SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT
GREENE COUNTY BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number 0-25165
Delaware 14-1809721
- -------------------------------- ----------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
302 Main Street, Catskill, New York 12414
- ----------------------------------- -----
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (518)943-2600
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days.
YES |X| NO |_|
As of February 14, 2000, the latest practicable date, 1,976,727 shares of the
registrant's common stock, $ .10 par value, were issued and outstanding.
<PAGE>
GREENE COUNTY BANCORP, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
*Consolidated Statements of Financial Condition 1
*Consolidated Statements of Income 2
*Consolidated Statements of Comprehensive Income 3
*Consolidated Statements of Changes in Shareholders' Equity 4
*Consolidated Statements of Cash Flows 5
*Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of December 31, 1999 and June 30, 1999
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,884,217 $ 2,784,524
Federal funds sold 4,595,071 3,351,222
------------- -------------
Total cash and cash equivalents 10,479,288 6,135,746
Investment securities, at fair value 46,369,620 49,662,206
Federal Home Loan Bank stock, at cost 765,600 765,600
Loans 98,101,885 91,829,423
Less: Allowance for possible loan losses (836,784) (791,897)
Less: Unearned origination fees and costs, net (262,837) (239,717)
------------- -------------
Net loans receivable 97,002,264 90,797,809
Purchased mortgage servicing rights 1,200,363 --
Premises and equipment 4,145,998 3,513,906
Accrued interest receivable 1,152,517 1,130,744
Prepaid expenses and other assets 756,664 461,162
Other real estate owned 123,548 176,850
------------- -------------
Total Assets $ 161,995,862 $ 152,644,023
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $ 10,235,812 $ 9,468,291
Interest bearing deposits 117,853,071 118,531,180
------------- -------------
Total deposits 128,088,883 127,999,471
Borrowings FHLB 10,000,000 --
Accrued interest and other liabilities 391,957 436,874
Accrued income taxes 346,629 285,812
------------- -------------
Total Liabilities 138,827,469 128,722,157
------------- -------------
Shareholders' Equity
Common stock, par value $.10 per share; authorized 4,000,000;
Issued and outstanding: 2,058,035 at December 31, 1999,
and 1,957,057 at June 30, 1999 215,284 195,706
Additional Paid-In Capital 9,966,948 8,202,655
Retained Earnings 15,043,460 16,354,339
Accumulated Other Comprehensive Income (472,018) (118,394)
Less: Treasury Stock, shares at cost (906,201) --
Less: Unearned ESOP shares, at cost (679,080) (712,440)
------------- -------------
Total shareholders' equity 23,168,393 23,921,866
Total liabilities and shareholders' equity $ 161,995,862 $ 152,644,023
============= =============
</TABLE>
See notes to consolidated financial statement
1
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
For the Three months and Six Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 1,809,238 $ 1,652,020 $ 3,556,496 $ 3,292,444
Investment securities 534,226 554,610 1,109,444 1,139,838
Mortgage-backed securities 68,341 63,856 142,821 137,252
Tax free securities 125,045 97,725 248,698 195,406
Interest bearing deposits and fed funds 77,598 79,561 138,023 168,082
----------- ----------- ----------- -----------
Total interest income 2,614,448 2,447,772 5,195,482 4,933,022
Interest expense:
Interest on deposits 1,113,563 1,270,415 2,250,412 2,572,296
Interest on borrowings 138,214 -- 151,760 --
----------- ----------- ----------- -----------
Total interest expense 1,251,777 1,270,415 2,402,172 2,572,296
Net interest income 1,362,671 1,177,357 2,793,310 2,360,726
----------- ----------- ----------- -----------
Less: provision for loan losses 30,000 45,000 75,000 90,000
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 1,332,671 1,132,357 2,718,310 2,270,726
----------- ----------- ----------- -----------
Noninterest income:
Service charges on deposit accounts 93,405 81,092 176,325 152,136
Other operating income 140,662 58,324 216,931 93,572
----------- ----------- ----------- -----------
Total other income 234,067 139,416 393,256 245,708
Noninterest expense:
Salaries and employee benefits 599,272 480,849 1,163,163 902,024
Contribution expense -- 484,150 -- 484,150
Occupancy expense 76,082 60,935 150,331 132,469
Equipment and furniture expense 63,970 50,963 134,210 105,143
Service and data processing fees 128,776 98,154 270,792 193,133
Office supplies 35,439 27,917 64,208 50,591
Other operating expense 322,693 230,632 626,224 422,404
----------- ----------- ----------- -----------
Total noninterest expense 1,226,232 1,433,600 2,408,928 2,289,914
Income(loss) before tax provision 340,506 (161,827) 702,638 226,520
Provision for income taxes
Current 95,111 (68,639) 224,533 70,759
Deferred (6,974) 746 2,510 787
----------- ----------- ----------- -----------
Total provision (benefit) for taxes 88,137 (67,893) 227,043 71,546
----------- ----------- ----------- -----------
Net Income $ 252,369 ($ 93,934) $ 475,595 $ 154,974
=========== =========== =========== ===========
EPS Basic $ 0.13 $ 0.24
Weighted average shares outstanding 1,992,258 2,023,442
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
For the Three Months Ended December 31, 1999 and 1998
1999 1998
Net income $ 252,369 ($ 93,934)
Other comprehensive loss
Unrealized holding gain(loss) arising
during the three months ended December 31,
1999 and 1998, net of tax benefit of
$114,847 and $62,462, respectively (152,239) (82,800)
--------- ---------
Total other comprehensive income (loss) (152,239) (82,800)
Comprehensive income $ 100,130 ($176,734)
========= =========
See notes to consolidated financial statements
Greene County Bancorp, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
For the Six Months Ended December 31, 1999 and 1998
1999 1998
Net income $ 475,595 $ 154,974
Other comprehensive income (loss)
Unrealized holding gain(loss) arising during
the six months ended December 31,
1999 and 1998, net of tax benefit of
$254,538 and ($141,523), respectively (353,624) 187,600
--------- ---------
Total other comprehensive income (loss) (353,624) 187,600
Comprehensive income $ 121,971 342,574
========= =========
See notes to consolidated financial statements
3
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
For the Six Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Common Additional Other
Shares Stock Paid - In Retained Comprehensive Treasury
Issued Amount Capital Earnings Income Stock
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 $ 15,487,922 $ 242,400
Net proceeds from sale of
Common stock 1,918,642 191,864 7,992,065
Issuance of common stock to
Charitable Foundation 38,415 3,842 380,308
Capital contribution to
Greene County Bancorp, MHC (1,000)
ESOP shares acquired
Net income 154,974
Change in unrealized gain on
securities available for sale,
net of applicable deferred
income taxes 187,600
--------- -------- ------------ ----------- --------- ---------
Balance at December 31, 1998 1,957,057 $195,706 $ 8,372,373 $15,641,896 $ 430,000 --
========= ======== ============ =========== ========= =========
Balance at June 30, 1999 1,957,057 $195,706 $ 8,202,655 $16,354,339 ($118,394) --
Stock dividend 195,778 19,578 1,766,896 (1,786,474)
ESOP shares earned (2,603)
Treasury stock repurchased (94,800) (906,201)
Net income 475,595
Change in unrealized gain(loss)
on securities available for
sale, net of applicable
deferred income taxes (353,624)
--------- -------- ------------ ----------- --------- ---------
Balance at December 31, 1999 2,058,035 $215,284 $ 9,966,948 $15,043,460 ($472,018) ($906,201)
========= ======== ============ =========== ========= =========
<CAPTION>
Unearned Total
ESOP Shareholders'
Shares Equity
<S> <C> <C>
Balance at June 30, 1998 $ 15,730,322
Net proceeds from sale of
Common stock 8,183,929
Issuance of common stock to
Charitable Foundation 384,150
Capital contribution to
Greene County Bancorp, MHC (1,000)
ESOP shares acquired (363,800) (363,800)
Net income 154,974
Change in unrealized gain on
securities available for sale,
net of applicable deferred
income taxes 187,600
------------ -------------
Balance at December 31, 1998 ($ 363,800) $ 24,276,175
============ =============
Balance at June 30, 1999 ($ 712,440) $ 23,921,866
Stock dividend --
ESOP shares earned 33,360 30,757
Treasury stock repurchased (906,201)
Net income 475,595
Change in unrealized gain(loss)
on securities available for
sale, net of applicable
deferred income taxes (353,624)
------------ -------------
Balance at December 31, 1999 ($ 679,080) $ 23,168,393
============ =============
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net Income $ 475,595 $ 154,974
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 120,000 103,500
Net (accretion) amortization of premiums and discounts 62,851 (46,233)
Provisions for loan losses 75,000 90,000
Contribution expense -- 384,150
ESOP compensation expense 30,858 --
Loss on sale of investments -- 34,298
Loss on sale of other real estate 7,107 --
Provision (benefit) for deferred income taxes 11,994 (167,000)
Net change in unearned loan fees and costs 23,120 40,953
Net increase in accrued income taxes 60,817 --
Net (increase) decrease in accrued interest receivable (21,773) 34,292
Net increase in prepaid and other assets (75,054) (113,160)
Net decrease in other liabilities (44,917) (60,332)
------------ ------------
Net cash provided by operating activities 725,598 455,442
Cash flows from investing activities:
Proceeds from maturities and zero coupon 2,455,312 8,167,026
Purchases of securities and mortgage servicing rights (3,612,288) (6,107,546)
Principal payments on securities 2,155,603 1,041,714
Principal payments on mortgage-backed securities 577,503 1,128,736
Proceeds from sale of other real estate 46,195 --
Net increase in loans receivable (6,435,500) (4,610,834)
Purchases of premises and equipment (752,092) (267,495)
------------ ------------
Net cash used by investing activities (5,565,267) (648,399)
Cash flows from financing activities:
Borrowings from FHLB 10,000,000 --
Purchases of treasury stock (906,201) --
Proceeds from issuance of common stock -- 8,184,000
Purchase of unallocated ESOP shares -- (363,800)
Net increase in deposits 89,412 1,911,298
------------ ------------
Net cash provided by financing activities 9,183,211 9,731,498
Net increase in cash and cash equivalents 4,343,542 9,538,541
Cash and cash equivalents at beginning of period 6,135,746 8,272,083
------------ ------------
Cash and cash equivalents at end of period $ 10,479,288 $ 17,810,624
============ ============
Cash paid during period for:
Interest $ 2,244,059 $ 2,577,000
Income taxes $ 166,227 $ 172,000
Non-cash investing activities:
Foreclosed loans transferred to other real estate $ 53,302 $ --
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
Greene County Bancorp, Inc
Notes to Consolidated Financial Statements
As of and for the Three and Six Months Ended December 31, 1999 and 1998
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Greene County Bancorp, Inc. (the "Company") and its
wholly-owned subsidiary, The Bank of Greene County (the "Bank"). The
financial statements have been prepared in accordance with Generally
Accepted Accounting Principles (GAAP) for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. To the extent that
information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or are
consistent with the audited financial statements incorporated by reference
to the Company's Annual Report on Form 10-KSB for the year ended June 30,
1999, such information and footnotes have not been duplicated herein. In
the opinion of management, all adjustments (consisting of only normal
recurring items) necessary for a fair presentation of the financial
position and results of operations and cash flows for the periods
presented have been included. All material inter-company accounts and
transactions have been eliminated in the consolidation. The results of
operations and other data for the three and six months ended December 31,
1999 are not necessarily indicative of results that may be expected for
the entire fiscal year ending June 30, 2000.
In preparing the financial statements, management is required to make
extensive use of estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet, and
revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to
the determination of the allowance for loan losses and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan
losses and valuation of real estate, management obtains independent
appraisals for significant properties.
(2) REORGANIZATION AND STOCK OFFERING
Greene County Bancorp, Inc. is a Delaware corporation organized in
December 1998 by The Bank of Greene County in connection with the
conversion of the Bank from a New York chartered mutual savings bank to a
New York chartered stock savings bank and reorganization to a two-tiered
mutual holding company. The Company was formed for the purpose of
acquiring all of the capital stock of the Bank upon completion of the
reorganization. As part of the reorganization, the Company issued
approximately 44.5% of the shares of its common stock to eligible
depositors of the Bank and the Bank's Employee Stock Ownership Plan (the
"ESOP") and issued approximately 53.5% of the Company's shares of common
stock to Greene County Bancorp, MHC (the "MHC"), a New York
state-chartered mutual holding company. Concurrent with the close of the
offering, the remaining 2% of the Company's shares of common stock were
issued to The Bank of Greene County Charitable Foundation (the
"Foundation"). The reorganization and offering were completed on December
30, 1998. Prior to that date, the Company had no assets and no
liabilities. The financial statements presented for periods prior to the
reorganization are for the Bank as the predecessor entity to the Company.
Completion of the offering resulted in the issuance of 1,957,057 shares of
common stock, 1,047,560 shares (53.5%) of which were issued to the MHC,
871,082 shares (44.5%) of which were sold to eligible depositors of the
Bank and issued to the Bank's ESOP, and 38,415 shares (2%) of which were
issued to the Foundation, at $10.00 per share. Costs related to the
offering, primarily marketing fees paid to an investment banking firm,
professional fees, registration fees, and printing and mailing costs, were
$694,211; the net proceeds of the offering excluding these costs amounted
to $8,016,709. The Bank's ESOP acquired 36,380 shares at issuance and
purchased an additional 36,380 shares in the open market after the initial
public offering.
6
<PAGE>
(3) EARNINGS PER SHARE
Earnings per share on common stock are computed using the weighted average
number of shares of common stock outstanding for the period. The Company
adopted Financial Accounting Standard No. 128 for the three and six months
ended December 31, 1999.
In calculating the weighted average number of shares outstanding, the
result of a stock dividend, stock repurchase program, and unallocated ESOP
shares were taken into account. The Board of Directors approved a 10%
stock dividend on July 6, 1999, for shareholders of record July 26, 1999,
effective August 9, 1999. As a result of the stock dividend, 195,778 new
shares were issued bringing the total number of shares issued to
2,152,835. Shareholders that would have received a fractional share as a
result of the dividend were rounded up to the next whole number. The Board
of Directors also approved on July 6, 1999, a stock repurchase program
whereby the Company may repurchase up to 107,638 shares, or approximately
5% of the Company's outstanding shares. As of December 31, 1999, the
Company had repurchased 94,800 shares for $906,201 at an average cost of
$9.56. At December 31, 1999, 11,528 shares of the 80,036 shares of common
stock in the ESOP were outstanding and allocated to employees leaving
68,508 unallocated. Consequently, 2,058,035 shares were outstanding as of
December 31, 1999. The weighted average number of shares outstanding
during the three-month period ended December 31, 1999 was 1,999,258. The
earnings per share amounted to $0.13 for the three-month period ended
December 31, 1999. The weighted average number of shares outstanding
during the six-month period ended December 31, 1999 was 2,023,442. The
earnings per share amounted to $0.24 for the six-month period ended
December 31, 1999. Basic and diluted EPS were the same for both time
periods.
(4) LOAN SERVICING RIGHTS
The Bank adopted the provisions of Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities". The cost of loan servicing
rights is amortized in proportion to, and over the period of, estimated
net servicing revenues using a method which approximates the interest
method. Impairment of loan servicing rights is assessed based on fair
values of those rights. For purposes of measuring the impairment, the
rights are stratified based on loan types, interest and prepayment rates
and other risk characteristics of the underlying loans.
The Bank evaluates the carrying value of the servicing portfolio by
estimating the future net servicing income of the portfolio based on
management's best estimate of remaining loan lives.
(5) IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 which
establishes accounting and reporting standards for derivative instruments
and for hedging activities. SFAS No. 133 requires that an entity recognize
all derivatives as either assets or liabilities in the statement of
financial condition at fair value. If certain conditions are met, a
derivative may be specifically designated as a fair value hedge, a cash
flow hedge, or a foreign currency hedge. A specific accounting treatment
applies to each type of hedge. SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000 and, accordingly,
will be adopted by the Company in the fiscal year beginning on July 1,
2000. The Company has not engaged in derivatives and hedging activities
covered by the new standard, and does not expect to begin such activities.
Accordingly, SFAS No. 133 is not expected to have a material impact on the
Company's consolidated financial statements.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
General
This quarterly report on Form 10-QSB contains forward-looking
statements. The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protections of the safe harbor with respect to all such forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the "words"' "believes",
"anticipates", " plans", "expects" and similar expressions are intended to
identify forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially
from those contemplated by such forward-looking statements. These
important factors include, without limitation, the Bank's continued
ability to originate quality loans, fluctuations in interest rates, real
estate conditions in the Bank's lending area, general and local economic
conditions, the Bank's continued ability to attract and retain deposits,
the Company's ability to control costs, new accounting pronouncements, and
changing regulatory requirements. The Company undertakes no obligation to
publicly release the results of any revisions to those forward-looking
statements that may be made to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Comparison of Financial Condition at December 31, 1999 and June 30, 1999
Total assets increased to $162.0 million at December 31, 1999 from
$152.6 at June 30, 1999, an increase of $9.4 million, or 6.2%. The growth
in assets was primarily due to increases in the net loan portfolio, cash
positions and an investment in mortgage servicing rights. The growth in
assets was funded with capital raised during the initial public offering
and borrowings from the Federal Home Loan Bank.
The net loan portfolio amounted to $97.0 million at December 31,
1999, as compared to $90.8 million at June 30, 1999, an increase of $6.2
million or 6.8%. The most significant growth was in the conventional fixed
rate real estate mortgage portfolio that increased by $5.8 million to
$62.8 million at December 31, 1999 as compared to $57.0 million at June
30, 1999. Increases in bi-weekly fixed rate mortgages of $1.2 million and
residential construction mortgages of $0.6 million offset decreases in the
adjustable rate mortgages of $1.7 million for the period between June
30,1999 and December 31, 1999, reflecting the overall decreased demand for
adjustable rate loan products in the current low but rising market
interest rate environment. The addition of a mortgage originator has
contributed to the continued strength in loan demand despite the rising
rate environment.
Total cash and cash equivalents including federal funds sold
amounted to $10.5 million at December 31, 1999, an increase of $4.4
million or 72.1% over the $6.1 million at June 30, 1999. The Bank held the
additional cash for liquidity purposes in order to support any excess cash
demands had they arisen in connection with the turn of the millennium.
The investment portfolio totaled $46.4 million at December 31, 1999
as compared to $49.7 at June 30, 1999, representing a $3.3 million, or
6.6%, decrease. The decrease is a net result of principal payments of $2.7
million, maturities of $2.5 million, purchases of $2.4 million and an
increase in unrealized losses of $0.6 million as well as accretion and
amortization. The portfolio mix remained consistent with US Treasuries and
government agencies representing 25.7%, state and political subdivisions
representing 22.6%, asset-backed securities representing 14.2%, and
corporate debt representing 25.3% of the portfolio at December 31, 1999.
At June 30, 1999, US Treasuries and government agencies represented 26.1%,
state and political subdivisions represented 20.9%, asset-backed
securities represented 17.0%, and corporate debt represented 23.1% of the
investment portfolio.
During October 1999, the Bank participated in a 50% investment at a
total cost of $1,231,951 in the servicing rights for loans with
outstanding principal balances totaling approximately $179.2 million. This
8
<PAGE>
investment is amortized using a method that approximates the interest
method. A third-party provider performs the servicing associated with the
loans.
Premises and equipment increased from $3.5 million at June 30, 1999,
to $4.1 million at December 31, 1999, an increase of $0.6 million, or
17.1%. The most significant item contributing to this increase was initial
expenses incurred in the construction of the new Tannersville office that
is expected to open for business in the spring of 2000. Approximately
$150,000 of the increase in premises and equipment is additional equipment
including a generator for the operations center, ATM juniors for assigning
PIN numbers to debit and ATM cards, and other computer equipment.
Total deposits amounted to $128.1 million at December 31, 1999 only
slightly higher than the $128.0 million at June 30, 1999. There was a
slight shift from interest bearing to noninterest bearing deposits of
approximately $678,000 between December 31, 1999 and June 30, 1999. At
June 30, 1999 and December 31, 1999, certificate accounts represented
$52.1 million and $51.6 million, respectively, or approximately 40.0% of
the deposit base.
In September 1999, the Bank of Greene County borrowed $2.5 million
at a rate of 6.82%, maturing in September 2004, from the Federal Home Loan
Bank. In October 1999, the Bank borrowed an additional $2.5 million at a
rate of 6.8%, maturing in October 2005, from the Federal Home Loan Bank.
An additional $5.0 million was borrowed short-term during October 1999, at
a rate of 5.78%, which will mature on February 29, 2000. These funds were
used to meet continuing loan demand and in an attempt to lock in a rate of
return on a portion of the loan portfolio. The short-term funding was also
intended to cover short-term funding requirements and to provide
additional liquidity during the Y2K period.
Stockholders' equity decreased from $23.9 million at June 30, 1999
to $23.2 million at December 31, 1999 representing a decrease of $0.7
million or 2.9%. The decrease was primarily the result of the repurchase
of 94,800 shares of treasury stock at a cost of $906,200. Net income of
$475,595 for the six-month period was offset by unrealized losses
associated with the investment portfolio. The unrealized losses amounted
to $472,018 at December 31, 1999, compared to the unrealized losses of
$118,394 at June 30, 1999. Management believes these losses will continue
to remain unrealized and does not believe they reflect impairment in the
investment portfolio. The decrease in Retained Earnings and the
corresponding increase in Additional Paid-In Capital of $1,764,293
resulted from of the stock dividend.
9
<PAGE>
Non-Accrual Loans and Non-Performing Assets
The following table sets forth information regarding non-accrual loans and
non-performing assets:
At December 31, 1999 At June 30, 1999
(Dollars in Thousands)
Nonaccruing loans:
One- to four- family $453 $487
Commercial real estate 130 166
Consumer 41 15
Commercial business -- --
Total 624 668
Foreclosed assets:
One- to four-family -- 53
Multi-family -- --
Nonfarm, nonresidential properties 124 124
Total $124 $177
Total non-performing assets $748 $845
Total as a percentage of total assets 0.46% 0.56%
During the six months ended December 31, 1999, there were $33,400 in
charge-offs and $3,300 in recoveries of loans previously charged-off. As a
result of these charge-offs and recoveries, and the increase to the loan
loss reserve, the balance of the allowance for loan losses at December 31,
1999 increased to $837,000 from $792,000 at June 30, 1999. The ratio of
the net charge-offs to average loans outstanding during the six months
ended December 31, 1999, was less than one percent.
While management believes, based on information currently available,
that the allowance for loan losses is sufficient to cover losses inherent
in the Company's loan portfolio at this time, no assurances can be given
that the level of allowances will be sufficient to cover future loan
losses or that future adjustments to the allowance will not be necessary
if economic and/or other conditions differ substantially from the economic
and other conditions considered by management in evaluating the adequacy
of the current level of the allowance.
10
<PAGE>
Comparison of Operating Results for the Three Months Ended December 31,
1999 and 1998
GENERAL. The earnings of the Company depend primarily on its level
of net interest income, which is the difference between interest earned on
the Company's interest-earning assets, consisting primarily of residential
and commercial real estate loans, consumer loans, securities available for
sale, and the interest paid on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is a function of the Company's
interest rate spread, which is the difference between the average yield
earned on interest-earning assets and the average rate paid on
interest-bearing liabilities, as well as a function of the average balance
of interest-earning assets as compared to interest-bearing liabilities.
The Company's earnings also are affected by its fees and service charges
and gains on sales of loans and securities, as well as its level of
operating and other expenses, including salaries and employee benefits,
occupancy and equipment costs, data processing expense, marketing and
advertising costs, and federal deposit insurance premiums.
The Company reported net income of $252,369 for the three months
ended December 31, 1999, compared to a net loss of $93,934 for the three
months ended December 31, 1998. Earnings per share as of December 31, 1999
amounted to $0.13 based on the weighted average number of shares
outstanding for the period between October 1, 1999 and December 31, 1999
of 1,992,258. However, EPS data is not provided for the period ended
December 31, 1998 since the Company was not a stock company until December
30, 1998, and so the earnings per share calculation for that period is not
meaningful.
INTEREST INCOME. Total interest income increased to $2,614,448 for
the three months ended December 31, 1999 from $2,447,772 for the three
months ended December 31, 1998, an increase of $166,676 or 6.8%. The
increase was due primarily to an increase of $11.6 million, or 8.3%, in
the average balance of interest earning assets for the three months ended
December 31, 1999, notwithstanding a decrease in the average yield on such
assets to 6.93% for the period from 7.03% for the earlier-year period. The
reduced yields on such assets reflected the declining market interest rate
environment over the past year, as the proceeds of loan payoffs, called
investment securities and the offering were deployed into lower-yielding
investments. The Company's interest rate spread (the difference between
yields earned on interest-earning assets and rates paid on deposits and
borrowings) increased to 3.28% for the three months ended December 31,
1999 from 3.08% for the three months ended December 31, 1998. The net
yield on average interest earning assets also improved from 3.38% for the
three-month period ended December 31, 1998 to 3.61% for the same time
frame in 1999. Management successfully lowered the cost of funds for the
savings and certificate of deposits accounts for the three-month period
ended December 31, 1999, compared to the same period in 1998. The average
savings and escrow rate decreased from 3.31% to 3.14% and the average
certificate account rate decreased from 5.59% to 4.81% when comparing the
three months ended December 1998 to 1999, respectively. However, the
progress made in improving yields and decreasing rates was partially
offset by additional costs incurred in borrowing from the FHLB. The
average rate on the borrowings was 5.53% for the three months ended
December 31, 1999.
INTEREST EXPENSE. Total interest expense decreased to $1,251,777 for
the three months ended December 31, 1999 from $1,270,415 for the three
months ended December 31, 1998. The decrease reflected primarily a
decrease of 29 basis points in the rate paid on interest bearing
liabilities despite an increase of $8.5 million or 6.6% in the average
balance of such interest bearing liabilities for the period ended December
31, 1999 as compared to December 31, 1998. The most significant component
of the increase in the average balance of interest bearing liabilities was
the borrowing of $10.0 million from FHLB. The average balance of savings
and escrow accounts increased from $54.5 million to $57.7 million but was
accompanied by a decrease in the rate paid on such balances of 10 basis
points. Demand and NOW accounts average balances remained relatively
consistent between December 31, 1999 and 1998. The average balance on
certificate accounts decreased from $56.3 million to $51.6 million the
average rate paid on such balances decreased 78 basis points from 5.59% to
4.81%.
PROVISION FOR LOAN LOSSES. The Company establishes provisions for
loan losses, which are charged to operations, in order to maintain the
allowance for loan losses at a level that is deemed appropriate. In
determining the appropriate level of the allowance for loan losses,
management considers past and anticipated loss experience, collateral
values, current and anticipated economic conditions, volume and type of
lending activities and the level of non-performing and other classified
loans. The allowance is based on
11
<PAGE>
estimates and the ultimate losses may vary from such estimates. Management
of the Company evaluates the allowance for loan losses on a quarterly
basis and makes provisions for loan losses in order to maintain the
adequacy of the allowance.
The Company's provision for loan losses was decreased to $30,000 for
the three month period ended December 31, 1999, as compared to $45,000 for
the three-month period ended December 31, 1998.
NON-INTEREST INCOME. Non-interest income consists primarily of fee
income for Bank services. Non-interest income increased to $234,067 for
the three months ended December 31, 1999, from $139,416 for the three
months ended December 31, 1998, an increase of $94,651 or 67.9%.
Contributing to the increase were increased service charges on various
deposits amounting to approximately $12,000 in additional income. Merchant
card income increased approximately $6,000 for the three-month period
ended December 31, 1999 as compared to the same period in 1998. ATM
surcharges to non-customer users of the Bank ATM machines amounted to
approximately $10,000 for the three months ended December 31, 1999. During
1998 the Bank did not impose any surcharge for ATM usage by non-customers.
The Bank also introduced the debit card to Bank customers during the last
three months of calendar year 1999 for which it collects a fee from the
merchant based on a percentage of the balance purchased. Another item
contributing to the level of non-interest income was revenue generated by
the purchase of mortgage servicing rights. The Company participated with
another institution in the purchase of mortgage servicing rights in
October 1999 which contributed approximately $54,000 to non-interest
income for the three-month period ended December 31, 1999.
NON-INTEREST EXPENSE. Total non-interest expense amounted to
$1,226,232 for the three months ended December 31, 1999 as compared to
$1,433,600 for the three months ended December 31, 1998 for a decrease of
$207,368. However, it should be noted that during the three months ended
December 31, 1998, $484,150, of expense was associated with the
contribution made to the Charitable Foundation at the time of the public
offering. The net non-interest expense excluding the Bank's Charitable
Foundation contribution for the three-month period was $949,450.
Consequently, excluding the expense attributed to the foundation,
non-interest expense increased $276,782 for the three-month period ended
December 31, 1999 as compared to December 31, 1998. Increases in salaries
and other employee benefits contributed $118,423 to the overall increase
in noninterest expense. Two senior level positions (Chief Financial
Officer and Information Systems Manager) were created and filled during
1999 as well as several teller and customer service positions. Also,
charges associated with the new ESOP Plan affected the compensation
expense. The service fees associated with bank processing increased by
$30,622 for the three-month period ended December 31, 1999 as compared to
December 31, 1998. These service fees and data processing fees increased
as a result of new services such as Telebank 24/7 and debit cards being
offered to Bank customers. Occupancy and equipment expenses increased for
the three month period ended December 31, 1999 as compared to the same
period during 1998 primarily as a result of the new operations center.
Amortization of the purchased mortgage servicing rights for the
three-month period ended December 31, 1999 amounted to approximately
$35,000 contributing to the increase in non-interest expense.
INCOME TAXES. The Company reported a tax expense of $88,137 for
federal and franchise taxes for the three months ended December 31, 1999,
compared to a tax benefit of $67,893 associated with the pre-tax loss of
$161,827 reported for the three months ended December 31, 1998.
Comparison of Operating Results for the Six Months Ended December 31, 1999
and 1998
GENERAL. The Company reported net income of $475,595 for the six
months ended December 31, 1999 compared to net income of $154,974 for the
six months ended December 31, 1998. Earnings per share as of December 31,
1999 amounted to $0.24 based on the weighted average number of shares
outstanding for the period between July 1, 1999 and December 31, 1999 of
2,023,442. EPS has been adjusted to reflect the 10% stock dividend
effective August 9, 1999, stock repurchases of 94,800 throughout the
six-month period, and unallocated ESOP shares of 68,508. Additionally, an
allocation of 11,528 shares of the 80,036 total shares of ESOP stock was
effective on December 31, 1999. It should be noted that net income for the
six months ended December 31, 1998, was significantly affected by
contribution expense of $484,000 reflecting the Company's
12
<PAGE>
contribution to the Charitable Foundation. However, EPS data is not
provided for the period ended December 31, 1998 since the Company was not
a stock company until December 30, 1998, and so the earnings per share
calculation for that period is not meaningful.
INTEREST INCOME. Total interest income on loans increased to
$3,556,496 for the six months ended December 31, 1999, compared to
$3,292,444 for the six months ended December 31, 1998, an increase of
$264,052 or 8.0%. The increase in interest income can be attributed to an
increase of approximately $11.5 million in average loan balances from
$83.2 million for the six-month period ended December 31, 1998, to $94.7
million for the period ended December 31, 1999. The effect of an increase
in the average loan balances was partially offset by a 41 basis points
decrease in the average yield. The decrease in yield was a result of a
lowering interest rate environment in the beginning of calendar year 1999.
The average balance of total investments including investment securities,
mortgage-backed securities, and tax free securities increased $2.4 million
for the six month period ended December 31, 1999, as compared to December
31, 1998, with the largest increase in tax exempt balances which
contributed to the lower overall average yield. The decrease in the
average investment yield was 20 basis points between the six-month period
ended December 31, 1998 and 1999.
INTEREST EXPENSE. Total interest expense decreased to $2,402,172 for
the six months ended December 31, 1999, from $2,572,296 for the six months
ended December 31, 1998. The decrease reflected a decrease of 46 basis
points in the average rate paid on interest bearing liabilities despite an
increase of $6.8 million or 5.3% in the average balance of such interest
bearing liabilities for the six month period ended December 31, 1999 as
compared to December 31, 1998. The most significant component of the
increase in the average balance of interest bearing liabilities was the
borrowing of $10.0 million from FHLB. The average balance of savings and
escrow accounts increased from $54.8 million to $58.3 million but was
accompanied by a decrease in the rate paid of 29 basis points. Demand and
NOW account average balances increased $1.6 million for the six-month
period ended December 31, 1999, as compared to the same period in 1998.
The average rate paid on these accounts was consistent when comparing the
six-month periods ended December 31, 1999 and 1998. The average balance on
certificate accounts decreased from $56.0 million for the six-month period
ended December 31, 1998, to $52.3 million for the six-month period ended
December 31, 1999. The decrease in average balance was accompanied by a
decrease in the average yield of 76 basis points. Also, FHLB borrowings
represented a significant new element of interest expense for the
six-month period ended December 31, 1999, amounting to $151,760 or 6.0% of
total interest expense.
NET INTEREST INCOME. Net interest income increased $432,584, or
18.3%, for the six-month period ending December 31, 1999, as compared to
the same period in 1998. The interest rate spread was 3.11% for the six
months ended December 31, 1998 as compared to 3.36% for the six months
ended December 31, 1999, helping to enhance the increase in net interest
income for the period.
The Company's provision for loan losses was decreased to $75,000 for
the six-month period ended December 31, 1999, as compared to $90,000 for
the six-month period ended December 31, 1998.
NON-INTEREST INCOME. Non-interest income consists of fee income for
Bank services and other operating income. Non-interest income increased to
$393,256 for the six months ended December 31, 1999, from $245,708 for the
six months ended December 31, 1998, an increase of $147,548 or 60.0%.
Contributing to the increase were increased service charges on various
deposits amounting to approximately $24,000 in additional income, a 15.9%
increase. Other operating income increased $123,359 or 132.0% between the
six-month periods ended December 31, 1998 and 1999. As stated in the
three-month analysis above, several new initiatives were undertaken during
the last quarter of fiscal year 1999, which contributed to the increase in
other non-interest income. Such activities included charging ATM usage
fees to non-bank customers and revenues from purchased mortgage servicing
rights. The Bank also introduced the debit card to Bank customers during
the last three months of calendar year 1999 for which it collects a fee
from the merchant based on a percentage of the balance purchased.
NON-INTEREST EXPENSE. Total non-interest expense amounted to
$2,408,928 for the six months ended December 31, 1999 as compared to
$2,289,914 for the six months ended December 31, 1998 for a decrease of
$119,014. However, it should be noted that during the six months ended
December 31, 1998,
13
<PAGE>
$484,150, of expense was associated with the contribution made to the
Charitable Foundation at the time of the public offering. Non-interest
expense, excluding the Charitable Foundation contribution, for the
six-month period was $1,805,764 representing an increased of $603,164 for
the six-month period ended December 31, 1999 as compared to December 31,
1998. Increases in salaries and other employee benefits contributed
$261,139 to the overall increase in noninterest expense. Two senior level
positions were created and filled during 1999 as well as several teller
and customer service positions. Also, charges associated with the new ESOP
Plan affected the compensation expense. The service fees associated with
bank processing increased by $77,659 for the six-month period ended
December 31, 1999 as compared to December 31, 1998. The service fees
charged by the Bank's computer provider increased as a result of new
services such as Telebank 24/7 and debit cards being offered to Bank
customers, as well as fees associated with testing for Y2K. Occupancy and
equipment expenses increased for the six month period ended December 31,
1999 as compared to the same period during 1998 primarily as a result of
the new operations center and new equipment associated with computer
upgrading. Other items contributing to the increase in other non-interest
expense are increased legal and auditing fees as well as other expenses
incurred as a result of being a public company such as annual reporting
costs and proxy solicitation expenses. The amortization of the purchased
mortgage servicing rights is another new item in the non-interest expense
category.
INCOME TAXES. The Company reported a tax expense of $227,043 for
federal and franchise taxes for the six months ended December 31, 1999,
compared to $71,546 for the six months ended December 31, 1998. A primary
item contributing to a difference in the income tax expense is the tax
benefit gained as a result of making the contribution to the Charitable
Foundation.
Liquidity
The Company's primary sources of funds are deposits, principal and
interest payments on loans, mortgage-backed securities and debt securities
and a line of credit available as needed from the FHLB. In December 1998,
$8.0 million of net proceeds from the offering added significantly to the
funds available to the Company for use in conducting its business. While
maturities and scheduled amortization of loans and investments are
predictable sources of funds, deposit flows and mortgage loan prepayments
are greatly influenced by interest rate trends, economic conditions and
competition.
During the past few years, the combination of generally low interest
rates on deposit products and the attraction of alternative investments
such as mutual funds and annuities have resulted in little growth or a net
decline in deposits in certain time periods. Based on its monitoring of
historic deposit trends and its current pricing strategy for deposits,
management believes the Company will retain a large portion of its
existing deposit base. The Company experienced insignificant changes in
the overall level of deposits when comparing December 31, 1998 to December
31, 1999.
Loan commitments totaled $1.1 million at December 31, 1999. The
Company anticipates that it will have sufficient funds available to meet
current loan commitments.
The Company's most liquid assets are cash and due from banks and
federal funds sold. At December 31, 1999, such assets amounted to $10.5
million, or 6.5% of total assets. Management also holds all investment
securities as available for sale and could consider the sale of securities
as an option if liquidity were needed.
In efforts to accommodate potential demand for cash as a result of
the Year 2000 management significantly increased the levels of vault cash
and other very liquid investments such as federal funds sold in order to
be prepared for potential customer demand for cash.
Stockholders' equity decreased from $23.9 million at June 30, 1999
to $23.2 million at December 31, 1999 representing a decrease of $0.7
million or 3.0%. The Company is required to meet various minimum amounts
and ratios of total and Tier I Capital ( as defined in the regulations) to
risk-weighted assets (as defined), and Tier I Capital (as defined) to
average assets (as defined). As of December 31, 1999, the Company had
total capital of $23.3 million or 26% of risk-weighted assets, Tier I
Capital of $22.4 million or 25% of risk-weighted assets, and Tier I
Capital of $22.4 million or 14% of average assets. At December 31, 1999,
the Company exceeded all regulatory capital requirements.
14
<PAGE>
The Company's ability to pay dividends is dependent on the Bank's
ability to pay dividends to the Company. There are certain restrictions on
the payment of dividends and other payments by the Bank to the Company.
Under New York law, the Bank is prohibited from declaring a cash dividend
on its common stock except from its net earnings for the current year and
retained net profits for the preceding two years.
Year 2000 Compliance
The Company's information technology systems and facilities successfully
completed the "roll-over" to the year 2000. The Company's transition to
the year 2000 during the first weeks of business in January 2000 resulted
in no adverse or negative impacts associated with the use of date
sensitive systems and equipment. The Company believes that with its
successful transition to the year 2000, the preponderance of risk
associated with the year 2000 problem has been identified and eliminated.
The Company recognizes the possibility that latent year 2000 related
issues may arise as information technology systems and facilities are more
fully utilized in the coming months. The Company will continue to evaluate
the year 2000 readiness of its business systems, facilities, and
significant vendors to ensure a complete transition through the year 2000.
The Company estimates the total cost of its year 2000 assessment and
remediation plan has amounted to approximately $200,000 which has been
funded through operating cash flows.
15
<PAGE>
GREENE COUNTY BANCORP, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not engaged in any material legal
proceedings at the present time.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
On October 27, 1999, the Company held an annual meeting of
shareholders. At the meeting, proposals to (1) Elect Directors Whittaker,
O'Grady and Smith for three year terms, and (2) ratify the engagement of
PricewaterhouseCoopers, LLP, to be the Company's auditors for the 2000
fiscal year were approved. The votes cast for and against these proposals,
and the number of abstention and broker non-votes with respect to each of
these proposals, were as follows:
Election of Directors
For Withheld
--- --------
J. Bruce Whittaker 1,873,847 4,450
Dennis R. O'Grady 1,873,847 4,450
Martin C. Smith 1,874,947 3,350
Ratification of PricewaterhouseCooper, LLP, as Auditors for the Company
For Against Abstain
--- ------- -------
Number of votes 1,867,630 1,125 9,542
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
Greene County Bancorp, Inc.
Date: February 14, 2000
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: February 14, 2000
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 10,479,288
<INT-BEARING-DEPOSITS> 117,853,071
<FED-FUNDS-SOLD> 4,595,071
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,369,620
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 98,101,885
<ALLOWANCE> 836,784
<TOTAL-ASSETS> 161,995,862
<DEPOSITS> 128,088,883
<SHORT-TERM> 5,000,000
<LIABILITIES-OTHER> 738,586
<LONG-TERM> 5,000,000
0
0
<COMMON> 215,284
<OTHER-SE> 22,953,109
<TOTAL-LIABILITIES-AND-EQUITY> 161,995,862
<INTEREST-LOAN> 3,556,496
<INTEREST-INVEST> 1,500,963
<INTEREST-OTHER> 138,023
<INTEREST-TOTAL> 5,195,482
<INTEREST-DEPOSIT> 2,250,412
<INTEREST-EXPENSE> 2,402,172
<INTEREST-INCOME-NET> 2,793,310
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,408,928
<INCOME-PRETAX> 702,638
<INCOME-PRE-EXTRAORDINARY> 702,638
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 475,595
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 3.73
<LOANS-NON> 624
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 792,000
<CHARGE-OFFS> 33,400
<RECOVERIES> 3,300
<ALLOWANCE-CLOSE> 837,000
<ALLOWANCE-DOMESTIC> 837,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 837,000
</TABLE>
