 884
---- ---- ------
Real Estate Owned:
One- to four-family ..................... 42 53 --
Multi-family ............................ -- -- --
Nonfarm, nonresidential properties ...... 109 124 124
---- ---- ------
Total ................................. $151 $177 $ 124
---- ---- ------
Total non-performing assets ................ $823 $845 $1.008
==== ==== ======
Total as a percentage of total assets ...... 0.49% 0.56% 0.72%
During the year ended June 30, 2000, gross interest income of $35,000
would have been recorded on nonaccrual loans under their original terms if the
loans had been current throughout the period. No interest income was recorded on
nonaccrual loans or on accruing loans more than 90 days delinquent during the
year ended June 30, 2000.
12
<PAGE>
Classification of Assets. Consistent with regulatory guidelines, the Bank
provides for the classification of loans and other assets considered to be of
lesser quality. Such ratings coincide with the "Substandard", "Doubtful" and
"Loss" classifications used by federal regulators in their examination of
financial institutions. Generally, an asset is considered Substandard if it is
inadequately protected by the current net worth and paying capacity of the
obligors and/or the collateral pledged. Substandard assets include those
characterized by the distinct possibility that the insured financial institution
will sustain some loss if the deficiencies are not corrected. Assets classified
as Doubtful have all the weaknesses inherent in assets classified Substandard
with the added characteristic that the weaknesses present make collection or
liquidation in full, on the basis of currently existing facts, highly
questionable and improbable. Assets classified as Loss are those considered
uncollectible and of such little value that their continuance as assets without
the establishment of a specific loss reserve and/or charge-off is not warranted.
Assets that do not currently expose the insured financial institutions to
sufficient risk to warrant classification in one of the aforementioned
categories but otherwise possess weaknesses are designated "Special Mention."
When the Bank classifies problem assets as either Substandard or Doubtful,
it establishes general valuation allowances or "loss reserves" in an amount
deemed prudent by management. General allowances represent loss allowances that
have been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When the Bank classifies problem assets as "Loss," it
is required either to establish a specific allowance for losses equal to 100% of
the amount of assets so classified, or to charge-off such amount. The Bank's
determination as to the classification of its assets and the amount of its
valuation allowance is subject to review by its regulatory agencies, which can
order the establishment of additional general or specific loss allowances. The
Bank reviews its portfolio monthly to determine whether any assets require
classification in accordance with applicable regulations.
On the basis of management's review of its assets, at June 30, 2000, the
Bank had classified a total of $329,000 of loans as follows:
At June 30, 2000
----------------
(In Thousands)
Special mention...................... $ 104
Substandard.......................... 225
Doubtful assets...................... --
Loss assets.......................... --
------
Total classified loans............. $ 329
General loss allowance............... $ 537
------
Total loss allowance............... $ 866
------
Specific loss allowance.............. $ --
======
Charge-offs.......................... $ 66
------
13
<PAGE>
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in the loan portfolio, the composition of the loan portfolio, specific
impaired loans and current economic conditions. Such evaluation, which includes
a review of all loans on which full collectibility may not be reasonably
assured, considers among other matters, the estimated net realizable value or
the fair value of the underlying collateral, economic conditions, historical
loan loss experience and other factors that warrant recognition in providing for
an adequate loan loss allowance. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowance for loan losses and valuation of REO. Such agencies may require the
Bank to recognize additions to the allowance based on their judgment about
information available to them at the time of their examination. The allowance
for loan losses is increased by a provision for loan losses (which results in a
charge to noninterest expense) and is reduced by net charge-offs. At June 30,
2000, the total allowance was $866,443, which amounted to 0.89% of total net
loans receivable and 128.93% of nonperforming loans. Management will continue to
monitor and modify the level of the allowance for loan losses in order to
maintain it at a level which management considers adequate to provide for
potential loan losses. For the year ended June 30, 2000, the Bank's charge offs
amounted to $66,000. For the years ended June 30, 1999 and 1998, the Bank's
charge-offs amounted to $126,000 each year.
The Bank requires an environmental site assessment to be performed by an
independent professional for all non-residential mortgage loans. It is also the
Bank's policy to require title and hazard insurance on all mortgage loans. In
addition, the Bank may require borrowers to make payments to a mortgage escrow
account for the payment of property taxes. Any exceptions to the Bank's loan
policies must be made in accordance with the limitations set out in each policy.
Typically, the exception authority ranges from the Chief Lending Officer to the
Board of Directors, depending on the size and type of loan involved.
Analysis of the Allowance For Loan Losses. The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.
Years Ended June 30,
----------------------
2000 1999 1998
---- ----- -----
(Dollars in Thousands)
Balance at beginning of period ...................... $792 $ 728 $ 723
---- ----- -----
Charge-offs:
One- to four-family .............................. -- 3 18
Commercial real estate ........................... -- -- 70
Consumer ......................................... 66 20 28
Commercial business .............................. -- 103 10
---- ----- -----
Total charge-offs ............................ 66 126 126
---- ----- -----
Recoveries:
One- to four-family .............................. -- 6 --
Consumer ......................................... 5 4 11
---- ----- -----
Total recoveries ............................. 5 10 11
---- ----- -----
Net charge-offs ..................................... 61 116 115
Additions charged to operations ..................... 135 180 120
---- ----- -----
Balance at end of period ............................ $866 $ 792 $ 728
==== ===== =====
Ratio of net charge-offs during the period to
average loans outstanding during the period ...... 0.06% 0.15% 0.15%
==== ===== =====
Ratio of net charge-offs during the period to
average non-performing assets .................... 7.18% 11.33% 12.74%
==== ===== =====
14
<PAGE>
Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the allowance for loan losses by loan category for the periods
indicated. The allowance is allocated to each loan category based on historical
loss experience and economic conditions. The unallocated portions of the
allowance represent general reserves for unused lines of credit and inherent
risk associated with increased volume in lending transactions
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ----------------------------- ------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Loan in Each Loan in Each Loans in Each
Amount of Amounts Category Amount of Amounts Category Amounts Amounts Category
Loan Loss by to Total Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans Allowance Category Loans
--------- -------- ----- --------- -------- ----- --------- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family .............. $442 $80,696 81.5% $484 $74,145 80.7% $318 $64,705 79.7%
Commercial real estate ........... 105 4,702 4.8 88 3,985 4.3 78 4,521 5.6
Construction and land ............ 4 616 0.6 6 1,654 1.8 2 798 1.0
Multi-family ..................... 22 1,253 1.3 10 841 0.9 1 388 0.5
Consumer ......................... 121 4,865 4.9 80 4,761 5.2 59 4,172 5.1
Home equity loans ................ 1 4,631 4.7 -- 4,689 5.1 14 4,727 5.8
Passbook loans ................... 1 490 0.5 -- 525 0.6 5 544 0.7
Commercial business .............. 72 1,707 1.7 55 1,230 1.4 62 1,336 1.6
Specific ......................... -- -- -- -- -- -- 104 -- --
Unallocated ...................... 98 -- -- 69 -- -- 85 -- --
---- ------ ----- ---- ------- ----- ---- ------- -----
Total allowance for loan losses $866 98,960 100.0% $792 $91,830 100.0% $728 $81,191 100.0%
==== ====== ===== ==== ======= ===== ==== ======= =====
</TABLE>
Securities Investment Activities
Given the Bank's substantial portfolio of fixed-rate residential mortgage
loans, the Bank maintains high balances of liquid investments for the purpose of
reducing interest rate risk. The Board of Directors establishes the securities
investment policy. This policy dictates that investment decisions will be made
based on the safety of the investment, liquidity requirements, potential
returns, cash flow targets, and desired risk parameters. In pursuing these
objectives, management considers the ability of an investment to provide
earnings consistent with factors of quality, maturity, marketability and risk
diversification.
The Bank's current policies generally limit securities investments to U.S.
Government and agency securities, federal funds sold, municipal bonds, corporate
debt obligations and mutual funds. The mutual fund in which the Bank invests has
portfolios comprised primarily of adjustable-rate mortgage-backed securities and
was purchased by the Bank to provide interest-earning liquid funds and an
adjustable interest rate. In addition, the Bank's policy permits investments in
mortgage-backed securities, including securities issued and guaranteed by Fannie
Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations ("CMOs").
The Bank's current securities investment strategy utilizes a risk management
approach of diversified investing among three categories: short-, intermediate-
and long-term. The emphasis of this approach is to increase overall investment
securities yields while managing interest rate risk. The Bank will only invest
in securities rated A or higher by at least one nationally recognized rating
agency (or securities attaining such rating as a result of guarantees by
insurance companies), with the exception of occasional investments in smaller
non-rated local bonds. The Bank does not engage in any derivative or hedging
transactions, such as interest rate swaps or caps.
At June 30, 2000, the Bank had $44.8 million in investment securities, or
26.7% of total assets. SFAS No. 115 requires the Bank to designate its
securities as held to maturity, available for sale or trading, depending on the
Bank's ability and intent regarding its investments. As of June 30, 2000, the
entire investment securities portfolio was classified as available for sale. At
June 30, 2000, the Bank's mortgage-backed securities portfolio totaled $6.1
million, or 3.6% of total assets and the Bank's asset-backed securities
portfolio totaled $5.0 million, or 3.0% of total assets.
15
<PAGE>
Book Value of Investment Securities. The following table sets forth
certain information regarding the investment securities and other interest
earning assets as of the dates indicated.
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------
2000 1999 1998
---------------- -------------- ---------------
Book % of Book % of Book % of
Value Total Value Total Value Total
----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Investment securities available for sale:
U.S. government securities ............... $ 4,684 10.3% $ 7,437 14.8% $13,190 27.6%
Federal agency obligations ............... 5,190 11.4 5,515 10.9 8,620 18.0
Municipal bonds .......................... 9,904 21.7 10,359 20.5 7,479 15.7
Mortgage-backed securities ............... 6,000 13.1 5,233 10.4 5,189 10.9
Asset-backed securities .................. 4,916 10.8 8,445 16.7 6,324 13.2
Corporate debt securities ................ 12,811 28.0 11,479 22.8 3,799 7.9
Equity securities ........................ 139 0.3 87 0.2 81 0.2
Mutual funds ............................. 1,164 2.5 1,107 2.2 2,320 4.9
Other .................................... -- -- -- -- 75 0.1
------- ----- ------- ----- ------- -----
Subtotal ............................. 44,808 98.1 49,662 98.5% 47,077 98.5%
FHLB stock .................................. 879 1.9 766 1.5 700 1.5
------- ----- ------- ----- ------- -----
Total investment securities and FHLB stock $45,687 100.0% $50,428 100.0% $47,777 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
Investment Portfolio Maturities. The following table sets forth the
scheduled maturities, book value, market value and weighted average yields
(unadjusted for tax effects) for the Bank's investment portfolio at June 30,
2000.
<TABLE>
<CAPTION>
At June 30, 2000
-----------------------------------------------------------------
Less Than 1 to 5 5 to 10 Over Total
1 Year Year Years 10 Years Securities
Book Book Book Book Book Market
Value Value Value Value Value Value
----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. government securities $2,996 $ 1,000 $ 688 $ -- $ 4,684 $ 4,684
Federal agency obligations 1,041 3,154 995 -- 5,190 5,190
Municipal bonds .......... 1,104 3,993 4,807 -- 9,904 9,904
Mortgage-backed securities 627 2,005 911 2,457 6,000 6,000
Asset-backed securities .. -- 1,317 191 3,408 4,916 4,916
Corporate debt securities 1,486 11,325 -- -- 12,811 12,811
Equity securities ........ 131 -- -- 8 139 139
Mutual funds ............. -- -- -- 1,164 1,164 1,164
FHLB stock ............... 879 -- -- -- 879 879
Other .................... -- -- -- -- -- --
------ ------- ------ ------ ------- -------
Total securities ......... $8,264 $22,794 $7,592 $7,037 $45,687 $45,687
====== ======= ====== ====== ======= =======
Weighted average yield ... 5.95% 6.01% 5.08% 6.55% 5.88%
====== ======= ====== ====== =======
</TABLE>
16
<PAGE>
Mortgage-Backed and Asset-Backed Securities. The Bank purchases
mortgage-backed securities in order to: (i) generate positive interest rate
spreads with minimal administrative expense; (ii) lower the Bank's credit risk
as a result of the guarantees provided by Freddie Mac, Fannie Mae, and GNMA; and
(iii) increase liquidity. At June 30, 2000, mortgage-backed securities
(including CMOs) totaled $6.1 million or 3.6% of total assets, all of which were
classified as available for sale. At June 30, 2000, all of the mortgage-backed
securities were fixed rate. The mortgage-backed securities portfolio had coupon
rates ranging from 5.25% to 6.6%, a weighted average yield of 5.75% and a
weighted average life (including pre-payment assumptions) of 7.0 years at June
30, 2000. The estimated market value of the Bank's mortgage-backed securities at
June 30, 2000 was $6.0 million, which was $133,300 less than cost.
The pooling of mortgages and the issuance of a security with an interest
rate that is based on the interest rate on the underlying mortgages create
mortgage-backed securities. Mortgage-backed securities typically represent a
participation interest in a pool of single-family or multi-family mortgages,
although the Bank focuses its investments on mortgage-backed securities backed
by single-family mortgages. The issuers of such securities (generally U.S.
Government agencies and government sponsored enterprises, including Fannie Mae,
Freddie Mac and GNMA) pool and resell the participation interests in the form of
securities to investors, such as the Bank, and guarantee the payment of
principal and interest to these investors. Mortgage-backed securities generally
yield less than the loans that underlie such securities because of the cost of
payment guarantees and credit enhancements. In addition, mortgage-backed
securities are usually more liquid than individual mortgage loans and may be
used to collateralize certain liabilities and obligations of the Bank.
Investments in mortgage-backed securities involve a risk that actual
prepayments will be greater than estimated over the life of the security, which
may require adjustments to the amortization of any premium or accretion of any
discount relating to such instruments thereby altering the net yield on such
securities. There is also reinvestment risk associated with the cash flows from
such securities or in the event such securities are prepaid. In addition, the
market value of such securities may be adversely affected by changes in interest
rates.
Management reviews prepayment estimates periodically to ensure that
prepayment assumptions are reasonable considering the underlying collateral for
the securities at issue and current interest rates and to determine the yield
and estimated maturity of the Bank's mortgage-backed securities portfolio. Of
the Bank's $6.1 million mortgage-backed securities portfolio at June 30, 2000,
$2.7 million with a weighted average yield of 5.3% had contractual maturities
within five years, $0.96 million with a weighted average yield of 5.5% had
contractual maturities of five to ten years and the remaining $2.4 million with
a weighted average yield of 6.3% had contractual maturities more than 10 years.
However, the actual maturity of a security may be less than its stated maturity
due to prepayments of the underlying mortgages. Prepayments that are faster than
anticipated may shorten the life of the security and may result in a loss of any
premiums paid and thereby reduce the net yield on such securities. Although
prepayments of underlying mortgages depend on many factors, the difference
between the interest rates on the underlying mortgages and the prevailing
mortgage interest rates generally is the most significant determinant of the
rate of prepayments. During periods of declining mortgage interest rates,
refinancing generally increases and accelerates the prepayment of the underlying
mortgages and the related security. Under such circumstances, the Bank may be
subject to reinvestment risk because, to the extent that the Bank's securities
prepay faster than anticipated, the Bank may not be able to reinvest the
proceeds of such repayments and prepayments at a comparable rate of return.
Conversely, in a rising interest rate environment prepayments may decline,
thereby extending the estimated life of the security and depriving the Bank of
the ability to reinvest cash flows at the increased rates of interest.
At June 30, 2000, the Bank's portfolio of asset-backed securities totaled
$5.0 million, or 3.0% of total assets, all of which were classified as available
for sale. At June 30, 2000, all of the asset-backed securities were fixed rate.
The portfolio had coupon rates ranging form 6.00% to7.15%, a weighted average
yield of 6.40% and a weighted average life (including prepayment assumptions) of
6.2 years at June 30, 2000. The estimated market value of the Bank's
asset-backed securities portfolio at June 30, 2000 was $4.9 million, which was
$88,000 less than cost at such date.
Asset-backed securities are a type of debt security collateralized by
various loans and assets including: automobile loans, equipment leases, credit
card receivables, home equity and improvement loans, manufactured housing,
student loans and other consumer loans. In the case of the Bank, its
asset-backed securities are collateralized by automobile loans and
second-mortgage loans.
Asset-backed securities provide the Bank with a broad selection of fixed-income
alternatives, most with higher credit ratings and less downgrade risk than
corporate bonds and more stable cash flows than mortgage related securities.
Prepayments and
17
<PAGE>
structure risk of asset-backed securities are less of a concern than CMO
securities due to the shorter maturities of the underlying collateral promoting
greater stability of payments.
Of the Bank's $5.0 million portfolio of asset-backed securities at June
30, 2000, $1.3 million with a weighted average yield of 6.1% had contractual
maturities within 5 years, $0.2 million with a weighted average yield of 6.4%
had contractual maturities of 5 to 10 years, and the remaining $3.5 million with
a weighted average yield of 6.5% had contractual maturities of more than 10
years.
Sources of Funds
General. Deposits, repayments and prepayments of loans and securities,
proceeds from sales of securities, and proceeds from maturing securities and
cash flows from operations are the primary sources of the Bank's funds for use
in lending, investing and for other general purposes.
Deposits. The Bank offers a variety of deposit accounts with a range of
interest rates and terms. The Bank's deposit accounts consist of savings, NOW
accounts, non-interest bearing checking accounts and money market accounts, and
certificates of deposit. The Bank also offers IRAs.
At June 30, 2000, deposits totaled $133.5 million. At June 30, 2000, the
Bank had a total of $51.9 million in certificates of deposit, of which $34.9
million had maturities of one year or less. Although the Bank has a significant
portion of its deposits in shorter-term certificates of deposit, management
monitors activity on these accounts and, based on historical experience and the
Bank's current pricing strategy, believes it will retain a large portion of such
accounts upon maturity.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition. Deposits are obtained predominantly from the areas in which the
Bank's branch offices are located. The Bank relies primarily on competitive
pricing of its deposit products and customer service and long-standing
relationships with customers to attract and retain these deposits; however,
market interest rates and rates offered by competing financial institutions
significantly affect the Bank's ability to attract and retain deposits. The Bank
uses traditional means of advertising its deposit products, including radio,
television, and print media. It generally does not solicit deposits from outside
its market area. While the Bank accepts certificates of deposit in excess of
$100,000, they are not subject to preferential rates. The Bank does not actively
solicit such deposits, as they are more difficult to retain than core deposits.
Historically, the Bank has not used brokers to obtain deposits.
The following table sets forth the deposit activities of the Bank for the
periods indicated.
Years Ended
June 30,
-------------------------------------------
2000 1999 1998
---- ---- ----
(Dollars in Thousands)
Opening balance ............. $127,999 $124,011 $117,542
Deposits .................... 333,442 289,926 228,799
Withdrawals ................. 332,441 291,331 227,002
Interest credited ........... 4,460 5,393 4,672
Ending balance .............. 133,460 127,999 124,011
Net increase ................ 5,461 3,988 6,469
Percent increase ............ 4.27% 3.22% 5.59%
18
<PAGE>
The following table indicates the amount of the Bank's certificates of deposit
by time remaining until maturity as of June 30, 2000.
<TABLE>
<CAPTION>
3 Months 3 to 6 7 to 12 Over
or Less Months Months 12 Months Total
------- ------- ------- --------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000 $3,358 $ 9,046 $18,309 $14,983 $45,696
Certificates of deposit of $100,000 or more 333 1,040 2,811 2,065 6,249
------ ------- ------- ------- -------
Total certificates of deposit ............. $3,691 $10,086 $21,120 $17,048 $51,945
====== ======= ======= ======= =======
</TABLE>
The following tables set forth information, by various rate categories,
regarding the balance of deposits by types of deposit for the periods indicated.
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------------
2000 1999 1998
------------------- ------------------- ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Transactions and Savings Deposits:
Demand accounts ............... $ 12,344 9.2% $ 9,468 7.4% $ 7,514 6.1%
Savings accounts .............. 53,892 40.4 54,670 42.6 33,412 27.3
NOW accounts .................. 9,090 6.8 7,744 6.1 6,187 5.1
Money market accounts ......... 6,189 4.6 3,940 3.1 19,609 16.0
-------- ------ -------- ------ -------- ------
Total Non-Certificates ........... 81,515 61.0% 75,822 59.2% 66,722 54.5%
======== ====== ======== ====== ======== ======
Certificates:
0.00-3.99% .................... 77 0.1 -- -- 612 0.5
4.00-5.99% .................... 51,868 38.9 52,084 40.7 46,733 38.2
6.00-7.99% .................... -- -- 93 0.1 8,257 6.8
8.00% and over ................ -- -- -- -- -- --
-------- ------ -------- ------ -------- ------
Total Certificates ............... 51,945 39.0 52,177 40.8 55,602 45.5
-------- ------ -------- ------ -------- ------
Total Deposits ................... $133,460 100.00% $127,999 100.00% $122,324 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
19
<PAGE>
The following table sets forth the amount and remaining maturities of the Bank's
certificates of deposit accounts at June 30, 2000.
<TABLE>
<CAPTION>
0.00- 4.00- 6.00% or Percent
3.99% 5.99% greater Total of Total
----- ----- ------- ----- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Certificate accounts maturing in quarter ending:
30-Sep-00 .................................. $-- $ 3,691 $ -- $ 3,691 7.1%
31-Dec-00 .................................. -- 10,086 -- 10,086 19.4
31-Mar-01 .................................. 5 11,871 -- 11,876 22.9
30-Jun-01 .................................. 10 9,234 -- 9,244 17.8
30-Sep-01 .................................. -- 7,132 -- 7,132 13.7
31-Dec-01 .................................. 62 3,623 -- 3,685 7.1
31-Mar-02 .................................. -- 1,441 -- 1,441 2.8
30-Jun-02 .................................. -- 1,155 -- 1,155 2.2
30-Sep-02 .................................. -- 708 -- 708 1.4
31-Dec-02 .................................. -- 844 -- 844 1.6
31-Mar-03 .................................. -- 661 -- 661 1.3
30-Jun-03 .................................. -- 531 -- 531 1.0
Thereafter ................................. -- 891 -- 891 1.7
--- ------- ----- ------- -----
Total ...................................... $77 $51,868 $ -- $51,945 100.0%
=== ======= ===== ======= =====
Percent of total ........................... 0.1% 99.9% 0.0%
=== ======= =====
</TABLE>
Borrowed Funds. In the event that the Bank requires funds beyond its
ability to generate them internally, additional sources of funds are available
through Federal Home Loan Bank ("FHLB"). At June 30, 2000 the Bank had available
an Overnight Line of Credit and a One-Month Overnight Repricing Line of Credit,
each in the amount of $7,446,400 with the FHLB. Interest on the line is
determined at the time of borrowing. In addition to the overnight line of credit
program, the Bank also has access to the FHLB's Term Advance Program under which
it can borrow at various terms and interest rates. Residential mortgages are
pledged by the Bank as collateral to secure the Bank's line of credit and term
borrowing.
At June 30, 2000, the Bank had the following borrowings:
Amount Rate Maturity Date
------ ---- -------------
(Dollars in Thousands)
$5,000 6.29% Fixed 08/29/2000
$2,500 6.82% Fixed 09/02/2004
$2,500 6.80% Fixed 10/04/2005
Personnel
As of June 30, 2000, the Bank had 70 full-time employees and 16 part-time
employees. A collective bargaining unit does not represent the employees and the
Bank considers its relationship with its employees to be good.
FEDERAL AND STATE TAXATION
Federal Taxation
General. The Mutual Company, the Company and the Bank are subject to
federal income taxation in the same general manner as other corporations, with
some exceptions discussed below. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and is
not a comprehensive description of the tax rules applicable to the Bank.
20
<PAGE>
Method of Accounting. For federal income tax purposes, the Bank currently
reports its income and expenses on the accrual method of accounting and uses a
tax year ending June 30 for filing its consolidated federal income tax returns.
The Small Business Protection Act of 1996 (the "1996 Act") eliminated the use of
the reserve method of accounting for bad debt reserves by savings institutions,
effective for taxable years beginning after 1995.
Bad Debt Reserves. Prior to the 1996 Act, the Bank was permitted to
establish a reserve for bad debts and to make annual additions to the reserve.
These additions could, within specified formula limits, be deducted in arriving
at the Bank's taxable income. As a result of the 1996 Act, the Bank must use the
specific charge off method in computing its bad debt deduction beginning with
its 1996 Federal tax return. In addition, the federal legislation requires the
recapture (over a six year period) of the excess of tax bad debt reserves at
December 31, 1995 over those established as of December 31, 1987. The amount of
such reserve subject to recapture as of June 30, 2000, was approximately
$108,000.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
New federal legislation eliminated these thrift related recapture rules.
However, under current law, pre-1988 reserves remain subject to recapture should
the Bank make certain non-dividend distributions.
At June 30, 2000, the Bank's total federal pre-1988 reserve was
approximately $2.1 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision has
been made.
Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at a rate of
20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. Net operating losses can
offset no more than 90% of AMTI. Certain payments of alternative minimum tax may
be used as credits against regular tax liabilities in future years. The Bank has
not been subject to the alternative minimum tax and has no such amounts
available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carry back net
operating losses to the preceding two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after August 5, 1997. At June 30, 2000, the Bank had no
net operating loss carryforwards for federal income tax purposes.
Corporate Dividends-Received Deduction. The Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The Mutual Company owns less than 80% of the
outstanding Common Stock of the Company. As such, the Mutual Company is not
permitted to file a consolidated federal income tax return with the Company and
the Bank. The corporate dividends-received deduction is 80% in the case of
dividends received from corporations with which a corporate recipient does not
file a consolidated return, and corporations which own less than 20% of the
stock of a corporation distributing a dividend may deduct only 70% of dividends
received or accrued on their behalf.
State Taxation
New York State Taxation - General. The Company and the Bank report income
on a combined calendar year basis to New York State. The New York State
franchise tax on banking corporations is imposed in an amount equal to the
greater of (a) 9% of "entire net income" allocable to New York State (b) 3% of
"alternative entire net income" allocable to New York State (c) 0.01% of the
average value of assets allocable to New York State or (d) $250. Entire net
income is based on federal taxable income, subject to certain modifications.
Alternative entire net income is equal to entire net income without certain
modifications. The Mutual Company files a separate New York State franchise tax
return.
Bad Debt Reserves. The Bank is allowed to utilize the reserve method of
accounting for New York State franchise tax purposes and is required to maintain
two reserve accounts the Reserve for Losses on Nonqualifying Loans (the "NY NQL
Reserve") and the Reserve for Losses on Qualifying Real Property Loans (the "NY
QRPL Reserve"). The addition to the NY NQL Reserve must be computed under the
"experience method". The addition to the NY QRPL Reserve may be computed under
either the experience method or the "percentage of taxable income method" (the
"PTI method"). The deduction under the PTI method is equal to 32% of entire net
income (before the deduction for the bad debt reserve addition),
21
<PAGE>
which must first be allocated to the NY NQL Reserve. The balance, if any, is the
allowable addition to the NY QRPL reserve, subject to a limitation based upon 6%
of Qualifying Real Property Loans ("QRPL"). As of December 31, 1997, the Bank's
NY QRPL Reserve was subject to this limitation.
Recapture of New York State Bad Debt Reserves. If the Bank ceases to
qualify as a "thrift institution" (as defined in the New York State tax law), or
fails to hold at least 60% of its assets in "Qualifying Assets", it will no
longer be entitled to use the reserve method and must recapture into entire net
income a portion of its NY QRPL Reserve. The amount subject to recapture is
generally equal to the excess of the NY QRPL Reserve over the federal QRPL
Reserve as of December 31, 1995. The amount of the Bank's NY QRPL Reserve
subject to recapture is approximately $1.8 million. Since it is the Bank's
intention to continue to qualify as a thrift institution and to meet the 60%
Qualifying Asset test, a deferred tax liability has not been established for the
$162,000 New York State tax that would result from such failure.
Net Operating Loss Deductions. For New York State franchise tax purposes,
the Bank is not entitled to carry back or forward net operating losses ("NOLs")
incurred in taxable years ending before January 1, 2001. NOLs incurred in
taxable years beginning on or after January 1, 2001 can be carried forward to
the succeeding 20 taxable years. No carryback of NOLs will be permitted.
Corporate Dividends-Received Deduction. Similar to the federal rules, the
Company and the Bank file a combined New York State franchise tax report and
intercompany dividends will be eliminated. However, the Mutual Company does not
own the requisite percentage (generally 80% or more) of the common stock of the
Company necessary to file on a combined basis with the Company. As long as the
Mutual Company owns more than 50% of the common stock of the Company, it is
eligible for a 60% dividends-received deduction. The Mutual Company is not
entitled to any dividends-received deduction if it owns 50% or less of the
common stock of the Company.
Delaware State Taxes. As a Delaware holding company not earning income in
Delaware, the Company will be exempt from Delaware corporate income tax, but is
required to file an annual report with, and pay an annual franchise tax to, the
State of Delaware.
REGULATION
General
The Bank is a New York-chartered savings bank and the FDIC through the BIF
insures its deposit accounts up to applicable limits. The Bank is subject to
extensive regulation by the Department, as its chartering agency, and by the
FDIC, as its deposit insurer. The Bank is required to file reports with, and is
periodically examined by, the FDIC and the New York Superintendent of Banking
concerning its activities and financial condition and must obtain regulatory
approvals prior to entering into certain transactions, including, but not
limited to, mergers with or acquisitions of other banking institutions. The Bank
is a member of the FHLB of New York and is subject to certain regulations by the
Federal Home Loan Bank System. Both the Company and the Mutual Company, as bank
holding companies, are subject to regulation by the Federal Reserve Board and
are required to file reports with the Federal Reserve Board. Any change in such
regulations, whether by the Department, the FDIC, or the Federal Reserve Board
could have a material adverse impact on the Bank, the Company, or the Mutual
Company.
Certain of the regulatory requirements applicable to the Bank, the Company
and the Mutual Company are referred to below or elsewhere herein.
New York Bank Regulation
FDIC regulations and other federal law and regulations limit the exercise
by an FDIC-insured savings bank of the lending and investment powers under the
New York State Banking Law. In particular, the applicable provisions of New York
State Banking Law and regulations governing the investment authority and
activities of an FDIC insured state-chartered savings bank have been
substantially limited by the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") and the FDIC regulations issued pursuant thereto.
22
<PAGE>
The Bank derives its lending, investment and other authority primarily
from the applicable provisions of New York State Banking Law and the regulations
of the Department, as limited by FDIC regulations. Under these laws and
regulations, savings banks, including the Bank, may invest in real estate
mortgages, consumer and commercial loans, certain types of debt securities,
including certain corporate debt securities and obligations of federal, state
and local governments and agencies, certain types of corporate equity securities
and certain other assets. Under the statutory authority for investing in equity
securities, a savings bank may invest up to 7.5% of its assets in corporate
stock, with an overall limit of 5% of its assets invested in common stock.
Investment in the stock of a single corporation is limited to the lesser of 2%
of the outstanding stock of such corporation or 1% of the savings bank's assets,
except as set forth below. Such equity securities must meet certain earnings
ratios and other tests of financial performance. A savings bank's lending powers
are not subject to percentage of assets limitations, although there are limits
applicable to single borrowers. A savings bank may also, pursuant to the
"leeway" power, make investments not otherwise permitted under the New York
State Banking Law. This power permits investments in otherwise impermissible
investments of up to 1% of assets in any single investment, subject to certain
restrictions and to an aggregate limit for all such investments of up to 5% of
assets. Additionally, in lieu of investing in such securities in accordance with
and reliance upon the specific investment authority set forth in the New York
State Banking Law, savings banks are authorized to elect to invest under a
"prudent person" standard in a wider range of investment securities as compared
to the types of investments permissible under such specific investment
authority. However, in the event a savings bank elects to utilize the "prudent
person" standard, it will be unable to avail itself of the other provisions of
the New York State Banking Law and regulations, which set forth specific
investment authority. The Bank has not elected to conduct its investment
activities under the "prudent person" standard. A savings bank may also exercise
trust powers upon approval of the Department.
New York State chartered savings banks may also invest in subsidiaries
under their service corporation investment authority. A savings bank may use
this power to invest in corporations that engage in various activities
authorized for savings banks, plus any additional activities, which may be
authorized by the Department. Investment by a savings bank in the stock, capital
notes and debentures of its service corporations is limited to 3% of the bank's
assets, and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets. Furthermore, New
York banking regulations impose requirements on loans which a bank may make to
its executive officers and directors and to certain corporations or partnerships
in which such persons have equity interests. These requirements include, but are
not limited to, requirements that (i) certain loans must be approved in advance
by a majority of the entire board of trustees and the interested party must
abstain from participating directly or indirectly in the voting on such loan,
(ii) the loan must be on terms that are not more favorable than those offered to
unaffiliated third parties, and (iii) the loan must not involve more than a
normal risk of repayment or present other unfavorable features.
Insurance of Accounts and Regulation by the FDIC
The Bank is a member of the BIF, which is administered by the FDIC. The
FDIC insures deposits up to applicable limits and such insurance is backed by
the full faith and credit of the U.S. Government. As insurer, the FDIC imposes
deposit insurance premiums and is authorized to conduct examinations of and to
require reporting by FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious risk to the FDIC. The FDIC also has the
authority to initiate enforcement actions against savings banks, after giving
the Superintendent an opportunity to take such action, and may terminate the
deposit insurance if it determines that the institution has engaged or is
engaging in unsafe or unsound practices, or is in an unsafe or unsound
condition.
Regulatory Capital Requirements
The Federal Reserve Board and the FDIC have adopted risk-based capital
guidelines for bank holding companies and banks under their supervision. The
guidelines establish a systematic analytical framework that makes regulatory
capital requirements more sensitive to differences in risk profiles among
banking organizations. The Company and the Bank are required to maintain certain
levels of regulatory capital in relation to regulatory risk-weighted assets. The
ratio of such regulatory capital to regulatory risk-weighted assets is referred
to as the Bank's "risk-based capital ratio." Risk-based capital ratios are
determined by allocating assets and specified off-balance sheet items to four
risk-weighted categories ranging from 0% to 100%, with higher levels of capital
being required for the categories perceived as representing greater risk.
These guidelines divide the Company's and the Bank's capital into two
tiers. The first tier ("Tier I") includes common equity, retained earnings,
certain non-cumulative perpetual preferred stock (excluding auction rate issues)
and
23
<PAGE>
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions. Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which at least 4% must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (Tier I capital to adjusted total assets as specified in
the regulations). These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth. All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The
FDIC may, however, set higher leverage and risk-based capital requirements on
individual institutions when particular circumstances warrant. Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.
At June 30, 2000, the Company and the Bank exceeded all regulatory capital
requirements.
Standards for Safety and Soundness
The federal banking agencies have adopted a final regulation and
Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") to implement the safety and soundness standards required under
federal law. The Guidelines set forth the safety and soundness standards that
the federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The standards set forth
in the Guidelines address internal controls and information systems; internal
audit system; credit underwriting; loan documentation; interest rate risk
exposure; asset growth; and compensation, fees and benefits. The agencies also
adopted additions to the Guidelines, which require institutions to examine asset
quality and earnings standards. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by federal
law. The final regulations establish deadlines for the submission and review of
such safety and soundness compliance plans.
Limitations on Dividends and Other Capital Distributions
The FDIC has the authority to use its enforcement powers to prohibit a
savings bank from paying dividends if, in its opinion, the payment of dividends
would constitute an unsafe or unsound practice. Federal law also prohibits the
payment of dividends by a bank that will result in the bank failing to meet its
applicable capital requirements on a pro forma basis. New York law restricts the
Bank from declaring a dividend, which would reduce its capital below (i) the
amount required to be maintained by state and federal law and regulations, or
(ii) the amount of the Bank's liquidation account established in connection with
the December 1998 Reorganization. New York law also prescribes that dividends
declared by a stock savings bank in any calendar year shall not exceed the total
of its net profits for that year combined with its retained net profits of the
preceding two years, plus any required transfer to surplus or for the retirement
of any preferred stock, unless approved by the Superintendent.
Prompt Corrective Action
The federal banking agencies have promulgated regulations to implement the
system of prompt corrective action required by federal law. Under the
regulations, a bank shall be deemed to be (i) "well capitalized" if it has total
risk-based capital of 10.0% or more, has a Tier I risk-based capital ratio of
6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not
subject to any written capital order or directive; (ii) "adequately capitalized"
if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized"; (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is
less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is
less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. Federal law
and regulations also specify circumstances under which a federal banking agency
may
24
<PAGE>
reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution to comply with supervisory actions
as if it were in the next lower category (except that the FDIC may not
reclassify a significantly undercapitalized institution as critically
undercapitalized).
Based on the foregoing, the Bank is currently classified as a "well
capitalized" savings institution.
Activities and Investments of Insured State-Chartered Banks
Federal law generally limits the activities and equity investments of
FDIC-insured, state-chartered banks to those that are permissible for national
banks, notwithstanding state laws. Under regulations dealing with equity
investments, an insured state bank generally may not, directly or indirectly,
acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank. An insured state bank is not prohibited from,
among other things, (i) acquiring or retaining a majority interest in a
subsidiary; (ii) investing as a limited partner in a partnership the sole
purpose of which is the direct or indirect investment in the acquisition,
rehabilitation, or new construction of a qualified housing project, provided
that such limited partnership investments may not exceed 2% of the bank's total
assets; (iii) acquiring up to 10% of the voting stock of a company that solely
provides or reinsures directors', trustees', and officers' liability insurance
coverage or bankers' blanket bond group insurance coverage for insured
depository institutions; and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met.
Federal law and FDIC regulations permit certain exceptions to the
foregoing limitation. For example, certain state-chartered banks, such as the
Bank, may continue to invest in common or preferred stock listed on a National
Securities Exchange or the National Market System of NASDAQ, and in the shares
of an investment company registered under the Investment Company Act of 1940, as
amended. As of June 30, 2000, the Bank had no securities pursuant to this
exception.
Transactions with Affiliates
Under current federal law, transactions between depository institutions
and their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary. In a holding company context, at a minimum, the parent holding
companies of a savings bank and any companies that are controlled by such parent
holding company are affiliates of the savings bank. Generally, Section 23A
limits the extent to which the savings bank or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of such
savings bank's capital stock and surplus, and contains an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus. The term "covered transaction" includes the making of loans
or other extensions of credit to an affiliate; the purchase of assets from an
affiliate, the purchase of, or an investment in, the securities of an affiliate;
the acceptance of securities of an affiliate as collateral for a loan or
extension of credit to any person; or issuance of a guarantee, acceptance, or
letter of credit on behalf of an affiliate. Section 23A also establishes
specific collateral requirements for loans or extensions of credit to, or
guarantees, acceptances on letters of credit issued on behalf of an affiliate.
Section 23B requires that covered transactions and a broad list of other
specified transactions be on terms substantially the same, or no less favorable,
to the savings bank or its subsidiary as similar transactions with
nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers, and stockholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank. Any "interested"
director may not participate in the voting. The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers and principal stockholders must generally be made on terms
substantially the same as offered in comparable transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional limitations on loans
to executive officers.
25
<PAGE>
Holding Company Regulation
Federal Bank Holding Company Regulation. The Company, as the sole
shareholder of the Bank, is a bank holding company. Bank holding companies are
subject to comprehensive regulation and regular examinations by the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and the regulations of the Federal Reserve Board. The Federal Reserve
Board also has extensive enforcement authority over bank holding companies,
including, among other things, the ability to assess civil money penalties, to
issue cease and desist or removal orders and to require that a holding company
divest subsidiaries (including its bank subsidiaries). In general, enforcement
actions may be initiated for violations of law and regulations and unsafe or
unsound practices.
The Company is subject to capital adequacy guidelines for bank holding
companies (on a consolidated basis) are substantially similar to those of the
FDIC for the Bank. The Company's stockholders' equity exceeded these
requirements as of June 30, 2000.
Under Federal Reserve Board policy, a bank holding company must serve as a
source of strength for its subsidiary bank. Under this policy the Federal
Reserve Board may require, and has required in the past, a holding company to
contribute additional capital to an undercapitalized subsidiary bank.
Under the BHCA, a bank holding company must obtain Federal Reserve Board
approval before: (i) acquiring, directly or indirectly, ownership or control of
any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (ii) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(iii) merging or consolidating with another bank holding company.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or
from engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by Federal Reserve Board regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The list of activities permitted by the Federal Reserve
Board includes, among other things, operating a savings association, mortgage
company, finance company, credit card company or factoring company; performing
certain data processing operations; providing certain investment and financial
advice; underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers.
Interstate Banking and Branching. Federal law allows the Federal Reserve
Board to approve an application of an adequately capitalized and adequately
managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state. The Federal Reserve Board may not approve
the acquisition of the bank that has not been in existence for the minimum time
period (not exceeding five years) specified by the statutory law of the host
state. The Federal Reserve Board is prohibited from approving an application if
the applicant (and its depository institution affiliates) controls or would
control more than 10% of the insured deposits in the United States of America or
30% or more of the deposits in the target bank's home state or in any state in
which the target bank maintains a branch. Individual states continue to have
authority to limit the percentage of total insured deposits in the state which
may be held or controlled by a bank or bank holding company to the extent such
limitation does not discriminate against out-of-state banks or bank holding
companies. Individual states may also waive the 30% state-wide concentration
limit referred to above.
Additionally, the federal banking agencies are authorized to approve
interstate merger transactions without regard to whether such transaction is
prohibited by the law of any state, unless the home state of one of the banks
"opted out" by adopting a law which applies equally to all out-of-state banks
and expressly prohibits merger transactions involving out-of-state banks.
Interstate acquisitions of branches are permitted only if the law of the state
in which the branch is located permits such acquisitions. In response to
Riegle-Neal, the State of New York enacted laws allowing interstate mergers and
branching on a reciprocal basis.
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<PAGE>
Federal law authorizes the FDIC to approve interstate branching de novo by
national and state banks, respectively, only in states which specifically allow
for such branching. The appropriate federal banking agencies are required to
prescribe regulations which prohibit any out-of-state bank from using the
interstate branching authority primarily for the purpose of deposit production.
The FDIC and Federal Reserve Board have adopted such regulations. These
regulations include guidelines to ensure that interstate branches operated by an
out-of-state bank in a host state are reasonably helping to meet the credit
needs of the communities which they serve. Should the FDIC determination that a
bank interstate branch is not reasonably helping to meet the credit needs of the
communities serviced by an interstate branch, the FDIC is authorized to close
the interstate branch or not permit the bank to open a new branch in the state
in which the bank previously opened an interstate branch.
Dividends. The Federal Reserve Board has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the Federal
Reserve Board's view that a bank holding company should pay cash dividends only
to the extent that the holding company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent with the holding company's capital needs, asset quality and
overall financial condition. The Federal Reserve Board also indicated that it
would be inappropriate for a company experiencing serious financial problems to
borrow funds to pay dividends. Furthermore, under the prompt corrective action
regulations adopted by the Federal Reserve Board, the Federal Reserve Board may
prohibit a bank holding company from paying any dividends if the holding
company's bank subsidiary is classified as "undercapitalized".
Bank holding companies are required to give the Federal Reserve Board
prior written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of their consolidated
net worth. The Federal Reserve Board may disapprove such a purchase or
redemption if it determines that the proposal would constitute an unsafe or
unsound practice or would violate any law, regulation, Federal Reserve Board
order, or any condition imposed by, or written agreement with, the Federal
Reserve Board. This notification requirement does not apply to any company that
meets the well-capitalized standard for commercial banks, has a safety and
soundness examination rating of at least a "2" and is not subject to any
unresolved supervisory issues.
New York State Bank Holding Company Regulation. In addition to the federal
bank holding company regulations, a bank holding company organized or doing
business in New York State also may be subject to regulation under the New York
State Banking Law. The term "bank holding company," for the purposes of the New
York State Banking Law, is defined generally to include any person, company or
trust that directly or indirectly either controls the election of a majority of
the directors or owns, controls or holds with power to vote more than 10% of the
voting stock of a bank holding company or, if the Company is a banking
institution, another banking institution, or 10% or more of the voting stock of
each of two or more banking institutions. In general, a bank holding company
controlling, directly or indirectly, only one banking institution will not be
deemed to be a bank holding company for the purposes of the New York State
Banking Law. Under New York State Banking Law, the prior approval of the Banking
Board is required before: (1) any action is taken that causes any company to
become a bank holding company; (2) any action is taken that causes any banking
institution to become or be merged or consolidated with a subsidiary of a bank
holding company; (3) any bank holding company acquires direct or indirect
ownership or control of more than 5% of the voting stock of a banking
institution; (4) any bank holding company or subsidiary thereof acquires all or
substantially all of the assets of a banking institution; or (5) any action is
taken that causes any bank holding company to merge or consolidate with another
bank holding company. Additionally, certain restrictions apply to New York State
bank holding companies regarding the acquisition of banking institutions which
have been chartered five years or less and are located in smaller communities.
Officers, directors and employees of New York State bank holding companies are
subject to limitations regarding their affiliation with securities underwriting
or brokerage firms and other bank holding companies and limitations regarding
loans obtained from its subsidiaries. Although the Company is not a bank holding
company for purposes of New York State law, any future acquisition of ownership,
control, or the power to vote 10% or more of the voting stock of another bank or
bank holding company would cause it to become such.
Dividend Waivers by the Mutual Holding Company. It has been the policy of
many mutual holding companies to waive the receipt of dividends declared by any
savings institution subsidiary or its holding company. The Federal Reserve Board
imposes certain conditions on the waiver by the Mutual Company of dividends paid
on the Common Stock. In particular, the Mutual Company is expected to be
required to obtain prior Federal Reserve Board approval before it may
27
<PAGE>
waive any dividends. As of the date hereof, management does not believe that the
Federal Reserve Board has given its approval to any waiver of dividends by any
mutual holding company that has requested its approval.
The Federal Reserve Board requires that the amount of any waived dividends
are not available for payment to ("Minority Stockholders") and must be excluded
from capital for purposes of calculating dividends payable to stockholders other
than the Mutual Company. Moreover, the cumulative amount of waived dividends
must be maintained in a restricted capital account, which would be added to any
liquidation account of the Bank, and would not be available for distribution to
Minority Stockholders. If the Mutual Company converts to stock form in the
future, any waived dividends would reduce the percentage of the converted
company's shares of Common Stock issued to Minority Stockholders in connection
with any such transaction.
The Mutual Company has not to date waived dividends declared by the
Company. The Mutual Company's decision as to whether or not to waive a
particular dividend, if such waiver is approved by the Federal Reserve Board,
depends on a number of factors, including the Mutual Company's capital needs,
the investment alternatives available to the Mutual Company as compared to those
available to the Company, and regulatory approvals. There can be no assurance
(i) that the Mutual Company will waive dividends paid by the Company, (ii) that
the Federal Reserve Board will approve any dividend waivers by the Mutual
Company or (iii) of the terms that may be imposed by the Federal Reserve Board
on any dividend waiver.
Conversion of the Mutual Company to Stock Form. New York law, regulations
of the Department and the Plan of Reorganization permit the Mutual Company to
convert from the mutual to the capital stock form of organization (a "Conversion
Transaction"). There can be no assurance when, if ever, a Conversion Transaction
will occur, and the board of trustees has no current intention or plan to
undertake a Conversion Transaction. In a Conversion Transaction, certain
depositors of the Bank would receive the right to subscribe for additional
shares of the resulting entity. In a Conversion Transaction, each share of
Common Stock outstanding immediately prior to the completion of the Conversion
Transaction held by persons other than the Mutual Company would be automatically
converted into and become the right to receive a number of shares of Common
Stock of the resulting entity determined pursuant to an exchange ratio that
ensures that after the Conversion Transaction, subject to certain adjustments to
reflect the percentage of the to-be outstanding shares of the resulting entity
issued to Minority Stockholders in exchange for their Common Stock would be
equal to the percentage of the outstanding shares of Common Stock held by
Minority Stockholders immediately prior to the Conversion Transaction.
Federal Securities Law
The Common Stock of the Company is registered with the SEC under the
Exchange Act. The Company is subject to the information, proxy solicitation,
insider trading restrictions and other requirements of the SEC under the
Exchange Act.
The Company Common Stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Company may not be resold
without registration or unless sold in accordance with certain resale
restrictions. If the Company meets specified current public information
requirements, each affiliate of the Company is able to sell in the public
market, without registration, a limited number of shares in any three-month
period.
Community Reinvestment Act
Under the Community Reinvestment Act, as amended (the "CRA"), as
implemented by FDIC regulations, a savings bank has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA requires the FDIC, in connection with its examination of
a savings institution to assess the institution's record of meeting the credit
needs of its community and to take such record into account in its evaluation of
certain applications by such institution. The Bank's latest CRA rating was
"outstanding".
The Bank is also subject to provisions of the New York State Banking Law
which impose continuing and affirmative obligations upon banking institutions
organized in New York State to serve the credit needs of its local community
("NYCRA") which are substantially similar to those imposed by the CRA. The NYCRA
also requires the Superintendent
28
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to consider a bank's NYCRA rating when reviewing a bank's application to engage
in certain transactions, including mergers, asset purchases and the
establishment of branch offices or automated teller machines, and provides that
such assessment may serve as a basis for the denial of any such application.
The Bank's NYCRA rating as of its latest examination was "outstanding".
Federal Home Loan Bank System
The Bank is a member of the FHLB of New York, which is one of 12 regional
FHLBs, that administers the home financing credit function of savings
institutions. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the regulation and oversight of the Federal Housing Finance Board. All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of New York. At June 30, 2000, the Bank had $879,000 of FHLB stock. The
dividend yield from FHLB stock was 7.53% at June 30, 2000. No assurance can be
given that such dividends will continue in the future at such levels.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings institutions and to contribute to low and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.
Reports to Security Holders
The Company files annual and quarterly reports with the SEC on Forms
10-KSB and 10-QSB, respectively. The Company also files current reports on the
Form 8-K with the SEC. Finally, the Company files preliminary and definitive
proxy materials with the SEC.
The public may read and copy any materials filed by the Company with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an
electronic filer. The SEC maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC. The address of the site is http://www.sec.gov.
29
<PAGE>
ITEM 2. Properties
The Bank currently conducts its business through four full-service banking
offices. Both the Company and the Bank maintain their executive offices at the
Operations Center, 302 Main Street, Catskill, New York. The following table sets
forth the Bank's offices as of June 30, 2000. The Bank's current facilities are
considered by management to be adequate for the needs of the Bank and the
Company in the foreseeable future.
<TABLE>
<CAPTION>
Net Book Value
Original of Property or
Leased Year Date of Leasehold
or Leased or Lease Improvements at
Location Owned Acquired Expiration June 30, 2000
-------- ----- -------- ---------- -------------
(In Thousands)
<S> <C> <C> <C> <C>
Main Office: (1)
Main & Church Streets Owned 1963 -- $ 190
Catskill, New York 12414
Full Service Branches:
Route 385 Owned 1974 -- 70
West Coxsackie, NY 12051
Main Street Owned 1988 -- 241
Cairo, NY 12413
Route 32 Owned 1997 -- 924
Greenville, NY 12083
Main Street
Tannersville, NY 12485 Owned 2000 -- 1,170
Operations Center:
302 Main Street Owned 1999 -- 532
Catskill, NY 12414
</TABLE>
----------
(1) Includes adjacent parking lot.
30
<PAGE>
ITEM 3. Legal Proceedings
The Company is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business which, in
the aggregate, involve amounts which are believed by management to be immaterial
to the financial condition and results of operations of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during the fourth
quarter of the year under report.
PART II
ITEM 5. Market for Company's Common Stock and Related Security Holder Matters
The "Common Stock and Related Matters" section of the Company's Annual
Report to Stockholders is incorporated herein by reference.
ITEM 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of the Company's Annual Report to Stockholders is
incorporated herein by reference.
ITEM 7. Selected Financial Data
The selected financial information for the year ended June 30, 2000 is
filed as part of the Company's Annual Report to Stockholders and is incorporated
by reference.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act
The "Proposal I - Election of Directors" section of the Company's
definitive Proxy Statement for the Company's 2000 Annual Meeting of Stockholders
(the "2000 Proxy Statement") is incorporated herein by reference.
ITEM 10. Executive Compensation
The "Proposal I - Election of Directors" section of the Company's 2000
Proxy Statement is incorporated herein by reference.
31
<PAGE>
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
The "Proposal I - Election of Directors" section of the Company's 2000
Proxy Statement is incorporated herein by reference.
ITEM 12. Certain Relationships and Related Transactions
The "Transactions with Certain Related Persons" section of the Company's
2000 Proxy Statement is incorporated herein by reference.
ITEM 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
The exhibits and financial statement schedules filed as a part of this
Form 10-KSB are as follows, all of which are included in the Annual Report
to Stockholders (Exhibit 13):
(A) Report of Independent Accountants
(B) Consolidated Statements of Condition
(C) Consolidated Statements of Operations
(D) Consolidated Statements of Changes in Equity
(E) Consolidated Statements of Cash Flows
(F) Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to
Consolidated Financial Statements. The remaining information appearing in
the Annual Report to Shareholders for the year ended June 30, 2000 is not
deemed to be filed as part of this report except as expressly provided
herein.
(b) Reports on Form 8-K
None
(c) Exhibits
3.1 Certificate of Incorporation of Greene County Bancorp, Inc.
(incorporated herein by reference to the Company's registration
statement on SB-2, file No. 333-63681 (the "SB-2"))
3.2 Bylaws of Greene County Bancorp, Inc. (incorporated herein by
reference to the Company's SB-2)
4 Form of Stock Certificate of Greene County Bancorp, Inc.
(incorporated herein by reference to the Form SB-2)
10.1 Employment Agreement with J. Bruce Whittaker (incorporated herein by
reference to the Company's SB-2)
32
<PAGE>
10.2 Employee Stock Ownership Plan (incorporated herein by reference to
the Company's SB-2)
13 Annual Report to Stockholders
21 Subsidiaries of the Company
27 EDGAR Financial Data Schedule
33
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GREENE COUNTY BANCORP, INC.
Date: September 19, 2000 By: /s/ J. Bruce Whittaker
-------------------------------------
J. Bruce Whittaker
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By: /s/ Michelle Plummer By: /s/ Walter H. Ingalls
-------------------------------- -------------------------------------
Michelle Plummer Walter H. Ingalls
Chief Financial Officer Chairman of the Board
Date: September 19, 2000 Date: September 19,2000
By: /s/ Richard J. Buck By: /s/ Raphael Klein
-------------------------------- -------------------------------------
Richard J. Buck Raphael Klein
Director Director
Date: September 19, 2000 Date: September 19, 2000
By: /s/ Paul Slutsky By: /s/ Anthony Camera, Jr.
-------------------------------- -------------------------------------
Paul Slutzky Anthony Camera, Jr.
Director Director
Date: September 19, 2000 Date: September 19, 2000
By: /s/ David H. Jenkins By: /s/ Dennis R. O'Grady
-------------------------------- -------------------------------------
David H. Jenkins, DVM Dennis R. O'Grady
Director Director
Date: September 19, 2000 Date: September 19, 2000
By: /s/ Martin C. Smith
--------------------------------
Martin C. Smith
Director
Date: September 19, 2000
